Bills › 91st General Assembly
Relating to bonds and letters of credit for general contractors and subcontractors
Sponsored by the Senate Local Government (successor To Ssb 1151) Committee
Where it is now
- Done: IntroducedMarch 10, 2025
- Done: SubcommitteeJanuary 15, 2026
- Done: Senate committeeMarch 10, 2025
- Done: Passes the SenateMarch 2, 202644–0
- Stopped: House committeeDied when the General Assembly ended
- Next: Passes the House
- 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 Construction companies working in Iowa must now get a $50,000 bond or letter of credit to do business. These companies must file this financial security with the state to be allowed to register or work on private construction projects. If a contractor fails to do their job or breaks the law, the state can use this money to help the people who were harmed.1
Read the official explanation
This bill relates to performance bonds and letters of credit for general contractors and subcontractors. The bill requires a general contractor or subcontractor, as defined in Code chapter 572 (mechanic’s lien), engaged in the business of construction, defined in the bill as the improvement of real property, including the performance of labor or furnishing of materials for the alteration, repair, or erection of a building or structure, in this state to obtain and maintain an annual performance bond or irrevocable letter of credit in the amount of $50,000. The bond or letter of credit shall be payable to the state of Iowa and executed by a surety company or financial institution authorized to do business in this state. The bill requires a bond or letter of credit required by the bill to be filed with the state. The bill allows the state or a political subdivision of the state to enforce the requirements of the bill in connection with private construction work within its jurisdiction and to bring an action on the bond or letter of credit in the name of the state of Iowa for the use and benefit of a private person or political subdivision harmed by the contractor’s or subcontractor’s failure to perform contractual obligations or for violation of the bill or other applicable law. The bill limits the aggregate liability of a surety company or financial institution under a bond or letter of credit issued pursuant to the bill to the penal sum of the bond or the face amount of the letter of credit. The bill prohibits a general contractor or subcontractor from registering, renewing a registration, or conducting business as a general contractor or subcontractor unless the general contractor or subcontractor has a bond or letter of credit as required by the bill. The bill prohibits a political subdivision of the state from requiring, in connection with private construction work, a general contractor or subcontractor to obtain or file a bond, letter of credit, or other financial security, or the issuance of a license, or imposing a license fee or charge, except as otherwise required by law. The bill does not apply to a general contractor or subcontractor performing work for the state or a political subdivision of the state.
Why it matters. General contractors and subcontractors doing construction work in Iowa would be required to obtain and maintain an annual $50,000 performance bond or irrevocable letter of credit filed with the state. This requirement would prevent these businesses from registering or conducting business if they do not have the required bond or letter of credit. The Licensing and Regulation Fund is estimated to see increased costs of approximately $734,000 in fiscal year 2027 and approximately $724,000 annually for fiscal year 2028 and beyond.2
Changed since by amendment S-5044; see Amendments.
House subcommittee
Named March 10, 2026. On March 12, 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
Cost: up to $724,000 Compare with other bills
AI summary This bill requires in-state general contractors and subcontractors to obtain an annual performance bond or letter of credit of $50,000 filed with the state. It is estimated to increase costs to the Licensing and Regulation Fund by approximately $734,000 in fiscal year 2027 due to new staff positions and a one-time $10,000 programming cost. For fiscal year 2028 and beyond, the estimated annual cost to the fund is approximately $724,000.4
Read the fiscal note
Description
Senate File 2376 relates to bonds and letters of credit for general contractors and subcontractors and does the following:
- Requires general contractors and subcontractors that engage in the business of construction in the State to obtain and maintain an annual performance bond or irrevocable letter of credit in the amount of $50,000 filed with and payable to the State.
- Authorizes the State or a political subdivision to enforce the requirements of the Bill in connection with private construction work within its jurisdiction and to bring an action on the bond or letter of credit in the name of the State for the use and benefit of a private person or political subdivision harmed by the failure to perform contractual obligations or for other violations.
- Authorizes political subdivisions to require a contractor or subcontractor to obtain or file a bond, letter of credit, or other financial security only for private construction work that is performed in a public-right-of-way.
This Bill does not apply to a general contractor or subcontractor performing work for the State or a political subdivision, including work subject to the requirements of Iowa Code chapter 8A, subchapter III.
Background
Under current law, in-state general contractors and subcontractors that engage in the business of construction in the State are not required to obtain and maintain an annual performance bond or irrevocable letter of credit with the State. Out-of-state contractors are required to hold a surety bond in the amount of $25,000.
According to the Department of Inspections, Appeals, and Licensing (DIAL), there are approximately 19,900 in-state contractors and 816 out-of-state contractors, for a total of approximately 20,716 contractors.
Assumptions
- The DIAL will not need to make any changes to its current licensing system.
- According to the DIAL, the Administrative Licensing and Inspection Governance Network (ALIGN) system, which is currently being built, will require additional functionality that is not currently planned for. The DIAL estimates that these changes will cost approximately $10,000.
- According to the DIAL, entering the annual performance bonds and irrevocable letters of credit into the ALIGN system will require 2.5 Administrative Support Assistant 3 full-time equivalent (FTE) positions at an annual cost of $55,000 each. The 2.5 Administrative Support Assistant 3 FTE positions will cost approximately $138,000 annually.
- According to the DIAL, it is estimated that 10.0% of in-state contractors will go through an investigation, hearing, or revocation process.
- According to the DIAL, it is estimated that the investigation, hearing, and revocation process work will require 8.0 Investigator 2 FTE positions.
- Each Investigator 2 FTE position will cost approximately $73,000 annually. The 8.0 Investigator 2 FTE positions will cost $586,000 annually.
- No additional revenue will be generated as a result of this Bill.
- The funding source will be the Licensing and Regulation Fund (LRF).
Fiscal Impact
Senate File 2376 is estimated to increase costs in FY 2027 to the Licensing and Regulation Fund by approximately $734,000 for 10.5 additional FTE positions and a one-time programming cost of $10,000 to the ALIGN system. The costs for FY 2028 and thereafter will be approximately $724,000 annually.
Source
- Department of Inspections, Appeals, and Licensing
- Contractor Bond Requirements · March 18, 2026 · $724,000
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91st General Assembly