Relating to the administration and implementation of state taxation matters and credits, including economic development and energy tax incentives and programs, and future tax contingencies, making appropriations, and including effective date provisions

The maximum amount of tax credits that the authority may allocate to the renewable chemical production tax credit program for the fiscal year beginning July 1, 2021, and ending June 30, 2022, and for each fiscal year thereafter is reduced from $10 million to $5 million. DIVISION II —— HIGH QUALITY JOBS —— ELIGIBILITY REQUIREMENTS. To be eligible to receive incentives or assistance under the high quality jobs program, a business cannot be in the process of reducing operations in one community while simultaneously apply for assistance under the program. Under current law, a reduction in operations within months before or after a business submits an application to the high quality jobs program is presumed to be a reduction in operations while simultaneously applying for assistance under the program. Under the bill, the economic development authority (authority) cannot presume that a reduction in operations is a reduction while simultaneously applying for assistance under the program with regard to a business that submits an application on or before June 30, 2022, if the business demonstrates to the satisfaction of the authority that the reduction in operations occurred after March 1, 2020, and that it was a result of the COVID-19 pandemic. The authority must consider whether the benefit of the project proposed by the business outweighs any negative impact related to the reduction in operations. The business remains subject to all other eligibility requirements. This division of the bill is repealed July 1, 2022.0.0 technology investment fund (fund).0 technology investments” (investments) is defined as projects that are intended to lead to the adoption of, and integration of, smart technologies into existing manufacturing operations located in the state by mitigating the risk to the manufacturer of significant technology investments. Projects may include investments in specialized hardware, software, or other equipment intended to assist a manufacturer in increasing the manufacturer’s productivity, efficiency, and competitiveness. The fund may be administered as a revolving fund and may consist of any moneys appropriated for purposes of the program and any other moneys that are lawfully available to the authority. The authority must use moneys in the fund to award financial assistance to eligible manufacturers for investments. Financial assistance may include but is not limited to grants, loans, and forgivable loans. The requirements for a manufacturer to be eligible for financial assistance under the program are outlined in the bill. Eligible manufacturers must submit an application to the program in the manner prescribed by the economic development authority (authority) by rule. The authority may accept applications during one or more application periods during a fiscal year as determined by the authority. All completed applications must be reviewed and scored on a competitive basis pursuant to rules adopted by the authority. The authority may engage an outside technical review panel (panel) to complete a technical review of applications. The authority board members appointed by the governor must review the recommendations of the authority and of the panel, if applicable, and shall approve, defer, or deny each application. In making recommendations to the board, the authority and the panel must consider the factors detailed in the bill. The board cannot approve an application for financial assistance for an investment that was made prior to the date of the application. The maximum amount of financial assistance awarded to an eligible manufacturer under the program cannot exceed $75,000. The authority must adopt rules as necessary to implement and administer the program. DIVISION IV —— ENERGY INFRASTRUCTURE REVOLVING LOAN PROGRAM.46, alternate energy revolving loan program, to prohibit the Iowa energy center from initiating any new loans after June 30, 2021. The division also requires that all loan payments received after June 30, 2021, be deposited, and any moneys remaining in the alternate energy revolving loan fund after June 30, 2021, be transferred, to the newly created energy infrastructure revolving loan fund. The division creates an energy infrastructure revolving fund (fund) in the office of the treasurer of state to be administered by the Iowa energy center (center). Moneys in the fund are to be used to provide financial assistance for the development and construction of energy infrastructure, including projects that support electric or gas generation transmission, storage, or distribution; electric grid modernization; energy-sector workforce development; emergency preparedness for rural and underserved areas; the expansion of biomass, biogas, and renewable natural gas; innovative technologies; and the development of infrastructure for alternative fuel vehicles. “Energy infrastructure” is defined as land, buildings, physical plant and equipment, and services directly related to the development of projects used for, or useful for, electricity or gas generation, transmission, storage, or distribution. “Financial assistance” is also defined in the bill. The center is required to establish and administer an energy infrastructure revolving loan program (program) to encourage the development of energy infrastructure within the state. An individual, business, rural electric cooperative, or municipal utility located and operating in this state is eligible for financial assistance under the program. With the approval of the center’s governing board, the economic development authority (authority) must determine the amount and the terms of all financial assistance awarded to an individual, business, rural electric cooperative, or municipal utility under the program. All agreements and administrative authority are vested in the center’s governing board. The authority may use not more than percent of the moneys in the fund at the beginning of each fiscal year for purposes of administrative costs, marketing, technical assistance, and other program support. DIVISION V —— WORKFORCE HOUSING TAX INCENTIVES.119 sets an aggregate tax credit amount limit for certain economic development programs.356 shall not be allocated more than $25 million in tax credits, and of the tax credits allocated to this program, $10 million is reserved for allocation to qualified housing projects in small cities. This division increases the workforce housing tax credit allocations from $25 million to $40 million for FY 2021-2022. Of the moneys allocated to workforce housing tax credits in FY 2021-2022, the bill increases the tax credits reserved for qualified housing projects in small cities from $10 million to $12 million. Beginning with FY 2022-2023 and each fiscal year thereafter, the bill sets the workforce housing tax credit allocations at $30 million, of which $15 million shall be reserved for small cities. Currently, upon completion of a housing project, a housing business (housing developer, contractor, or nonprofit that completes a housing project) submits an examination of the project in accordance with the American institute of certified public accountants to the authority.356. The bill also requires the authority to review the information submitted by the housing business prior to notifying the housing business of tax incentive awards. The bill permits the authority to establish a disaster housing recovery period following the declaration of a major disaster by the president of the United States. Currently, the authority may accept applications for disaster recovery housing projects on a continuous basis.106A(1)(o). DIVISION VI —— BROWNFIELDS AND GRAYFIELDS. Current law provides that the economic development authority (authority) may allocate not more than $10 million in tax credits in a fiscal year to the brownfield redevelopment program (brownfields). The division provides that tax credits that are not awarded or that are revoked (including revoked within the previous five years) under brownfields may be awarded during the next annual application period, and those tax credits do not count against the $10 million tax credit maximum.293A, redevelopment tax credits, is repealed on June 30, 2021. The division changes the repeal date to June 30, 2031, and the repeal date is effective upon enactment of the division.293B, related to the application, review, registration, and authorization of projects awarded tax credits under brownfields, is repealed on June 30, 2021. The division changes the repeal date to June 30, 2031, and the repeal date is effective upon enactment of the division. DIVISION VII —— FEDERAL PAYCHECK PROTECTION PROGRAM. Under current law, for the tax year 2020 and later, Iowa law fully conforms with the federal treatment of forgiven paycheck protection program loans and excludes such amounts from net income and allows certain deductions for business expenses paid using those loans. For fiscal-year filers who received paycheck protection program loans during the 2019 tax year, current law excludes such amounts from net income, but does not allow certain deductions for business expenses paid using those loans. The bill fully conforms with federal law for those fiscal-year filers who previously were excluded from such conformity and allows such filers to take business expense deductions using federal paycheck protection program loan proceeds that were forgiven. This division of the bill takes effect upon enactment. DIVISION VIII —— FUTURE TAX CHANGES. The bill amends 2018 Iowa Acts, chapter 1161, section 133 (trigger), by striking the two conditions necessary for the trigger to occur, and specifies the provisions in 2018 Iowa Acts, chapter 1161, sections through 132, take effect January 1, 2023.3146 billion, and also equaling or exceeding 104 percent of the net general fund revenues for the fiscal year ending June 30, 2021. If these two conditions are not satisfied, current law institutes the changes for tax years beginning on or after the January following the first fiscal year for which the two conditions do occur. By striking the “trigger”, the bill sets in motion numerous tax changes for tax years beginning on or after January 1, 2023, described below.50% For a married couple filing a joint return, the taxable income amounts in each bracket above are doubled. Also, the taxable income amounts in each bracket above will be indexed to inflation and increased in future tax years, beginning in the tax year following the 2023 tax year. Under current law, the starting point for computing the Iowa individual income tax is federal adjusted gross income before the net operating loss deduction, which is generally a taxpayer’s gross income minus several deductions. From that point, Iowa requires several adjustments and then provides taxpayers with a deduction for federal income taxes paid, and the option to deduct a standard deduction or itemized deductions. The bill changes the starting point for computing the individual income tax to federal taxable income, which includes all deductions and adjustments taken at the federal level in computing tax, including a standard deduction or itemized deductions, and the qualified business income deduction allowed for certain income earned from a pass-through entity. Because the starting point changes to federal taxable income, and federal law does not provide for the filing status of married filing separately on a combined return, the bill repeals that filing status option for Iowa tax purposes. Because net operating loss is no longer calculated at the state level, the bill requires a taxpayer to add back any federal net operating loss deduction carried over from a taxable year beginning prior to the 2023 tax year, but allows taxpayers to deduct any remaining Iowa net operating loss from a prior taxable year. The bill repeals the individual alternative minimum tax (AMT), allows an individual to claim any remaining AMT credit against the individual’s regular tax liability for the 2023 tax year, and then repeals the AMT credit in the tax year following the 2023 tax year. The bill repeals most Iowa-specific deductions, exemptions, and adjustments currently available when computing net income and taxable income under Iowa law, including the Iowa optional standard deduction and all itemized deductions, and the ability to deduct federal income taxes, except for a one-year phase out in the 2023 tax year for taxes paid, or refunds received, that relate to a prior year. The bill maintains the add-back for income from securities that are federally exempt but not state-exempt, and for bonus depreciation amounts. The bill maintains the general pension exclusion and the deduction for income from federal securities. The bill maintains the deduction for contributions to the Iowa 529 plan, the Iowa ABLE plan, a first-time homebuyer savings account, and an individual development account. The bill also maintains the deductions for military pension income, military active duty pay, social security retirement benefits, certain payments received for providing unskilled in-home health care, certain amounts received from the veterans trust fund, victim compensation awards, biodiesel production refunds, certain wages paid to individuals with disabilities or individuals previously convicted of a felony, certain organ donations, and Segal AmeriCorps education award payments.7(29) to make the deduction only applicable to taxpayers who are at least years old and who have net income below $100,000.7(21) to restrict the deduction to the sale of real property used in farming businesses by permitting the taxpayer to take the deduction if either of the following apply: the taxpayer materially participated in the farming business for at least years and held the real property for at least years; or the taxpayer sold the real property to a relative. The bill expands the definition of “relative” to include an entity in which a relative of the taxpayer has a legal or equitable interest in the entity as an owner, member, partner, or beneficiary. The bill provides a new deduction for any income of an employee resulting from the payment by an employer, whether paid to the employee or a lender, of principal or interest on the employee’s qualified education loan.13, to require that any amount of itemized deduction, standard deduction, personal exemption deduction, or qualified business income deduction that was allowed in computing federal taxable income shall be added back. Under current law, the starting point for calculating the corporate income tax and franchise tax is federal taxable income before the net operating loss deduction, because net operating loss is calculated at the state level. The bill repeals the separate calculation of net operating loss at the state level. As a result, the bill requires taxpayers to add back any federal net operating loss deduction carried over from a taxable year beginning prior to the trigger year, but allows taxpayers to deduct any remaining Iowa net operating loss from a prior taxable year. The bill also repeals most Iowa-specific deductions, exemptions, and adjustments currently available when computing net income and taxable income under Iowa law. The bill maintains the add-back for income from securities that are federally exempt but not state exempt, and for bonus depreciation amounts. The bill maintains the deductions for income from federal securities, for foreign dividend and subpart F income, for certain wages paid to individuals with disabilities or individuals previously convicted of a felony, and for biodiesel production refunds.