Exempting sales and use taxes incurred for constructing a regional water trail system by a nonprofit corporation, and including effective date and retroactive applicability provisions

Sponsored by the House Ways and Means Committee

Topics:Environment & natural resources Taxes

Same legislation: HSB 774

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Official bill page Lobbyist declarations One-pager to print

Where it is now

Done: IntroducedApril 8, 2026
Done: SubcommitteeApril 8, 2026
Done: House committeeApril 15, 2026
Stopped: Passes the HouseDied when the General Assembly ended
Next: Senate committeeFunnel: by March 20, 2026
Next: Passes the Senate
Next: To the Governor
Next: Signed into law

Died when the session ended The 2026 session adjourned on May 3, 2026, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?

What’s in it

AI summary Certain Iowa nonprofit organizations that build regional water trail systems would no longer have to pay sales or use taxes on building materials, equipment, or construction services. These nonprofits must have a board mostly appointed by local government officials and follow specific recreation and safety plans. This change allows these groups to get refunds for taxes paid on items used to build the trails.¹

Read the official explanation

This bill exempts sales and use taxes incurred by a nonprofit corporation for the construction of a regional water trail system. The bill makes a nonprofit corporation (nonprofit) organized under Code chapter 504 a designated exempt entity, which allows the nonprofit corporation to apply to the department of revenue for the refund of the sales and use tax upon sales of building materials, supplies, and equipment, or from services furnished, by a contractor in the performance of a written contract with the nonprofit. The nonprofit is generally defined to mean an Iowa nonprofit corporation that has a majority of voting board members appointed by political subdivisions of the state, that implements a regional recreational and dam safety plan, and constructs a regional water trail system. The bill also exempts from the sales tax the sales price of tangible personal property or specified digital products sold or of services furnished to the nonprofit.3(80).3(80)(c)(1) to specify written contracts with an exempt entity for the sales tax exemption even if another designated exempt entity ultimately owns the property subject to the construction project.5. The bill takes effect upon enactment and applies retroactively to January 1, 2025, to all tangible personal property or specified digital products sold, or services furnished, to the designated exempt entity occurring on or after that date. The bill also applies retroactively to January 1, 2025, to building materials, supplies, equipment, or services furnished to a contractor and used in the performance of a written contract with the designated exempt entity occurring on or after that date.

Full bill text²

House subcommittee

Named April 8, 2026 (as HSB 774). On April 13, 2026 it recommended passage.

Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part

Fiscal note

AI summary This bill provides sales and use tax exemptions and refunds for certain nonprofit organizations constructing regional water trail systems. It is estimated to decrease revenue for the General Fund, the SAVE Fund, and the LOST by $2.0 million, $0.4 million, and $0.4 million in fiscal year 2027. Further decreases are expected for the General Fund, SAVE Fund, and LOST in fiscal year 2028 and fiscal year 2029.³

Read the fiscal note

Description

House File 2774 creates a sales and use tax exemption and refund for the construction of a regional water trail system by certain nonprofit organizations. The Bill also allows written contracts with a designated exempt entity to qualify for a sales and use tax exemption if the construction project becomes the property of another designated exempt entity. The Bill takes effect upon enactment and applies retroactively to January 1, 2025.

Background

Designated exempt entities may apply to the Iowa Department of Revenue (IDR) for a refund of the sales and use tax paid for building materials, supplies, equipment, and services furnished by a contractor in the performance of a written contract.

Under current law, a written construction contract with a designated exempt entity for the construction of a regional water trail system qualifies for a sales and use tax exemption only if the construction project becomes public property or the property of the designated exempt entity included in the contract.

Assumptions

Transactions eligible for a sales and use tax exemption or refund that occur prior to July 1, 2026, will impact FY 2027. Transactions eligible for a sales and use tax exemption or refund that occur on or after July 1, 2026, will impact the fiscal year in which they occur.
One regional water trail construction project will qualify for the sales and use tax exemption and refund during the projection period. This project will take place between 2021 and 2028 with a total cost of $125.0 million.
Construction costs are distributed equally across each year of a construction project.
Secure an Advanced Vision for Education (SAVE) refunds are 1.0% of taxable expenditures. Local option sales tax (LOST) distributions are estimated to be 0.95% of taxable expenditures.