Bill Text: IA SF350 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act relating to the administration of programs by the economic development authority by creating a renewable chemical production tax credit, modifying the tax credit for investments in qualifying businesses and community-based seed capital funds, modifying the entrepreneur investment awards program, making miscellaneous changes to other economic development authority programs, and including effective date and retroactive and other applicability provisions. (Formerly SSB 1116.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2015-03-31 - Fiscal note. SCS. [SF350 Detail]
Download: Iowa-2015-SF350-Introduced.html
Senate File 350 - Introduced SENATE FILE BY COMMITTEE ON ECONOMIC GROWTH (SUCCESSOR TO SSB 1116) A BILL FOR 1 An Act relating to the administration of programs by the 2 economic development authority by creating a renewable 3 chemical production tax credit, modifying the tax credit for 4 investments in qualifying businesses and community=based 5 seed capital funds, modifying the entrepreneur investment 6 awards program, making miscellaneous changes to other 7 economic development authority programs, and including 8 effective date and retroactive and other applicability 9 provisions. 10 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 1212SV (3) 86 mm/sc PAG LIN 1 1 DIVISION I 1 2 RENEWABLE CHEMICAL PRODUCTION TAX CREDIT 1 3 Section 1. Section 15.119, subsection 2, Code 2015, is 1 4 amended by adding the following new paragraph: 1 5 NEW PARAGRAPH. h. The renewable chemical production tax 1 6 credit program administered pursuant to sections 15.315 through 1 7 15.320. In allocating tax credits pursuant to this subsection, 1 8 the authority shall not allocate more than fifteen million 1 9 dollars for purposes of this paragraph. 1 10 Sec. 2. NEW SECTION. 15.315 Short title. 1 11 This part shall be known and may be cited as the "Renewable 1 12 Chemical Production Tax Credit Program". 1 13 Sec. 3. NEW SECTION. 15.316 Definitions. 1 14 As used in this part, unless the context otherwise requires: 1 15 1. "Biobased content percentage" means, with respect to any 1 16 renewable chemical, the amount, expressed as a percentage, of 1 17 renewable organic material present as determined by testing 1 18 representative samples using the American society for testing 1 19 and materials standard D6866. 1 20 2. "Biomass feedstock" means sugar, polysaccharide, 1 21 glycerin, lignin, fat, grease, or oil derived from a plant or 1 22 animal, or a protein capable of being converted to a building 1 23 block chemical by means of a biological or chemical conversion 1 24 process. 1 25 3. "Building block chemical" means a molecule converted 1 26 from biomass feedstock as a first product or a secondarily 1 27 derived product that can be further refined into a higher=value 1 28 chemical, material, or consumer product. "Building block 1 29 chemical" includes but is not limited to glycerol, methanoic 1 30 or formic acid, arabonic acid, erythonic acid, glyceric acid, 1 31 glycolic acid, lactic acid, 3=hydroxypropionate, propionic 1 32 acid, malonic acid, serine, succinic acid, fumaric acid, 1 33 malic acid, aspartic acid, 3=hydroxybutyrolactone, acetoin, 1 34 threonine, itaconic acid, furfural, levulinic acid, glutamic 1 35 acid, xylonic acid, xylaric acid, xylitol, arabitol, citric 2 1 acid, aconitic acid, 5=hydroxymethylfurfural, lysine, gluconic 2 2 acid, glucaric acid, sorbitol, gallic acid, ferulic acid, 2 3 nonfuel butanol, nonfuel ethanol, a polymer or gum that can be 2 4 produced directly from a protein=based biomass feedstock, or 2 5 such additional molecules as may be included by the authority 2 6 by rule. 2 7 4. "Eligible business" means a business meeting the 2 8 requirements of section 15.317. 2 9 5. "Food additive" means a building block chemical that 2 10 is not primarily consumed as food but which, when combined 2 11 with other components, improves the taste, appearance, odor, 2 12 texture, or nutritional content of food. The authority, in its 2 13 discretion, shall determine whether or not a building block 2 14 chemical is primarily consumed as food. 2 15 6. "Program" means the renewable chemical production tax 2 16 credit program administered pursuant to this part. 2 17 7. "Renewable chemical" means a building block chemical 2 18 with a biobased content percentage of at least fifty percent. 2 19 "Renewable chemical" does not include a chemical sold or used 2 20 for the production of food, feed, or fuel. "Renewable chemical" 2 21 includes cellulosic ethanol, starch ethanol, or other ethanol 2 22 derived from biomass feedstock, fatty acid methyl esters, 2 23 or butanol, but only to the extent that such molecules are 2 24 produced and sold for uses other than food, feed, or fuel. 2 25 "Renewable chemical" also includes a building block chemical 2 26 that can be a food additive as long as the building block 2 27 chemical is not primarily consumed as food and is also sold 2 28 for uses other than food. "Renewable chemical" also includes 2 29 supplements, vitamins, nutraceuticals, and pharmaceuticals, but 2 30 only to the extent that such molecules do not provide caloric 2 31 value so as to be considered sustenance as food or feed. 2 32 8. "Sugar" means the organic compound glucose, fructose, 2 33 xylose, arabinose, lactose, sucrose, starch, cellulose, or 2 34 hemicellulose. 2 35 Sec. 4. NEW SECTION. 15.317 Eligibility requirements. 3 1 To be eligible to receive the renewable chemical production 3 2 tax credit pursuant to the program, a business shall meet all 3 3 of the following requirements: 3 4 1. The business is physically located in this state. 3 5 2. The business is operated for profit and under single 3 6 management. 3 7 3. The business is not an entity providing professional 3 8 services, health care services, or medical treatments or an 3 9 entity engaged primarily in retail operations. 3 10 4. The business organized, expanded, or located in the state 3 11 on or after the effective date of this division of this Act. 3 12 5. The business shall not be relocating or reducing 3 13 operations as described in section 15.329, subsection 1, 3 14 paragraph "b", and as determined under the discretion of the 3 15 authority. 3 16 6. The business is in compliance with all agreements entered 3 17 into under this program or other programs administered by the 3 18 authority. 3 19 Sec. 5. NEW SECTION. 15.318 Eligible business application 3 20 and agreement == maximum tax credits. 3 21 1. Application. 3 22 a. An eligible business that produces a renewable chemical 3 23 in this state from biomass feedstock during a calendar year may 3 24 apply to the authority for the renewable chemical production 3 25 tax credit provided in section 15.319. 3 26 b. The application shall be made to the authority in the 3 27 manner prescribed by the authority. 3 28 c. The application shall be made during the calendar year 3 29 following the calendar year in which the renewable chemicals 3 30 are produced. 3 31 d. The authority may accept applications on a continuous 3 32 basis or may establish, by rule, an annual application 3 33 deadline. 3 34 e. The application shall include all of the following 3 35 information: 4 1 (1) The amount of renewable chemicals produced in the state 4 2 from biomass feedstock by the eligible business during the 4 3 calendar year, measured in pounds. 4 4 (2) Any other information reasonably required by the 4 5 authority in order to establish and verify eligibility under 4 6 the program. 4 7 2. Agreement and fees. 4 8 a. Before being issued a tax credit under section 15.319, 4 9 an eligible business shall enter into an agreement with the 4 10 authority for the successful completion of all requirements of 4 11 the program. 4 12 b. The compliance cost fees authorized in section 15.330, 4 13 subsection 12, shall apply to all agreements entered into 4 14 under this program and shall be collected by the authority in 4 15 the same manner and to the same extent as described in that 4 16 subsection. 4 17 c. An eligible business shall fulfill all the requirements 4 18 of the program and the agreement before receiving a tax credit 4 19 or entering into a subsequent agreement under this section. 4 20 The authority may decline to enter into a subsequent agreement 4 21 under this section or issue a tax credit if an agreement is not 4 22 successfully fulfilled. 4 23 d. Upon establishing that all requirements of the program 4 24 and the agreement have been fulfilled, the authority shall 4 25 issue a tax credit and related tax credit certificate to the 4 26 eligible business stating the amount of renewable chemical 4 27 production tax credit under section 15.319 the eligible 4 28 business may claim. 4 29 3. Maximum tax credit amount. 4 30 a. The maximum amount of tax credit that may be issued under 4 31 section 15.319 to an eligible business for the production of 4 32 renewable chemicals in a calendar year shall not exceed the 4 33 following: 4 34 (1) In the case of an eligible business that has been in 4 35 operation in the state for five years or less at the time of the 5 1 application, one million dollars. 5 2 (2) In the case of an eligible business that has been in 5 3 operation in the state for more than five years at the time of 5 4 the application, five hundred thousand dollars. 5 5 b. An eligible business shall not receive a tax credit for 5 6 renewable chemicals produced before the date the business first 5 7 qualified as an eligible business pursuant to section 15.317. 5 8 c. An eligible business shall not receive more than five tax 5 9 credits under the program. 5 10 d. The authority shall issue tax credits under the program 5 11 on a first=come, first=served basis until the maximum amount of 5 12 tax credits allocated pursuant to section 15.119, subsection 5 13 2, paragraph "h", is reached. The authority shall maintain 5 14 a list of successful applicants under the program, so that 5 15 if the maximum aggregate amount of tax credits is reached in 5 16 a given fiscal year, eligible businesses that successfully 5 17 applied but for which tax credits were not issued shall be 5 18 placed on a wait list in the order the eligible businesses 5 19 applied and shall be given priority for receiving tax credits 5 20 in succeeding fiscal years. Placement on a wait list pursuant 5 21 to this paragraph shall not constitute a promise binding the 5 22 state. The availability of a tax credit and issuance of a tax 5 23 credit certificate pursuant to this subsection in a future 5 24 fiscal year is contingent upon the availability of tax credits 5 25 in that particular fiscal year. 5 26 4. Termination and repayment. The failure by an eligible 5 27 business in fulfilling any requirement of the program or any of 5 28 the terms and obligations of an agreement entered into pursuant 5 29 to this section may result in the reduction, termination, 5 30 or recision of the tax credits under section 15.319 and may 5 31 subject the eligible business to the repayment or recapture of 5 32 tax credits claimed. The repayment or recapture of tax credits 5 33 pursuant to this subsection shall be accomplished in the same 5 34 manner as provided in section 15.330, subsection 2. 5 35 5. Confidentiality. 6 1 a. Except as provided in paragraph "b", any information 6 2 or record in the possession of the authority with respect to 6 3 the program shall be presumed by the authority to be a trade 6 4 secret protected under chapter 550 or common law and shall be 6 5 kept confidential by the authority unless otherwise ordered by 6 6 a court. 6 7 b. The identity of a tax credit recipient and the amount 6 8 of the tax credit shall be considered public information under 6 9 chapter 22. 6 10 Sec. 6. NEW SECTION. 15.319 Renewable chemical production 6 11 tax credit. 6 12 1. An eligible business that has entered into an agreement 6 13 pursuant to section 15.318 may claim a tax credit equal to 6 14 the product of five cents multiplied by the number of pounds 6 15 of renewable chemicals produced in this state from biomass 6 16 feedstock by the eligible business during the calendar year. 6 17 However, an eligible business shall not receive a tax credit 6 18 for the production of a secondarily derived building block 6 19 chemical if that chemical is also the subject of a credit at 6 20 the time of production as a first product. The renewable 6 21 chemical production tax credit shall not be available for any 6 22 renewable chemical produced after the 2025 calendar year. 6 23 2. The tax credit shall be allowed against taxes imposed 6 24 under chapter 422, division II or III. 6 25 3. The tax credit shall be claimed for the tax year during 6 26 which the eligible business was issued the tax credit. 6 27 4. An individual may claim a tax credit under this section 6 28 of a partnership, limited liability company, S corporation, 6 29 cooperative organized under chapter 501 and filing as a 6 30 partnership for federal tax purposes, estate, or trust electing 6 31 to have income taxed directly to the individual. The amount 6 32 claimed by the individual shall be based upon the pro rata 6 33 share of the individual's earnings from the partnership, 6 34 limited liability company, S corporation, cooperative, estate, 6 35 or trust. 7 1 5. Any tax credit in excess of the tax liability is 7 2 refundable. In lieu of claiming a refund, the taxpayer 7 3 may elect to have the overpayment shown on the taxpayer's 7 4 final, completed return credited to the tax liability for the 7 5 following tax year. 7 6 6. a. To claim a tax credit under this section, a taxpayer 7 7 shall include one or more tax credit certificates with the 7 8 taxpayer's tax return. 7 9 b. The tax credit certificate shall contain the taxpayer's 7 10 name, address, tax identification number, the amount of the 7 11 credit, the name of the eligible business, and any other 7 12 information required by the department of revenue. 7 13 c. The tax credit certificate, unless rescinded by the 7 14 authority, shall be accepted by the department of revenue as 7 15 payment for taxes imposed pursuant to chapter 422, divisions II 7 16 and III, subject to any conditions or restrictions placed by 7 17 the authority upon the face of the tax credit certificate and 7 18 subject to the limitations of the program. 7 19 d. Tax credit certificates issued pursuant to this section 7 20 shall not be transferred to any other person. 7 21 Sec. 7. NEW SECTION. 15.320 Rules. 7 22 The authority and the department of revenue shall each adopt 7 23 rules as necessary for the implementation and administration 7 24 of this part. 7 25 Sec. 8. NEW SECTION. 422.10A Renewable chemical production 7 26 tax credit. 7 27 The taxes imposed under this division, less the credits 7 28 allowed under section 422.12, shall be reduced by a renewable 7 29 chemical production tax credit allowed under section 15.319. 7 30 Sec. 9. Section 422.33, Code 2015, is amended by adding the 7 31 following new subsection: 7 32 NEW SUBSECTION. 22. The taxes imposed under this division 7 33 shall be reduced by a renewable chemical production tax credit 7 34 allowed under section 15.319. 7 35 Sec. 10. EFFECTIVE UPON ENACTMENT. This division of this 8 1 Act, being deemed of immediate importance, takes effect upon 8 2 enactment. 8 3 Sec. 11. APPLICABILITY. This division of this Act applies 8 4 to renewable chemicals produced in the state from biomass 8 5 feedstock on or after the effective date of this division of 8 6 this Act. 8 7 Sec. 12. RETROACTIVE APPLICABILITY. This division of this 8 8 Act applies retroactively to January 1, 2015, for tax years 8 9 beginning on or after that date. 8 10 DIVISION II 8 11 ANGEL INVESTOR TAX CREDITS 8 12 Sec. 13. Section 2.48, subsection 3, paragraph d, 8 13 subparagraph (1), Code 2015, is amended to read as follows: 8 14 (1) Tax credits for investments in qualifying businesses 8 15and community=based seed capital fundsunder chapter 15E, 8 16 division V. 8 17 Sec. 14. Section 15.119, subsection 2, paragraph d, Code 8 18 2015, is amended to read as follows: 8 19 d. The tax credits for investments in qualifying businesses 8 20and community=based seed capital fundsissued pursuant to 8 21 section 15E.43. In allocating tax credits pursuant to this 8 22 subsection, the authority shall allocate two million dollars 8 23 for purposes of this paragraph, unless the authority determines 8 24 that the tax credits awarded will be less than that amount. 8 25 Sec. 15. Section 15E.41, Code 2015, is amended by striking 8 26 the section and inserting in lieu thereof the following: 8 27 15E.41 Purpose. 8 28 The purpose of this division is to stimulate job growth, 8 29 create wealth, and accelerate the creation of new ventures by 8 30 using investment tax credits to incentivize the transfer of 8 31 capital from investors to entrepreneurs, particularly during 8 32 early=stage growth. 8 33 Sec. 16. Section 15E.42, Code 2015, is amended by adding the 8 34 following new subsection: 8 35 NEW SUBSECTION. 2A. "Entrepreneurial assistance 9 1 program" includes the entrepreneur investment awards program 9 2 administered under section 15E.362, the receipt of services 9 3 from a service provider engaged pursuant to section 15.411, 9 4 subsection 1, or the program administered under section 15.411, 9 5 subsection 2. 9 6 Sec. 17. Section 15E.42, subsection 3, Code 2015, is amended 9 7 to read as follows: 9 8 3. "Investor" means a person making a cash investment in 9 9 a qualifying businessor in a community=based seed capital 9 10 fund. "Investor" does not include a person that holds at least 9 11 a seventy percent ownership interest as an owner, member, or 9 12 shareholder in a qualifying business. 9 13 Sec. 18. Section 15E.42, subsection 4, Code 2015, is amended 9 14 by striking the subsection. 9 15 Sec. 19. Section 15E.43, subsections 1 and 2, Code 2015, are 9 16 amended to read as follows: 9 17 1. a. For tax years beginning on or after January 1,2002 9 182015, a tax credit shall be allowed against the taxes imposed 9 19 in chapter 422, divisions II, III, and V, and in chapter 432, 9 20 and against the moneys and credits tax imposed in section 9 21 533.329, for a portion of a taxpayer's equity investment, 9 22 as provided in subsection 2, in a qualifying businessor a 9 23 community=based seed capital fund. 9 24 b. An individual may claim a tax credit under this 9 25paragraphsection of a partnership, limited liability company, 9 26 S corporation, estate, or trust electing to have income 9 27 taxed directly to the individual. The amount claimed by the 9 28 individual shall be based upon the pro rata share of the 9 29 individual's earnings from the partnership, limited liability 9 30 company, S corporation, estate, or trust. 9 31b.c. A tax credit shall be allowed only for an investment 9 32 made in the form of cash to purchase equity in a qualifying 9 33 businessor in a community=based seed capital fund. A 9 34 taxpayer that has received a tax credit for an investment in 9 35 a community=based seed capital fund shall not claim the tax 10 1 credit prior to the third tax year following the tax year in 10 2 which the investment is made. Any tax credit in excess of the 10 3 taxpayer's liability for the tax year may be credited to the 10 4 tax liability for the following five years or until depleted, 10 5 whichever is earlier. A tax credit shall not be carried back 10 6 to a tax year prior to the tax year in which the taxpayer 10 7 redeems the tax credit. 10 8c.In the case of a tax credit allowed against the taxes 10 9 imposed in chapter 422, division II, where the taxpayer died 10 10 prior to redeeming the entire tax credit, the remaining credit 10 11 can be redeemed on the decedent's final income tax return.10 12 d. For an investment made by a natural person, any tax 10 13 credit in excess of the tax liability is refundable. In lieu 10 14 of claiming a refund, the taxpayer may elect to have the 10 15 overpayment shown on the taxpayer's final, completed return 10 16 credited to the tax liability for the following tax year. For 10 17 any other person, any tax credit in excess of the taxpayer's 10 18 liability for the tax year may be credited to the tax liability 10 19 for the following three years or until depleted, whichever is 10 20 earlier. A tax credit shall not be carried back to a tax year 10 21 prior to the tax year in which the taxpayer redeems the tax 10 22 credit. 10 23 2.AThe amount of the tax credit shall equaltwenty 10 24twenty=five percent of the taxpayer's equity investment. The 10 25 maximum amount of a tax creditfor an investment by an investor 10 26 in any one qualifying business shall be fifty thousand dollars. 10 27 Each year, an investor and all affiliates of the investor shall 10 28 not claim tax credits under this section for more than five 10 29 different investments in five different qualifying businesses 10 30that may be claimed per tax year by a natural person and the 10 31 person's spouse, child, or sibling shall not exceed one hundred 10 32 thousand dollars combined. The maximum amount of tax credits 10 33 that may be issued per tax year for equity investments in any 10 34 one qualifying business shall not exceed five hundred thousand 10 35 dollars. 11 1 Sec. 20. Section 15E.43, subsections 5 and 7, Code 2015, are 11 2 amended to read as follows: 11 3 5. A tax credit shall not betransferabletransferred to any 11 4 othertaxpayerperson. 11 5 7. The authority shall develop a system for registration 11 6 andauthorizationissuance of tax credits authorized pursuant 11 7 to this division and shall control distribution of all tax 11 8credits distributedcredit certificates to investors pursuant 11 9 to this division. The authority shall develop rules for the 11 10 qualification and administration of qualifying businesses 11 11and community=based seed capital funds. The department of 11 12 revenue shall adoptthese criteria as administrative rules and 11 13 any otherrules pursuant to chapter 17A as necessary for the 11 14 administration of this division. 11 15 Sec. 21. Section 15E.43, subsections 6 and 8, Code 2015, are 11 16 amended by striking the subsections. 11 17 Sec. 22. Section 15E.44, subsection 2, paragraph c, Code 11 18 2015, is amended by striking the paragraph and inserting in 11 19 lieu thereof the following: 11 20 c. The business is participating in an entrepreneurial 11 21 assistance program. The authority may waive this requirement 11 22 if a business establishes that its owners, directors, officers, 11 23 and employees have an appropriate level of experience such 11 24 that participation in an entrepreneurial assistance program 11 25 would not materially change the prospects of the business. 11 26 The authority may consult with outside service providers in 11 27 consideration of such a waiver. 11 28 Sec. 23. Section 15E.44, subsection 2, paragraphs e and f, 11 29 Code 2015, are amended to read as follows: 11 30 e. The business shall not have a net worth that exceedsfive 11 31ten million dollars. 11 32 f. The business shall have secured all of the following at 11 33 the time of application for tax credits: 11 34 (1) At least two investors. 11 35 (2)totalTotal equity financing,near equity financing,12 1 binding investment commitments, or some combination thereof, 12 2 equal to at leasttwo hundred fiftyfive hundred thousand 12 3 dollars, from investors. For purposes of this subparagraph, 12 4 "investor" includes a person who executes a binding investment 12 5 commitment to a business. 12 6 Sec. 24. Section 15E.46, Code 2015, is amended to read as 12 7 follows: 12 8 15E.46ReportsConfidentiality == reports. 12 9 1. Except as provided in subsection 2, all information or 12 10 records in the possession of the authority with respect to 12 11 this division shall be presumed by the authority to be a trade 12 12 secret protected under chapter 550 or common law and shall be 12 13 kept confidential by the authority unless otherwise ordered by 12 14 a court. 12 15 2. All of the following shall be considered public 12 16 information under chapter 22: 12 17 a. The identity of a qualifying business. 12 18 b. The identity of an investor and the qualifying business 12 19 in which the investor made an equity investment. 12 20 c. The number of tax credit certificates issued by the 12 21 authority. 12 22 d. The total dollar amount of tax credits issued by the 12 23 authority. 12 24 3. The authority shall publish an annual report of the 12 25 activities conducted pursuant to this division and shall 12 26 submit the report to the governor and the general assembly. 12 27 The report shall include a listing of eligible qualifying 12 28 businesses and the number of tax credit certificates and the 12 29 amount of tax credits issued by the authority. 12 30 Sec. 25. Section 15E.52, subsection 4, Code 2015, is amended 12 31 to read as follows: 12 32 4. A taxpayer shall not claim a tax credit under this 12 33 section if the taxpayer is a venture capital investment fund 12 34 allocation manager for the Iowa fund of funds created in 12 35 section 15E.65 or an investor that receives a tax credit for 13 1 the same investment in a qualifying business as described in 13 2 section 15E.44 or in a community=based seed capital fund as 13 3 described in section 15E.45, Code 2015. 13 4 Sec. 26. Section 422.11F, subsection 1, Code 2015, is 13 5 amended to read as follows: 13 6 1. The taxes imposed under this division, less the credits 13 7 allowed under section 422.12, shall be reduced by an investment 13 8 tax credit authorized pursuant to section 15E.43 for an 13 9 investment in a qualifying businessor a community=based seed 13 10 capital fund. 13 11 Sec. 27. Section 422.33, subsection 12, paragraph a, Code 13 12 2015, is amended to read as follows: 13 13 a. The taxes imposed under this division shall be reduced by 13 14 an investment tax credit authorized pursuant to section 15E.43 13 15 for an investment in a qualifying businessor a community=based 13 16 seed capital fund. 13 17 Sec. 28. Section 422.60, subsection 5, paragraph a, Code 13 18 2015, is amended to read as follows: 13 19 a. The taxes imposed under this division shall be reduced by 13 20 an investment tax credit authorized pursuant to section 15E.43 13 21 for an investment in a qualifying businessor a community=based 13 22 seed capital fund. 13 23 Sec. 29. Section 432.12C, subsection 1, Code 2015, is 13 24 amended to read as follows: 13 25 1. The tax imposed under this chapter shall be reduced by 13 26 an investment tax credit authorized pursuant to section 15E.43 13 27 for an investment in a qualifying businessor a community=based 13 28 seed capital fund. 13 29 Sec. 30. REPEAL. Section 15E.45, Code 2015, is repealed. 13 30 Sec. 31. EFFECTIVE UPON ENACTMENT. This division of this 13 31 Act, being deemed of immediate importance, takes effect upon 13 32 enactment. 13 33 Sec. 32. APPLICABILITY. Unless otherwise provided in this 13 34 division of this Act, this division of this Act applies to 13 35 equity investments in a qualifying business made on or after 14 1 the effective date of this division of this Act, and equity 14 2 investments made in a qualifying business or community=based 14 3 seed capital fund prior to the effective date of this division 14 4 of this Act shall be governed by sections 15E.41 through 14 5 15E.46, 422.11F, 422.33, 422.60, 432.12C, and 533.329, Code 14 6 2015. 14 7 Sec. 33. APPLICABILITY. The sections of this division 14 8 of this Act amending section 15E.44, subsection 2, apply 14 9 to businesses that submit an application to the economic 14 10 development authority to be registered as a qualifying business 14 11 on or after the effective date of this division of this Act, 14 12 and businesses that submit an application to the economic 14 13 development authority to be registered as a qualifying business 14 14 before the effective date of this division of this Act shall be 14 15 governed by section 15E.44, subsection 2, Code 2015. 14 16 DIVISION III 14 17 ENTREPRENEUR INVESTMENT AWARDS PROGRAM 14 18 Sec. 34. Section 15E.362, Code 2015, is amended by striking 14 19 the section and inserting in lieu thereof the following: 14 20 15E.362 Entrepreneur investment awards program. 14 21 1. For purposes of this division, unless the context 14 22 otherwise requires: 14 23 a. "Business development services" includes but is not 14 24 limited to corporate development services, business model 14 25 development services, business planning services, marketing 14 26 services, financial strategies and management services, 14 27 mentoring and management coaching, and networking services. 14 28 b. "Eligible entrepreneurial assistance provider" means a 14 29 person meeting the requirements of subsection 3. 14 30 c. "Financial assistance" means the same as defined in 14 31 section 15.327. 14 32 d. "Program" means the entrepreneur investment awards 14 33 program administered pursuant to this division. 14 34 2. The authority shall establish and administer an 14 35 entrepreneur investment awards program for purposes of 15 1 providing financial assistance to eligible entrepreneurial 15 2 assistance providers that provide technical and financial 15 3 assistance to entrepreneurs and start=up companies seeking to 15 4 create, locate, or expand a business in the state. Financial 15 5 assistance under the program shall be provided from the 15 6 entrepreneur investment awards program fund created in section 15 7 15E.363. 15 8 3. In order to be eligible for financial assistance under 15 9 the program an entrepreneurial assistance provider must meet 15 10 all of the following requirements: 15 11 a. The provider must have its principal place of operations 15 12 located in this state. 15 13 b. The provider must offer a comprehensive set of business 15 14 development services to emerging and early=stage innovation 15 15 companies to assist in the creation, location, growth, and 15 16 long=term success of the company in this state. 15 17 c. The business development services may be performed at the 15 18 physical location of the provider or the company. 15 19 d. The business development services may be provided in 15 20 consideration of equity participation in the company, a fee 15 21 for services, a membership agreement with the company, or any 15 22 combination thereof. 15 23 4. Entrepreneurial assistance providers may apply for 15 24 financial assistance under the program in the manner and form 15 25 prescribed by the authority. 15 26 5. The economic development authority board in its 15 27 discretion may approve, deny, or defer each application 15 28 for financial assistance under the program from persons 15 29 it determines to be an eligible entrepreneurial assistance 15 30 provider. 15 31 6. Subject to subsection 7, the amount of financial 15 32 assistance awarded to an eligible entrepreneurial assistance 15 33 provider shall be within the discretion of the authority. 15 34 7. a. The maximum amount of financial assistance awarded 15 35 to an eligible entrepreneurial assistance provider shall not 16 1 exceed two hundred thousand dollars. 16 2 b. The maximum amount of financial assistance provided under 16 3 the program shall not exceed one million dollars in a fiscal 16 4 year. 16 5 8. The authority shall award financial assistance on a 16 6 competitive basis. In making awards of financial assistance, 16 7 the authority may develop scoring criteria and establish 16 8 minimum requirements for the receipt of financial assistance 16 9 under the program. In making awards of financial assistance, 16 10 the authority may consider all of the following: 16 11 a. The business experience of the professional staff 16 12 employed or retained by the eligible entrepreneurial assistance 16 13 provider. 16 14 b. The business plan review capacity of the professional 16 15 staff of the eligible entrepreneurial assistance provider. 16 16 c. The expertise in all aspects of business disciplines 16 17 of the professional staff of the eligible entrepreneurial 16 18 assistance provider. 16 19 d. The access of the eligible entrepreneurial assistance 16 20 provider to external service providers, including legal, 16 21 accounting, marketing, and financial services. 16 22 e. The service model and likelihood of success of the 16 23 eligible entrepreneurial assistance provider and its similarity 16 24 to other successful entrepreneurial assistance providers in the 16 25 country. 16 26 f. The financial need of the eligible entrepreneurial 16 27 assistance provider. 16 28 9. Financial assistance awarded to an eligible 16 29 entrepreneurial assistance provider shall only be used for 16 30 the purpose of operating costs incurred by the eligible 16 31 entrepreneurial assistance provider in providing business 16 32 development services to emerging and early=stage innovation 16 33 companies in this state. Such financial assistance shall not 16 34 be distributed to owners or investors of the company to which 16 35 business development services are provided and shall not be 17 1 distributed to other persons assisting with the provision of 17 2 business development services to the company. 17 3 10. The authority may contract with outside service 17 4 providers for assistance with the program or may delegate 17 5 the administration of the program to the Iowa innovation 17 6 corporation pursuant to section 15.106B. 17 7 11. The authority may make client referrals to eligible 17 8 entrepreneurial assistance providers. 17 9 Sec. 35. Section 15E.363, subsection 3, Code 2015, is 17 10 amended to read as follows: 17 11 3.TheMoneys credited to the fund are appropriated to 17 12 the authority and shall be used to providegrants under the 17 13 entrepreneur investment awards program established in section 17 14 15E.362financial assistance under the program. 17 15 DIVISION IV 17 16 MISCELLANEOUS CHANGES 17 17 Sec. 36. Section 15.355, subsection 2, Code 2015, is amended 17 18 to read as follows: 17 19 2. A housing business may claim a refund of the sales and 17 20 use taxes paid under chapter 423 that are directly related 17 21 to a housing project. The refund available pursuant to this 17 22 subsection shall be as provided in section 15.331Ato the 17 23 extent applicable for purposes of this program, excluding 17 24 subsection 2, paragraph "c", of that section. For purposes of 17 25 the program, the term "project completion", as used in section 17 26 15.331A, shall mean the date on which the authority notifies 17 27 the department of revenue that all applicable requirements 17 28 of an agreement entered into pursuant to section 15.354 are 17 29 satisfied. 17 30 Sec. 37. SPECIAL PROJECT EXTENSION. Notwithstanding 17 31 any other provision of law to the contrary, the economic 17 32 development authority may extend the project completion 17 33 date for a project awarded tax incentives under both the 17 34 redevelopment tax credit program in sections 15.293A and 17 35 15.293B and the housing enterprise zone tax incentives program 18 1 in section 15E.193B, Code 2014, if the property that is the 18 2 subject of the project suffered a catastrophic fire during the 18 3 2014 calendar year. 18 4 Sec. 38. EFFECTIVE UPON ENACTMENT. The section of this 18 5 division of this Act amending section 15.355, being deemed of 18 6 immediate importance, takes effect upon enactment. 18 7 Sec. 39. RETROACTIVE APPLICABILITY. The section of 18 8 this division of this Act amending section 15.355 applies 18 9 retroactively to July 1, 2014, for all agreements entered into 18 10 pursuant to section 15.354 on or after that date. 18 11 EXPLANATION 18 12 The inclusion of this explanation does not constitute agreement with 18 13 the explanation's substance by the members of the general assembly. 18 14 This bill relates to the administration of programs by the 18 15 economic development authority (EDA) by creating a renewable 18 16 chemical production tax credit, modifying the tax credit for 18 17 investments in qualifying businesses and community=based seed 18 18 capital funds, and modifying the entrepreneur investment awards 18 19 program. 18 20 DIVISION I == RENEWABLE CHEMICAL PRODUCTION TAX CREDIT. 18 21 Division I creates a renewable chemical production tax credit 18 22 program (program) that will be administered by the EDA and that 18 23 will provide tax credits to eligible businesses that produce 18 24 renewable chemicals in Iowa from biomass feedstock. "Renewable 18 25 chemical", "biomass feedstock", and other related terms are 18 26 defined in the division. 18 27 In order to qualify for the tax credit, a business must 18 28 meet several requirements. First, the business must be 18 29 physically located in Iowa and operated for profit under 18 30 single management. Second, the business must not be an 18 31 entity providing professional services, health care services, 18 32 or medical treatments, or be engaged primarily in retail 18 33 operations. Third, the business must have organized, expanded, 18 34 or located in Iowa on or after the effective date of the 18 35 division. Fourth, the business must not be, in the discretion 19 1 of the EDA, ineligible under certain provisions relating to the 19 2 relocation or reduction of business operations within Iowa. 19 3 Fifth, the business must be in compliance with all agreements 19 4 entered into under the program or other programs administered 19 5 by the EDA. 19 6 An eligible business seeking a tax credit is required 19 7 to apply to the EDA during the calendar year following the 19 8 calendar year in which the renewable chemicals are produced. 19 9 The application must include the amount of renewable chemicals 19 10 produced in Iowa from biomass feedstock by the eligible 19 11 business during the calendar year, measured in pounds, and any 19 12 other information reasonably required by the EDA in order to 19 13 establish and verify eligibility under the program. The EDA 19 14 may accept applications on a continuous basis or may establish 19 15 an annual application deadline. 19 16 Before being issued a tax credit, an eligible business 19 17 is required to enter into an agreement with the EDA for the 19 18 successful completion of all requirements of the program. The 19 19 EDA is authorized to impose two compliance cost fees under the 19 20 program. The first fee equals $500 per agreement. The second 19 21 fee equals 0.5 percent of the value of the tax credit claimed 19 22 pursuant to the agreement if the agreement has an aggregate tax 19 23 credit value of $100,000 or greater. 19 24 An eligible business that fails to comply with the 19 25 requirements of the program or the terms of an agreement with 19 26 the EDA may have its tax credits reduced, terminated, or 19 27 rescinded, and may be subject to the repayment or recapture of 19 28 claimed tax credits. 19 29 Upon determining that all requirements of an agreement and 19 30 the program have been fulfilled, the EDA shall issue a tax 19 31 credit and related tax credit certificate to the eligible 19 32 business in an amount equal to the product of $.05 multiplied 19 33 by the number of pounds of renewable chemicals produced in Iowa 19 34 from biomass feedstock by the eligible business during the 19 35 calendar year. Renewable chemicals produced by an eligible 20 1 business prior to the effective date of the division, or 20 2 prior to the date the business first qualifies as an eligible 20 3 business, or after calendar year 2025, shall not qualify for 20 4 the tax credit. 20 5 The tax credit shall be claimed for the tax year during 20 6 which the eligible business was issued the tax credit. The tax 20 7 credit may be claimed against the individual income tax and the 20 8 corporate income tax. The credit is refundable or may, at the 20 9 election of the taxpayer, be carried forward for up to one tax 20 10 year. The tax credit shall not be transferred to any person. A 20 11 tax credit issued to a partnership, limited liability company, 20 12 S corporation, cooperative organized under Code chapter 501 20 13 and filing as a partnership for federal tax purposes, estate, 20 14 or trust electing to have the income taxed directly to the 20 15 individual may be claimed by the individual based upon the pro 20 16 rata share of the individual's earnings from that entity. 20 17 The division provides that the program is subject to the 20 18 EDA's maximum aggregate tax credit cap of $170 million per 20 19 fiscal year in Code section 15.119, and not more than $15 20 20 million per fiscal year may be issued by the EDA under the 20 21 program. In addition, the maximum amount of tax credit that 20 22 may be issued to an eligible business in any one calendar year 20 23 shall not exceed $1 million or $500,000, depending on whether 20 24 the eligible business has been operating in Iowa at the time of 20 25 application for five or fewer years, or more than five years, 20 26 respectively. An eligible business shall not receive more than 20 27 five tax credits under the program. The EDA is required to 20 28 issue tax credits on a first=come, first=served basis until the 20 29 maximum amount of $15 million per fiscal year is reached. If 20 30 the amount of tax credits exceeds this amount in a fiscal year, 20 31 the EDA is required to establish a wait list and give priority 20 32 in subsequent years to the eligible businesses on the wait 20 33 list. 20 34 The division provides for the confidentiality of certain 20 35 information under the program. The identity of a tax credit 21 1 recipient and the amount of the tax credit shall be considered 21 2 public information under Code chapter 22 (examination of public 21 3 records), but any other information or record in the possession 21 4 of the EDA with respect to the program shall be presumed by 21 5 the EDA to be a trade secret protected under Code chapter 550 21 6 or common law and shall be kept confidential by the EDA unless 21 7 otherwise ordered by a court. 21 8 The division takes effect upon enactment and applies to 21 9 renewable chemicals produced in Iowa from biomass feedstock on 21 10 or after that date. The division applies retroactively to tax 21 11 years beginning on or after January 1, 2015. 21 12 DIVISION II == ANGEL INVESTOR TAX CREDITS. Division II 21 13 makes several changes to the tax credit for investments in 21 14 qualifying businesses and community=based seed capital funds, 21 15 often referred to as the angel investor tax credits. The 21 16 division amends the purpose of the tax credit in Code section 21 17 15E.41. The division excludes investments in community=based 21 18 seed capital funds from qualifying for the tax credit and 21 19 makes several conforming amendments to remove references to 21 20 community=based seed capital funds from the Code. 21 21 The division modifies the amount and dollar limitation of 21 22 the tax credit for a taxpayer. The tax credit is increased 21 23 from 20 percent to 25 percent of a taxpayer's equity investment 21 24 in a qualifying business. Under current law, a taxpayer cannot 21 25 claim more than $50,000 of tax credit per investment in a 21 26 qualifying business, and for each tax year a taxpayer and the 21 27 taxpayer's affiliates cannot claim tax credits for more than 21 28 five investments in five different qualifying businesses. The 21 29 division amends this dollar limitation to prohibit a natural 21 30 person and the person's spouse, child, or sibling from claiming 21 31 a combined amount of more than $100,000 in tax credits per tax 21 32 year. 21 33 The division also provides that no more than $500,000 in tax 21 34 credits may be issued per tax year for equity investments in 21 35 any one qualifying business. 22 1 The division modifies the procedures for claiming the tax 22 2 credit. Under current law, the tax credit is not refundable 22 3 but available for carryforward for up to five tax years. The 22 4 division makes the tax credit refundable for an investment 22 5 made by a natural person, and for any other person reduces the 22 6 carryforward period to three years. 22 7 The division strikes a provision permitting the EDA 22 8 to cooperate with small business development centers to 22 9 disseminate information regarding the credits and to develop 22 10 standard application forms, and requiring the EDA to distribute 22 11 copies of the application forms to all community=based seed 22 12 capital funds and potential individual investors. 22 13 The division modifies the eligibility requirements for 22 14 qualifying businesses. The division strikes the requirement 22 15 that a business have an owner that meets at least one of 22 16 four qualifications relating to business education or 22 17 business experience. The division requires that a business 22 18 be participating in an entrepreneurial assistance program, 22 19 as defined in the division, but allows the EDA to waive this 22 20 requirement if the business establishes that its owners, 22 21 directors, officers, and employees have an appropriate level 22 22 of experience such that an entrepreneurial assistance program 22 23 would not materially change the prospects of the business. 22 24 The EDA is allowed to consult with outside service providers 22 25 in considering such a waiver. The division increases from $5 22 26 million to $10 million the maximum amount of net worth that 22 27 a business may have to be considered a qualifying business. 22 28 The division increases from $250,000 to $500,000 the amount of 22 29 financing that a business must have in order to be considered a 22 30 qualifying business, removes "near equity" from the types of 22 31 financing that will be considered in that calculation, requires 22 32 that the financing be secured at the time of application for 22 33 the tax credits, and requires that the business have at least 22 34 two investors at the time of application for the tax credits. 22 35 These modified eligibility requirements apply to businesses 23 1 that submit an application to the EDA to be registered as a 23 2 qualifying business on or after the effective date of this 23 3 division of the bill, and businesses that submitted such an 23 4 application to the EDA before the effective date of this 23 5 division of the bill shall be governed by current law. 23 6 The division provides for the confidentiality of certain 23 7 information with regard to the tax credit. The identity of 23 8 a qualifying business, the identity of an investor and the 23 9 qualifying business in which the investor made an equity 23 10 investment, and the total number and amount of tax credits 23 11 issued shall be considered public information under Code 23 12 chapter 22 (examination of public records), but any other 23 13 information or record in the possession of the EDA with respect 23 14 to the program shall be presumed by the EDA to be a trade secret 23 15 protected under Code chapter 550 or common law and shall be 23 16 kept confidential by the EDA unless otherwise ordered by a 23 17 court. 23 18 The division takes effect upon enactment and applies to 23 19 equity investments in a qualifying business made on or after 23 20 that date. Equity investments in a qualifying business or 23 21 community=based seed capital fund made prior to the effective 23 22 date of the division shall be governed by current law. 23 23 DIVISION III == ENTREPRENEUR INVESTMENT AWARDS PROGRAM. 23 24 Division III amends the entrepreneur investment awards program 23 25 administered by the EDA. The division strikes provisions that 23 26 prohibited the EDA from making awards under the program since 23 27 July 1, 2014, and that required the EDA by December 31, 2014, 23 28 to conduct a comprehensive review of the program and submit 23 29 a report with specified information to the governor and the 23 30 general assembly. 23 31 The division modifies the purpose of the program to be 23 32 to provide financial assistance to eligible entrepreneurial 23 33 assistance providers (provider) that provide technical and 23 34 financial assistance to entrepreneurs and start=up companies 23 35 seeking to create, locate, or expand a business in Iowa. 24 1 "Financial assistance" is defined in the division. 24 2 The division changes the requirements for receiving an 24 3 award. To be eligible to receive an award under current 24 4 law, an entrepreneurial assistance program must have been 24 5 an Iowa=based business, expended at least $500,000 during 24 6 the previous fiscal year to provide technical and financial 24 7 assistance services that meet the broad=based needs of 24 8 entrepreneurs seeking to create, locate, or expand a business 24 9 in Iowa that intends to derive more than 10 percent of its 24 10 gross sales from markets outside Iowa; and must have engaged 24 11 and communicated with certain other programs, funding sources, 24 12 and entities for its entrepreneur clients. The division 24 13 amends the eligibility for receiving financial assistance to 24 14 require that a provider have its principal place of operations 24 15 in Iowa and that the provider offer a comprehensive set of 24 16 business development services to emerging and early=stage 24 17 innovation companies to assist in the creation, location, 24 18 growth, and long=term success of the company in Iowa. 24 19 "Business development services" is defined in the division. 24 20 Business development services may be performed at the physical 24 21 location of the provider or the company and may be provided in 24 22 consideration of equity participation in the company, a fee for 24 23 services, or a membership agreement with the company. 24 24 Under current law, the EDA board could approve, deny, or 24 25 defer each application for a grant, and was required to award 24 26 grants on a first=come, first=served basis. The division 24 27 specifies that the EDA board has the discretion to approve, 24 28 deny, or defer each application for financial assistance and 24 29 that the amount of financial assistance awarded to a provider 24 30 is within the discretion of the EDA. The division requires 24 31 the EDA to award financial assistance on a competitive basis 24 32 and allows the EDA to develop scoring criteria and establish 24 33 minimum requirements for the receipt of a financial assistance 24 34 award. 24 35 In addition to the four factors relating to the provider's 25 1 professional staff that the EDA may consider under current 25 2 law in deciding whether to award financial assistance, the 25 3 division provides that the EDA may also consider the service 25 4 model and likelihood of success of the provider, the provider's 25 5 similarity to other successful providers in the country, and 25 6 the provider's financial need. 25 7 The division modifies the maximum award amount for a 25 8 recipient. Under current law, a grant to an entrepreneur 25 9 assistance program cannot exceed the lesser of 25 percent of 25 10 the funds expended by the program during the previous fiscal 25 11 year, 100 percent of the funds raised from certain persons 25 12 by the program during the previous fiscal year, or $200,000. 25 13 The division provides that the amount of financial assistance 25 14 awarded to any one provider shall not exceed $200,000. 25 15 The division modifies the permitted use of funds received 25 16 under the program. Under current law, grants are only 25 17 permitted to be used for the purpose of operating costs 25 18 incurred by the program. The division specifies that financial 25 19 assistance awarded to a provider shall only be used for 25 20 the purpose of operating costs incurred by the provider in 25 21 the provision of business development services to emerging 25 22 and early=stage innovation companies in Iowa. The division 25 23 further requires that such financial assistance shall not be 25 24 distributed to owners or investors of the company to which the 25 25 business development services are being provided and shall not 25 26 be provided to other persons assisting with the provision of 25 27 the services. 25 28 Under current law, an entrepreneurial assistance provider is 25 29 required to accept client referrals from the EDA as a condition 25 30 of receiving a grant. The division provides that the EDA may 25 31 make client referrals to eligible providers. 25 32 DIVISION IV == MISCELLANEOUS CHANGES. Division IV makes 25 33 several miscellaneous changes to other EDA programs. The 25 34 division amends the sales and use tax refund available under 25 35 the workforce housing tax incentive program. That refund 26 1 is available for sales and use tax paid prior to project 26 2 completion, which is currently defined to mean the first date 26 3 upon which the average annualized production of finished 26 4 product for the preceding 90=day period at the manufacturing 26 5 facility operated by the eligible business is at least 50 26 6 percent of the initial design capacity of the facility. The 26 7 division amends the definition of "project completion" to mean 26 8 the date on which the EDA notifies the department of revenue 26 9 that all applicable requirements of a workforce housing tax 26 10 incentive program agreement are satisfied. This provision 26 11 takes effect upon enactment and applies retroactively to July 26 12 1, 2014, for all workforce housing tax incentive agreements 26 13 entered into on or after that date. 26 14 The division allows the EDA to extend the project 26 15 completion date for a project awarded tax incentives under the 26 16 redevelopment tax credit program and the housing enterprise 26 17 zone tax incentives program if the property that is the subject 26 18 of the project suffered a catastrophic fire during the 2014 26 19 calendar year. LSB 1212SV (3) 86 mm/sc
