Bill expands economic development tax credits

Summary#

HSB-785 would amend Iowa’s major economic growth attraction program in the Iowa Code and add a provision allowing its investment tax credits to reduce insurance-premium taxes. Its stated purpose is to modify the program; the bill does not guarantee that a project will be attracted or succeed. The supplied status says it was reported and renumbered as HF 2801; it is not law based on that status.

  • The Iowa Economic Development Authority may choose either tax credits of up to 5% for up to two eligible businesses, or a credit of up to 10% for one eligible business with a project in a rural county. The options cannot both be used.
  • A rural county is one with 50,000 people or fewer in the most recent U.S. decennial census. For either option, the authority must find the site suitable. Rural projects may qualify through a documented site evaluation as well as through the specified land-control or certified-site routes.
  • A business cannot receive a credit certificate until its project, or a designated portion, is in service and at least half of the agreed jobs for that project or portion are on its payroll at wages at least 140% of the qualifying wage threshold.
  • Credits are paid over five years under the 5% option and ten years under the rural option. Excess credits may be refunded; the rural credit may also be transferred, subject to authority approval and a check that the recipient is not associated with a foreign adversary or foreign adversary entity.
  • The bill adds rules for recovering credits if a business disposes of or makes project property unusable within five years, or within ten years for the rural option. It also makes businesses and some transferees liable for credits obtained through prohibited activity, with an exception for qualifying transferees.

What it means for you#

  • Businesses seeking a program credit: The bill describes a program for qualifying investments over $1 billion, according to its explanation. A rural project could receive a larger percentage credit, but only one rural business may use that option instead of up to two businesses using the 5% option. The authority decides whether a site is suitable.
  • Businesses receiving credits: A rural credit may be transferred only with authority approval. Transferability does not apply to agreements made after December 31, 2027. Businesses may have to repay some or all of a credit if project property becomes ineligible within the applicable five- or ten-year period.
  • Taxpayers: Credits can reduce state tax revenue, and excess credits may be refunded. The bill also allows them against insurance-premium taxes.
  • Counties and communities: The supplied explanation says existing program rules allow a community to grant a property-tax exemption and businesses may receive other listed incentives. This bill changes a condition for the agricultural-land exemption; it does not itself require a community to grant an exemption.

Money#

No publicly available information on the bill’s estimated cost is included in the supplied material.

  • The bill authorizes refundable credits of up to 5% or 10% of qualifying investment, depending on the option. It gives no overall dollar estimate or cap.
  • The bill does not provide a staffing or administrative cost estimate. Refundable credits and credits used against taxes could reduce state revenue or require payments, but the amount is unknown.

What is unclear#

  • The parent Iowa Code provisions are not supplied, so the bill’s descriptions of current law could not be checked against the full current law.
  • “Site evaluation commensurate with a certified site” and “foreign adversary” are not defined in the supplied bill text. It also relies on an external definition of “affiliate” that is not supplied.
  • The bill does not specify how the authority will judge site suitability, what evidence a site evaluation must include, or how it will decide which eligible businesses receive the limited credits.
  • No fiscal estimate is supplied, and the bill does not state how the new credit option would affect any existing agreements or other program incentives beyond the provisions described.

Case for#

  • A possible argument for the bill is that a larger credit could make the program available to a major project in a rural county.
  • Requiring a project to be in service and at least half of its agreed jobs to be on payroll before issuing the credit links the benefit to project progress and hiring.
  • Repayment rules could recover some credit value if project property becomes ineligible soon after a credit is issued.
  • Transferability could give eligible rural businesses another way to use the credit, while approval and recipient checks limit who can receive it.

Case against#

  • A credit of up to 10% of a qualifying investment can be substantial, and the bill supplies no cost estimate or overall dollar cap.
  • The bill allows the authority to judge site suitability and accept site evaluations without setting out the decision standards in the text.
  • Choosing the rural option uses the program’s allowance for one eligible business instead of up to two businesses under the other option; the bill does not explain how the authority should weigh those choices.
  • The bill’s long repayment periods and transfer rules add complexity. The supplied text does not fully explain how those rules interact with existing agreements or incentives.