Relating to housing in the state by establishing an Iowa housing tax credit program, establishing a neighborhood renovation grant program, and increasing first-time homebuyer tax incentives, and including effective date and applicability provisions

The inclusion of this explanation does not constitute agreement with the explanation’s substance by the members of the general assembly. This bill relates to housing in the state by establishing an Iowa housing tax credit program and a neighborhood renovation grant program and by increasing first-time homebuyer tax incentives. DIVISION I —— IOWA HOUSING TAX CREDIT PROGRAM. The bill creates an Iowa housing tax credit program available against the individual and corporate income taxes, franchise tax, insurance premium tax, and moneys and credits tax. The bill requires the Iowa finance authority (authority) to develop a system for the application, review, and authorization of Iowa housing tax credits. A tax credit may be claimed by a taxpayer for a “qualified development” defined to mean a qualified low-income housing project under section 42(g) of the Internal Revenue Code that is financed by tax-exempt bonds. An Iowa housing tax credit may be authorized by the authority if all of the following apply: the tax credit is issued to a taxpayer who has an ownership interest in the qualified development; the tax credit amount is allocated pursuant to a qualified allocation plan adopted by the authority; the tax credit is necessary for the financial feasibility of the qualified development; the amount of the tax credit allocated to an owner shall not exceed percent of the qualified basis of the qualified development; and the qualified development is the subject of a recorded restrictive covenant requiring the qualified development be maintained and operated as a qualified development for a certain number of years. The amount of an Iowa housing tax credit award is determined by the authority and may be claimed during the credit period (10 years), and any credit in excess of the taxpayer’s liability for the tax year is not refundable but may be credited to the tax liability for the following five years. In any calendar year, the bill limits the aggregate amount of the tax credit to $15 million plus the sum of the total of unallocated tax credits from the preceding calendar year and the previously allocated tax credits that have been revoked, canceled, or recaptured. A taxpayer shall claim the credit by including one or more tax certificates issued by the authority with the taxpayer’s return. The bill allows a tax credit certificate to be transferred to any person or entity. The bill requires the transferee to submit the transferred tax credit certificate to the authority within days of the transfer, and requires the authority to issue a replacement tax credit certificate within days of receiving the transferred tax credit certificate. The bill allows the authority to recapture tax credit amounts from previously issued tax credits, if on the last day of a taxable year during the compliance period (15 years), if the amount of the qualified basis of a qualified development owned by a taxpayer claiming the credit is less than the amount of the qualified basis as of the last day of the immediately preceding tax year, the amount of the taxpayer’s liability shall be increased by the recapture amount determined using the method under section 42(j) of the Internal Revenue Code. If a recapture event occurs, the bill requires the taxpayer to include the recaptured amount on the return submitted for the tax year in which the recapture event is identified. The bill requires the authority to submit a report to the general assembly by January each year, detailing the Iowa housing tax credit program. The division takes effect January 1, 2026, and applies to tax years beginning on or after that date. DIVISION II —— FIRST-TIME HOMEBUYER SAVINGS ACCOUNTS. The bill makes changes to the income tax benefits related to contributions made to a first-time homebuyer savings account. Under current law, for married persons filing a joint return an account holder is allowed to deduct the first $4,000 of contributions made to an account during the tax year if the account holder also maintains a joint first-time homebuyer savings account, and for any other person the account holder is allowed to deduct for the first $2,000 of contributions made to such an account during the tax year. The first-time homebuyer savings account annual deduction limits are indexed to inflation and are increased each year. For the 2024 tax year the annual deduction limit for married persons filing a joint return is $4,512, and for all other persons the limit is $2,256. The bill increases the annual deduction limit for first-time homebuyer savings account contributions to $10,000 for married persons filing a joint return, and to $5,000 for any other account holder. The new annual deduction limits in the bill are also indexed to inflation and are increased each year. DIVISION III —— NEIGHBORHOOD RENOVATION GRANT PROGRAM. The bill establishes a neighborhood housing renovation grant program (program) and fund (neighborhood fund) to be administered by the authority for purposes of awarding grants to eligible homeowners for qualifying exterior home improvements, repairs, or renovations (exterior work). There is appropriated to the authority for deposit in the neighborhood fund for the fiscal year beginning July 1, 2025, from the general fund of the state, the sum of $50 million.7(2), interest or earnings on moneys in the neighborhood fund shall accrue to the authority and shall be used for purposes of the program.33, moneys in the neighborhood fund at the end of each fiscal year shall not revert to any other fund but shall remain in the neighborhood fund for expenditure for subsequent fiscal years. All repayments or recaptures of the grants awarded under the program shall accrue to the authority and shall be used for purposes of the program. The authority shall not use more than percent of the moneys in the neighborhood fund at the beginning of the fiscal year for purposes of administrative costs, marketing, and other program support. To qualify for the program, a homeowner’s household income shall not exceed $109,000 and the homeowner must occupy the property at which the exterior work will occur. A grant awarded under the program shall not exceed $20,000. Exterior work that qualifies for the program is detailed in the bill. The authority shall adopt rules to administer the division.