Bill Text: IA SF433 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act providing for an environmental practices tax credit, and including effective date and retroactive and other applicability provisions. (Formerly SSB 1258.)
Sponsorship: Committee Bill
Status: (Introduced - Dead) 2015-03-12 - Subcommittee, Bolkcom, Behn, and Quirmbach. S.J. 591. [SF433 Detail]
Download: Iowa-2015-SF433-Introduced.html
Senate File 433 - Introduced SENATE FILE BY COMMITTEE ON NATURAL RESOURCES AND ENVIRONMENT (SUCCESSOR TO SSB 1258) A BILL FOR 1 An Act providing for an environmental practices tax credit, 2 and including effective date and retroactive and other 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 2575SV (1) 86 da/sc PAG LIN 1 1 Section 1. Section 2.48, subsection 3, Code 2015, is amended 1 2 by adding the following new paragraph: 1 3 NEW PARAGRAPH. g. In 2018, the environmental practices tax 1 4 credit under chapter 467. 1 5 Sec. 2. NEW SECTION. 422.11K Environmental practices tax 1 6 credit. 1 7 The taxes imposed under this division, less the credits 1 8 allowed under section 422.12, shall be reduced by an 1 9 environmental practices tax credit allowed under chapter 467. 1 10 Sec. 3. Section 422.33, Code 2015, is amended by adding the 1 11 following new subsection: 1 12 NEW SUBSECTION. 24. The taxes imposed under this division 1 13 shall be reduced by an environmental practices tax credit 1 14 allowed under chapter 467. 1 15 Sec. 4. NEW SECTION. 467.1 Environmental practices tax 1 16 credit ==== creation and purpose. 1 17 1. An environmental practices tax credit is established. 1 18 2. The purpose of the tax credit is to assist eligible 1 19 crop farmers to participate in establishing new qualified 1 20 environmental practices that do all of the following: 1 21 a. Reduce soil erosion and sediment loss. 1 22 b. Manage nutrients and reduce contaminant loads 1 23 contributing to receiving surface waters. 1 24 c. Improve surface water quality. 1 25 Sec. 5. NEW SECTION. 467.2 Definitions. 1 26 1. "Agreement" means an environmental practices agreement 1 27 as provided in section 467.7. 1 28 2. "Crop" means alfalfa, corn, soybeans, straw, oats, wheat, 1 29 or other similar crop ordinarily utilized for, or ordinarily 1 30 added as an ingredient in, animal feed or bedding, food 1 31 intended for human consumption, or fiber. 1 32 3. "Crop farmer" means a person who holds a title to 1 33 cropland. 1 34 4. a. "Cropland" means real estate that meets all of the 1 35 following criteria: 2 1 (1) Includes at least thirty contiguous acres not divided 2 2 into lots for the purpose of sale or lease, and not divided by 2 3 city streets or alleys. 2 4 (2) Is used to grow a crop. 2 5 b. "Cropland" may include real estate that is located within 2 6 the limits of a city. 2 7 5. "Department" means the department of agriculture and land 2 8 stewardship. 2 9 6. a. "Environmental practice" means a permanent 2 10 conservation measure established on cropland, or as part of 2 11 cropland's field drainage tile system, in order to reduce 2 12 nutrients or contaminant loads contributed by soil or sediment 2 13 to receiving surface waters. 2 14 b. "Environmental practice" includes any of the following: 2 15 (1) Stabilizing the soil or otherwise limiting sediment 2 16 from being conveyed by surface water runoff. 2 17 (2) (a) Filtering sediment=laden water. 2 18 (b) Detaining sediment=laden water for a period in order 2 19 to allow the sediments to settle out, or to allow bacteria to 2 20 digest contaminants. 2 21 (3) Reducing the volume or velocity of 2 22 precipitation=induced surface water. 2 23 7. "Holder" means a person who is either an eligible crop 2 24 farmer who has been issued an environmental practices tax 2 25 credit certificate, or a person who has been transferred such 2 26 tax credit certificate. 2 27 8. "Nutrient" includes nitrogen and phosphorus. 2 28 9. "Practice" means a qualified environmental practice as 2 29 provided in section 467.6. 2 30 10. "Tax credit" means the environmental practices tax 2 31 credit as established in section 467.1. 2 32 11. "Tax credit certificate" means the environmental 2 33 practices tax credit certificate issued pursuant to section 2 34 467.9. 2 35 Sec. 6. NEW SECTION. 467.3 Administration. 3 1 1. The department, in cooperation with the department of 3 2 revenue, shall administer and enforce the provisions of this 3 3 chapter. 3 4 2. The departments shall prescribe forms as required to 3 5 administer this chapter. 3 6 3. The departments may provide procedures for the receipt, 3 7 filing, processing, and return of documents in an electronic 3 8 format, including but not limited to the transmission of 3 9 documents by the internet. The departments may provide for 3 10 authentication of the documents that may include electronic 3 11 signatures as provided in chapter 554D. 3 12 4. The departments shall adopt rules necessary to 3 13 administer this chapter pursuant to chapter 17A. 3 14 Sec. 7. NEW SECTION. 467.4 Allowance. 3 15 1. The environmental practices tax credit is allowed 3 16 under this chapter against the taxes imposed in chapter 422, 3 17 divisions II and III. 3 18 2. An individual may claim a tax credit of a partnership, 3 19 limited liability company, S corporation, estate, or trust 3 20 electing to have income taxed directly to the individual. The 3 21 amount claimed by the individual shall be based upon the pro 3 22 rata share of the individual's earnings from the partnership, 3 23 limited liability company, S corporation, estate, or trust. 3 24 3. A tax credit in excess of the taxpayer's liability for 3 25 the tax year is not refundable but may be credited to the tax 3 26 liability for the following five years or until depleted, 3 27 whichever is earlier. A tax credit shall not be carried back 3 28 to a tax year prior to the tax year in which the taxpayer claims 3 29 the tax credit. 3 30 4. A tax credit shall not be allowed for the portion of the 3 31 cost of a qualified environmental practice that was financed 3 32 by federal or state moneys, including but not limited to 3 33 moneys credited to the state treasury or a state fund or state 3 34 account. 3 35 Sec. 8. NEW SECTION. 467.5 Eligibility ==== crop farmers. 4 1 1. An environmental practices tax credit is only allowed 4 2 under section 467.4 if the tax credit is claimed by a crop 4 3 farmer meeting the eligibility requirements of this section 4 4 or a taxpayer transferred the tax credit pursuant to section 4 5 467.10. 4 6 2. A crop farmer is not eligible, unless the crop farmer 4 7 is an Iowa taxpayer who has an annual gross income of less 4 8 than four million dollars computed as an average of the crop 4 9 farmer's three preceding tax years according to the crop 4 10 farmer's filed federal tax returns. 4 11 3. a. In the case of a crop farmer holding title to 4 12 cropland in joint tenancy or tenancy in common, the annual 4 13 gross incomes of all such joint tenants or tenants in common 4 14 are considered together when determining eligibility. 4 15 b. In the case of married taxpayers, the annual gross 4 16 incomes of both spouses are considered together when 4 17 determining eligibility. 4 18 Sec. 9. NEW SECTION. 467.6 Qualified environmental 4 19 practices. 4 20 1. The environmental practices tax credit is only allowed 4 21 under section 467.4, if it is an environmental practice that 4 22 qualifies under this section. 4 23 2. a. A qualified environmental practice must be any of the 4 24 following: 4 25 (1) A bioreactor installed as part of or connected to a 4 26 field drainage tile line. 4 27 (2) A saturated buffer that includes all of the following: 4 28 (a) A subsurface drain outlet with permanent vegetation. 4 29 (b) A water control structure and subsurface distribution 4 30 piping capable of diverting drainage system discharge to create 4 31 an elevated zone of soil saturation. 4 32 (3) Cropland integrated with prairie grass strips 4 33 established in a drainage area as follows: 4 34 (a) A minimum of ten percent of the drainage area must be 4 35 comprised of strips of prairie grass established as permanent 5 1 vegetation that is used to filter runoff. 5 2 (b) The remaining percent of the drainage area must be 5 3 comprised of crops, with the crops alternating with the strips 5 4 of prairie grass. 5 5 (4) A grassed waterway, as defined in section 459A.102, 5 6 if constructed and maintained in compliance with standards of 5 7 the United States department of agriculture, natural resources 5 8 conservation service. 5 9 (5) An area maintained in permanent vegetation cover, 5 10 including perennial vegetation cover consisting of grasses, 5 11 legumes, or both, and includes but is not limited to grasslands 5 12 or forages. 5 13 (6) A wetland area of at least one=half acre so long as the 5 14 area is mostly under water or waterlogged during the growing 5 15 season and is characterized by vegetation of hydric soils. 5 16 b. The department shall adopt rules pursuant to chapter 5 17 17A further defining a qualified environmental practice as 5 18 described in paragraph "a". 5 19 3. The department may establish similar qualified 5 20 environmental practices by rule. The practice must accomplish 5 21 the purposes of this chapter as provided in section 467.1 in 5 22 a manner comparable to a qualified environmental practice 5 23 described in subsection 2. 5 24 4. The department may rank qualified environmental 5 25 practices according to a cost=benefit analysis to be used 5 26 in prioritizing the approval of applications under section 5 27 467.8 for the issuance of environmental practices tax credit 5 28 certificates. 5 29 Sec. 10. NEW SECTION. 467.7 Environmental practices 5 30 agreement. 5 31 1. As a condition for allowing an environmental practices 5 32 tax credit, the eligible crop farmer and the department must 5 33 execute an environmental practices agreement as provided in 5 34 this section. 5 35 2. The agreement shall be signed by the eligible crop farmer 6 1 and a copy of the agreement shall be attached to an application 6 2 for an environmental practices tax credit certificate as 6 3 required in section 467.8. The department's execution of the 6 4 agreement is contingent upon the department's approval of the 6 5 application. 6 6 3. a. The agreement shall also require that the eligible 6 7 crop farmer maintain the qualified environmental practice 6 8 so that when placed in service it effectively performs the 6 9 function for which it was originally established for the period 6 10 specified in the agreement. 6 11 b. In order to be maintained, a qualified environmental 6 12 practice must be kept in good repair, or be reconstructed 6 13 if necessary. A qualified environmental practice is not 6 14 maintained if it is removed, altered, or modified so that it 6 15 no longer effectively performs the function for which it was 6 16 originally established. 6 17 4. The agreement is a charge against the eligible crop 6 18 farmer who shall be personally liable for the maintenance of 6 19 the qualified environmental practice for the remaining period 6 20 of the agreement. A successor in interest to the cropland 6 21 shall not be responsible for the maintenance of the qualified 6 22 environmental practice. The agreement does not create a legal 6 23 or equitable interest in the cropland. 6 24 5. The term of the agreement commences on the date that 6 25 the department approves the application for the environmental 6 26 practices tax credit. The term of the agreement shall not 6 27 exceed twenty years. 6 28 6. a. The eligible crop farmer must consent to the 6 29 department inspecting the location where the qualified 6 30 environmental practice is established. Nothing in this section 6 31 prevents the department from inspecting the location of a 6 32 proposed environmental practice. 6 33 b. Upon approving an application and executing the 6 34 agreement, the department may inspect the location where the 6 35 qualified environmental practice is established upon consent 7 1 of the eligible crop farmer or under an administrative search 7 2 warrant obtained under section 808.14. 7 3 c. The department may arrange that any inspection 7 4 be conducted by the commissioners of the soil and water 7 5 conservation district where the cropland is located as provided 7 6 in chapter 161A. 7 7 7. The department may enforce the terms and conditions of 7 8 the agreement by administrative order. The courts of this 7 9 state may prevent and restrain a breach of an agreement through 7 10 the issuance of an injunction. The attorney general may bring 7 11 an action on behalf of the department to enforce the terms and 7 12 conditions of the agreement. 7 13 8. a. If an agreement is terminated after the tax credit 7 14 is claimed, the department shall rescind the tax credit 7 15 certificate and demand a refund of the amount of the tax credit 7 16 claimed multiplied by an effective interest rate as provided 7 17 in this subsection. The payment due must be remitted to the 7 18 department for deposit in the state treasury within thirty days 7 19 from the date the department delivers notice of payment due to 7 20 the crop farmer or the farmer's estate. 7 21 b. The effective interest rate is based on the current rate 7 22 published in the Iowa administrative bulletin by the department 7 23 of revenue pursuant to section 421.7 on the date that the 7 24 department notifies the eligible crop farmer or the farmer's 7 25 estate of the payment amount due. 7 26 c. (1) The termination is nonhostile under any of the 7 27 following circumstances: 7 28 (a) The cropland is transferred for fair value to another 7 29 person, so long as each person who executed the agreement has 7 30 relinquished any apparent, real, or contingent interest in the 7 31 cropland, and the department is notified of the transfer not 7 32 more than ninety days after the transfer is effective. 7 33 (b) The cropland is to be converted to a use incompatible 7 34 with crop production, and the department is notified of the 7 35 change in use not more than ninety days after the effective 8 1 date of the change. 8 2 (2) Under the circumstance described in subparagraph (1), 8 3 the effective interest rate for a nonhostile termination equals 8 4 the current rate. 8 5 (3) A refund of tax credit amounts claimed and carried 8 6 forward is not owing or required to be paid under this 8 7 paragraph "c", if the successor titleholder of the cropland 8 8 agrees in writing to assume the liability of the eligible crop 8 9 farmer under the agreement. 8 10 d. The termination is hostile under any circumstances not 8 11 described in paragraph "a". The effective interest rate for a 8 12 hostile termination equals ten times the current rate. 8 13 Sec. 11. NEW SECTION. 467.8 Tax credit certificates ==== 8 14 applications. 8 15 1. The department shall accept applications submitted 8 16 by eligible crop farmers for the issuance of environmental 8 17 practices tax credit certificates. The department shall not 8 18 approve an application until all of the following occurs: 8 19 a. The department and the crop farmer execute an 8 20 environmental practices agreement as provided in section 467.7. 8 21 b. The crop farmer has established a qualified environmental 8 22 practice placed in service as provided in section 467.7. 8 23 c. The crop farmer submits federal tax returns, including 8 24 all supporting schedules, for at least the prior three tax 8 25 years. 8 26 2. The department may require that the eligible crop 8 27 farmer submit additional information as determined relevant 8 28 by the department. The department may require the additional 8 29 information be submitted with the application or after the 8 30 application has been accepted. 8 31 3. The department may approve an application submitted by an 8 32 eligible crop farmer, regardless of any of the following: 8 33 a. The farmer was issued a tax credit certificate under 8 34 this chapter for a prior tax year, or may be issued a tax 8 35 credit certificate for a future tax year, regardless of whether 9 1 the tax credit certificate was or may be used, not used, or 9 2 transferred. 9 3 b. The farmer has submitted two or more applications under 9 4 this chapter for separate tax credit certificates to be used 9 5 in the same tax year. However, the department is not required 9 6 to approve such applications. 9 7 4. The department shall approve applications on a 9 8 first=come, first=served basis, unless the department 9 9 prioritizes applications according to cost=benefit analysis of 9 10 environmental practices as provided in section 467.6. 9 11 5. The department shall not approve an application, if any 9 12 of the following applies: 9 13 a. The amount of the tax credit would exceed seventy=five 9 14 percent of the actual and reasonable cost of establishing a 9 15 practice. 9 16 b. The eligible crop farmer would otherwise be allowed to 9 17 claim a tax credit in excess of ten thousand dollars for that 9 18 tax year. 9 19 c. The taxpayer is at fault for breaching any environmental 9 20 practice agreement as provided in section 467.7. 9 21 Sec. 12. NEW SECTION. 467.9 Tax credit certificates ==== 9 22 issuance. 9 23 1. A taxpayer is not allowed an environmental practices 9 24 tax credit, unless an environmental practices tax credit 9 25 certificate issued by the department of agriculture and land 9 26 stewardship is included with the taxpayer's tax return received 9 27 by the department of revenue for the tax year for which the tax 9 28 credit is claimed. 9 29 2. A tax credit certificate, unless rescinded by the 9 30 department of agriculture and land stewardship, shall 9 31 be accepted by the department of revenue, subject to any 9 32 conditions or restrictions placed by the department of 9 33 agriculture and land stewardship upon the face of the tax 9 34 credit certificate. 9 35 Sec. 13. NEW SECTION. 467.10 Tax credit certificates ==== 10 1 transfer. 10 2 1. An eligible crop farmer issued a tax credit certificate, 10 3 or other holder of an environmental practice tax certificate, 10 4 may transfer the tax credit certificate to a transferee. A tax 10 5 credit certificate shall be transferable by the holder and any 10 6 subsequent holders. A transferee may use the amount of the 10 7 tax credit transferred against the taxes imposed in chapter 10 8 422, divisions II and III, for any future tax year the farmer 10 9 could have claimed the tax credit. A transferred tax credit 10 10 equals the amount of the tax credit that would otherwise remain 10 11 eligible to be credited to the future tax liability of the 10 12 prior holder. 10 13 2. Any consideration received for the transfer of the tax 10 14 credit shall not be included as income under chapter 422, 10 15 divisions II and III. Any consideration paid for the transfer 10 16 of the tax credit shall not be deducted from income under 10 17 chapter 422, divisions II and III. 10 18 3. Nothing in this section prevents a tax credit certificate 10 19 from validly passing to the estate or trust of an eligible crop 10 20 farmer or transferee under chapter 633. 10 21 4. a. A taxpayer who has already claimed the tax credit 10 22 and surrendered the tax credit certificate to the department 10 23 of revenue, but who is intending to transfer the remaining tax 10 24 credit amount to a transferee, shall apply to the department of 10 25 revenue for a replacement tax credit certificate in the manner 10 26 and form prescribed by the department of revenue. 10 27 b. Paragraph "a" does not apply if the department of revenue 10 28 provides for the transfer of the tax credit by another method 10 29 including by recording the transfer on the face of the original 10 30 tax credit certificate. 10 31 5. If the tax credit has not been claimed, within ninety 10 32 days of the transfer, the transferee shall submit the 10 33 transferred tax credit certificate to the department of revenue 10 34 along with a statement containing the transferee's name, tax 10 35 identification number, and address, the denomination that the 11 1 tax credit certificate is to carry, and any other information 11 2 required by the department of revenue. 11 3 6. Within thirty days of receiving an application under 11 4 subsection 4 or the transferred tax credit certificate and 11 5 the transferee's statement as provided in subsection 5, the 11 6 department of revenue shall issue a replacement tax credit 11 7 certificate to the transferor under subsection 4 or the 11 8 transferee under subsection 5. Each replacement tax credit 11 9 certificate shall contain the same type of information required 11 10 for the original tax credit certificate and shall have the same 11 11 expiration date that appeared on the transferred tax credit 11 12 certificate. 11 13 7. A tax credit shall not be claimed by a transferee until 11 14 a replacement tax credit certificate identifying the transferee 11 15 as the proper holder has been issued by the department of 11 16 revenue. 11 17 Sec. 14. NEW SECTION. 467.11 Tax credits ==== availability. 11 18 The amount of environmental practices tax credit 11 19 certificates that may be issued under this chapter shall not in 11 20 the aggregate exceed three million dollars in any tax year. 11 21 Sec. 15. EFFECTIVE UPON ENACTMENT. This Act, being of 11 22 immediate importance, takes effect upon enactment. 11 23 Sec. 16. APPLICABILITY. This Act applies to environmental 11 24 practices first established on or after the effective date of 11 25 this Act. 11 26 Sec. 17. RETROACTIVE APPLICABILITY. This Act applies 11 27 retroactively to January 1, 2015, for tax years beginning on 11 28 or after that date. 11 29 EXPLANATION 11 30 The inclusion of this explanation does not constitute agreement with 11 31 the explanation's substance by the members of the general assembly. 11 32 This bill establishes an environmental practices tax credit. 11 33 The purpose of the tax credit is to assist eligible crop 11 34 farmers in reducing soil erosion and sediment loss, managing 11 35 nutrients and reducing contaminant loads contributing to 12 1 receiving surface waters, and improving surface water quality. 12 2 The bill provides that the tax credit is to be administered 12 3 by the department of agriculture and land stewardship and the 12 4 department of revenue. The tax credit is allowed against 12 5 individual and corporate income taxes. The tax credit cannot 12 6 be used for any part of the cost of a practice that was financed 12 7 in whole or in part by federal or state moneys. The tax credit 12 8 must be claimed by an eligible crop farmer who has an annual 12 9 gross income of less than $4 million. In addition, the tax 12 10 credit is only available for certain qualified environmental 12 11 practices as set forth in the bill or as established by 12 12 departmental rule that meets the purposes of the tax credit. 12 13 The bill requires an eligible crop farmer to submit 12 14 an application to the department of agriculture and land 12 15 stewardship for approval which must include a qualified 12 16 environmental practices agreement to be executed by the 12 17 department and the eligible crop farmer if the department 12 18 approves the application. The application must require that 12 19 the practice be maintained for a specific number of years. 12 20 The agreement does not create a lien on the land or bind a 12 21 successor in interest. It provides for the inspection of 12 22 the qualified environmental practice and the agreement's 12 23 enforcement. It also provides for the termination of the 12 24 agreement and recision of the tax credit and refund to the 12 25 state of a prorated portion of the tax credit claimed together 12 26 with interest. 12 27 The bill provides for the issuance of a tax credit 12 28 certificate which must be included with the taxpayer's state 12 29 tax return in order to claim the tax credit. It also provides 12 30 for the transferability of the tax credit certificate to any 12 31 number of subsequent transferees. Not more than $3 million in 12 32 tax credit certificates may be issued in any tax year. 12 33 The bill takes effect upon enactment for environmental 12 34 practices first conducted or installed on or after that date 12 35 and applies retroactively to tax years beginning on and after 13 1 January 1, 2015. LSB 2575SV (1) 86 da/sc
