Bills › 88th General Assembly
Creating an empower rural Iowa Act to provide incentives for broadband access
Sponsored by the Senate Ways and Means Committee
Where it is now
- Done: IntroducedApril 10, 2019
- Skipped: SubcommitteeSkipped
- Done: Senate committeeApril 17, 2019
- Done: Passes the SenateApril 24, 201950–0
- Skipped: House committeeSkipped
- Done: Passes the HouseApril 23, 2019
- Done: To the GovernorMay 2, 2019
- Done: Signed into lawMay 20, 2019
HF 772 became law → The same legislation passed as HF 772, so this version was set aside. Go to HF 772 What’s a funnel?
What’s in it
This bill modifies provisions applicable to the broadband grant program administered by the office of the chief information officer (OCIO) under Code chapter 8B. The bill provides that it may be known and cited as the “Empower Rural Iowa Act”. Current law requires the OCIO to administer a broadband grant program to award grants to communications service providers that reduce or eliminate targeted service areas, as defined, by installing broadband infrastructure that facilitates broadband service at or above megabits per second of download speed and megabits per second of upload speed as of July 1, 2015.
Read the full explanation
The bill removes references to the specified download and upload speeds and date throughout Code chapter 8B and instead references the download and upload speed benchmarks identified by the federal communications commission in its most recent broadband report issued pursuant to federal law.1, as described in the bill. Current law provides that the determination of whether a communications service provider facilitates broadband service meeting the requisite download or upload speeds shall be ascertained by reference to certain broadband availability maps or data sources identified by the OCIO by rule. The bill requires the OCIO to periodically make renewed determinations of whether such a provider facilitates broadband service at or above the requisite speeds, including making such determinations prior to each round of grant applications. The bill provides that the broadband grant program shall be designed to reduce or eliminate unserved and underserved areas in Iowa, leveraging federal funds and public and private partnerships where possible, by awarding grants to communications service providers to install broadband infrastructure that facilitates broadband service in targeted service areas at or above the requisite download and upload speeds. Current law allows unencumbered or unobligated moneys remaining in the broadband grant fund at the close of the fiscal year to remain available for use until the close of the succeeding fiscal year. The bill instead provides that such moneys shall remain available until three years following the last day of the fiscal year in which the funds were originally appropriated. The bill allows the OCIO to increase the minimum download and upload speeds for broadband grant eligibility by rule. The bill requires the OCIO to conduct a validation process for public comment on grant applications, as described in the bill. The bill requires the OCIO to identify certain information relating to broadband grants on a public internet site. Current law provides certain factors for the OCIO to consider in awarding grants on a competitive basis. The bill modifies such factors for the OCIO to consider in awarding grants and provides that the OCIO shall afford the greatest weight to certain factors, as described in the bill. Current law requires the OCIO to evaluate applications for broadband grants only pursuant to the information provided in an application. The bill allows the OCIO to consider any information obtained during the application process or validation process. The bill extends the OCIO broadband grant program from July 1, 2020, to July 1, 2025. Current law requires the OCIO to adopt rules related to the broadband grant program. The bill instead provides the OCIO with discretion to adopt rules deemed necessary to interpret or administer Code chapter 8B, including but not limited to rules relating to the broadband grant program.
Changed since by amendments S-3222, H-1272, H-1247, H-1246; see Amendments.
Fiscal note
AI summary This bill modifies broadband grant requirements and extends a property tax exemption, though these broadband changes are estimated to have no fiscal impact. It also increases the annual maximum for the Workforce Housing Tax Incentives Program and adds a one-time $10.0 million allocation for disaster areas. These housing incentives are projected to reduce net General Fund revenue by $2.2 million in fiscal year 2020, $4.9 million in fiscal year 2021, $8.2 million in fiscal year 2022, $7.2 million in fiscal year 2023, $5.0 million in fiscal year 2024, and $4.8 million in fiscal year 2025 and after. Additionally, the tax credits could reduce revenue for schools by as much as $100,000 per fiscal year.2
Read the fiscal note
Description
House File 772 relates to broadband infrastructure and tax incentives for housing development. The Bill:
- Modifies the existing broadband infrastructure grant program (Iowa Code chapter 8B) administered by the Office of the Chief Information Officer (OCIO). The Bill makes changes to definitions and grant application requirements. The Bill also extends the current grant program sunset date five years, from July 1, 2020, to July 1, 2025. The Bill does not provide funding for the grant program.
- Extends an existing property tax exemption for broadband infrastructure installed in certain areas of the State that meets minimum upload and download speeds. The exemption is extended five years to include infrastructure installations first assessed through assessment year (AY) 2026.
- Modifies the existing Workforce Housing Tax Incentives Program (WHTIP). The Bill:
- Provides for a $5.0 million increase (from $20.0 million to $25.0 million) in the annual maximum aggregate tax credit amount that may be awarded to projects in a fiscal year (applies to FY 2020 and after).
- Provides for a $5.0 million increase (from $5.0 million to $10.0 million) in the existing small city project suballocation (applies to FY 2020 and after).
- Changes the project award process from the current first-come, first-served basis to a competitive application process (applies to applications made on or after July 1, 2019).
- Limits the tax incentives available to an individual housing project to no more than the amount of tax incentives provided in the project agreement (applies to applications made on or after July 1, 2019).
- Notwithstands the $10.0 million small city project suballocation for FY 2020 and directs that up to the entire $25.0 million FY 2020 WHTIP allocation limit is available for small city projects registered prior to July 1, 2019.
- Provides for an additional $10.0 million one-time allocation of WHTIP tax credits for projects in counties that meet specified major disaster criteria.
Background
The broadband infrastructure grant program is authorized in Iowa Code section 8B.11. Grants are awarded to communications service providers on a competitive basis. The program received a $1.3 million appropriation from the Rebuild Iowa Infrastructure Fund (RIIF) for FY 2019. In addition, HF 759 (FY 2020 Administration and Regulation Appropriations Act) appropriates $5.0 million from the General Fund to the program in FY 2020. While the Bill extends the availability of the program, it does not provide future funding. The property tax exemption for qualified broadband infrastructure was enacted in HF 655 (2015 Community Development Act). The exemption applies to the installation of infrastructure meeting specified minimum upload and download speeds. To qualify, an infrastructure project had to commence and be completed on or after July 1, 2015, and before July 1, 2020. The Bill removes the upload and download speed minimums and replaces them with speeds identified by the Federal Communications Commission pursuant to Section 706 of the federal Telecommunications Act of 1996.
However, SF 2388 (2018 Telecommunications Property Tax Assessment Act) exempts broadband infrastructure from taxation as real property beginning with AY 2022. At that time, property taxation of telecommunications companies will be restricted to the value of land and buildings and, as a result, the value of broadband transmission property will not be subject to property tax. Therefore, the Bill’s extension of the property tax exemption for qualified broadband infrastructure will have no fiscal impact because such infrastructure will be exempt under existing law.
Current law provides that the WHTIP provides investment tax credits and sales/use tax refunds for housing businesses that complete qualified housing projects in Iowa. The current process is first-come, first-served. If a project registered with the Iowa Economic Development Authority is completed within a specified time limit, is examined by a certified public accountant, and all other requirements of the WHTIP are satisfied, investment tax credits and/or sales/use tax refunds are authorized. Currently, the tax incentive total issued in a fiscal year under the WHTIP is limited to $20.0 million, with a suballocation of up to $5.0 million per fiscal year reserved for projects located in any Iowa county that is not one of the 11 most populated counties.
The WHTIP provides a 20.0% investment tax credit for projects located in Iowa’s 88 least-populated counties and a 10.0% investment tax credit for projects located in the 11 most-populated counties. The tax credit percentage for projects qualifying for the one-time $10.0 million disaster allocation is 20.0%.
The WHTIP has been in place since FY 2015. From FY 2015 through FY 2019, a total of $100.0 million in WHTIP incentives was allocated to projects, and a backlog of approximately $54.0 million in registered projects has developed. Under current law, credit awards to completed projects will wait until additional annual allocations become available. Assumptions — Workforce Housing Tax Incentives Program
- The Bill raises the allocation cap for the WHTIP by $5.0 million per fiscal year, beginning FY 2020. The remaining changes to the WHTIP have no identifiable impact on the redemption of WHTIP tax credits or refunds. It is assumed that under current law, $20.0 million in tax incentives will be awarded each fiscal year, and under the Bill, $25.0 million in tax incentives will be awarded each fiscal year.
- The annual $5.0 million increase in tax credit awards is assumed to be divided into $1.2 million in increased sales/use tax refunds and $3.8 million in increased investment tax credits.
- The WHTIP investment tax credits are transferable but not refundable. It is assumed that 94.0% of the awarded investment tax credits will be redeemed over the course of six fiscal years and the timetable for redemptions will equal:
- Year 1 (fiscal year of award) = 46.0%
- Year 2 = 35.0%
- Year 3 = 6.0%
- Year 4 = 3.0%
- Year 5 = 2.0%
- Year 6 = 2.0%
- Sales/use tax refunds issued under the WHTIP are assumed to be redeemed at a rate of 76.8% of the award amount, with 50.0% of the 76.8% redeemed in the initial fiscal year of the award and 50.0% in the succeeding fiscal year.
- The additional $10.0 million in WHTIP tax credits for disaster areas is assumed to be redeemed as follows:
- FY 2021 = $0.9 million
- FY 2022 = $4.0 million
- FY 2023 = $3.0 million
- FY 2024 = $0.6 million
- FY 2025 = $0.3 million
- FY 2026 = $0.2 million
- Expiring unredeemed = $1.0 million
Fiscal Impact
For the broadband infrastructure provisions of the Bill (Division II):
- The extension of the authorization of the broadband grant program does not have a fiscal impact without additional funds dedicated to the program’s purpose.
- The OCIO will continue to administer the grant program and can be assumed to continue to incur administrative expenses if additional State funding is provided to the grant program.
- The extension of the property tax exemption for qualified broadband infrastructure installed prior to January 1, 2027, does not have a fiscal impact on State or local government, as that type of property is already exempt under current law.
The WHTIP provisions of the Bill (Division III) are projected to reduce net General Fund revenue by the following amounts:
- FY 2020 = $2.2 million
- FY 2021 = $4.9 million
- FY 2022 = $8.2 million
- FY 2023 = $7.2 million
- FY 2024 = $5.0 million
- FY 2025 and after = $4.8 million
As nonrefundable tax credits that may be applied against State individual income tax liability, the investment tax credit portion of the allocation limit increase could lower the amount of revenue raised by the local option income surtax for schools by as much as $100,000 per fiscal year.
Sources
- Department of Revenue
- Iowa Economic Development Authority
- Office of the Chief Information Officer
- Final Fiscal Note - Broadband and Housing Incentives · June 7, 2019
- Broadband and Housing Incentives · April 22, 2019
- Broadband and Housing Incentives · April 15, 2019
Iowa Code it changes
Lobbying
42 for · 0 against · 7 undecided · Who →
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88th General Assembly