Iowa General Assembly Daily Bills, Amendments & Study Bills March 17, 2009



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HF 751

House File 751 - Introduced

HOUSE FILE

BY COMMITTEE ON ECONOMIC

GROWTH
(SUCCESSOR TO HSB 134)

Passed House, Date Passed Senate, Date

Vote: Ayes Nays Vote: Ayes Nays

Approved
A BILL FOR
1 An Act relating to historic preservation and cultural and

2 entertainment district tax credits by increasing the aggregate

3 amount of credits that may be approved, changing the amounts

4 allocated to various projects, and modifying certain

5 administrative duties of the department of cultural affairs.

6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

7 TLSB 1304HV 83

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House File 751 - Introduced continued
PAG LIN

1 1 Section 1. Section 404A.2, Code 2009, is amended to read

1 2 as follows:

1 3 404A.2 AMOUNT OF CREDIT.

1 4 1. The amount of the credit equals twenty=five percent of

1 5 the qualified rehabilitation costs made to eligible property.

1 6 a. In the case of commercial property, rehabilitation

1 7 costs must equal at least fifty percent of the assessed value

1 8 of the property, excluding the land, prior to the

1 9 rehabilitation.

1 10 b. In the case of residential property or barns, the

1 11 rehabilitation costs must equal at least twenty=five thousand

1 12 dollars or twenty=five percent of the fair market assessed

1 13 value, excluding the land, prior to the rehabilitation,

1 14 whichever is less.

1 15 c. In computing the tax credit for eligible property that

1 16 is classified as residential or as commercial with multifamily

1 17 residential units, the rehabilitation costs used shall not

1 18 exceed one hundred thousand dollars per residential unit.

1 19 d. In computing the tax credit, the only costs which may

1 20 be included are the qualified rehabilitation costs incurred

1 21 between the period ending on the project completion date and

1 22 beginning on the date two years prior to the project

1 23 completion date, provided that any qualified rehabilitation

1 24 costs incurred prior to the date of approval of the project as

1 25 provided in section 404A.3 must be qualified rehabilitation

1 26 expenditures under the federal rehabilitation credit in

1 27 section 47 of the Internal Revenue Code.

1 28 2. For purposes of this chapter, qualified rehabilitation

1 29 costs include amounts if they are properly includable in

1 30 computing the basis for tax purposes of the eligible property.

1 31 a. Amounts treated as an expense and deducted in the tax

1 32 year in which they are paid or incurred and amounts that are

1 33 otherwise not added to the basis for tax purposes of the

1 34 eligible property are not qualified rehabilitation costs.

1 35 b. Amounts incurred for architectural and engineering


House File 751 - Introduced continued
2 1 fees, site survey fees, legal expenses, insurance premiums,

2 2 development fees, and other construction=related costs are

2 3 qualified rehabilitation costs to the extent they are added to

2 4 the basis for tax purposes of the eligible property.

2 5 c. Costs of sidewalks, parking lots, and landscaping do

2 6 not constitute qualified rehabilitation costs.

2 7 3. For purposes of individual and corporate income taxes

2 8 and the franchise tax, the increase in the basis of the

2 9 rehabilitated property that would otherwise result from the

2 10 qualified rehabilitation costs shall be reduced by the amount

2 11 of the credit computed under this chapter.

2 12 Sec. 2. Section 404A.3, Code 2009, is amended to read as

2 13 follows:

2 14 404A.3 APPROVAL OF REHABILITATION PROJECT.

2 15 1. a. In order for costs of a rehabilitation project to

2 16 qualify for a tax credit, the rehabilitation project must

2 17 receive approval from the state historic preservation office

2 18 of the department of cultural affairs.

2 19 b. Applications for approvals from the state historic

2 20 preservation office of the department of cultural affairs

2 21 shall be on forms approved by the state historic preservation

2 22 office and shall contain information as required by the state

2 23 historic preservation office. The information shall at least

2 24 include the approximate date of the start of rehabilitation,

2 25 the approximate date of completion, as well as the cost.

2 26 c. The approval process shall not exceed ninety days

2 27 beginning from the date the rehabilitation project is


2 28 submitted on which a completed application is received by the

2 29 state historic preservation office. After the ninety=day

2 30 limit, the rehabilitation project is deemed to be approved

2 31 unless the state historic preservation office has denied or

2 32 contacted for further information regarding the application.

2 33 2. The state historic preservation office shall establish

2 34 selection criteria and standards for rehabilitation projects

2 35 involving eligible property. The main emphasis of the


House File 751 - Introduced continued
3 1 standards shall be to ensure that a rehabilitation project

3 2 maintains the integrity of the eligible property. To the

3 3 extent applicable, the standards shall be consistent with the

3 4 standards of the United States secretary of the interior for

3 5 the rehabilitation of eligible property that is listed on the

3 6 national register of historic places or is designated as of

3 7 historic significance to a district listed in the national

3 8 register of historic places or shall be consistent with

3 9 standards for issuance of certificates of appropriateness

3 10 under sections 303.27 through 303.32.

3 11 The selection standards shall provide that a person who



3 12 qualifies for the rehabilitation tax credit under section 47

3 13 of the Internal Revenue Code shall automatically qualify for

3 14 the state historic preservation and cultural and entertainment

3 15 district tax credit under this chapter.

3 16 3. a. A rehabilitation project for which the state



3 17 historic preservation office has reserved tax credits pursuant

3 18 to section 404A.4 shall begin rehabilitation of the property

3 19 before the end of the fiscal year in which the project

3 20 application was approved and for which the tax credits were

3 21 reserved.

3 22 b. The eligible property shall be placed in service within



3 23 thirty=six months of the date on which the project application

3 24 was approved. For purposes of this section, "placed in

3 25 service" has the same meaning as used for purposes of section


3 26 47 of the Internal Revenue Code. However, if the state

3 27 historic preservation office determines that extenuating

3 28 circumstances exist, the office may grant an applicant an

3 29 additional twelve months in which to complete a project.

3 30 c. A rehabilitation project for which a project



3 31 application was approved and tax credits reserved prior to

3 32 July 1, 2009, shall complete the project and place the

3 33 building in service on or before June 30, 2011,

3 34 notwithstanding the time period specified in paragraph "b".

3 35 4. A rehabilitation project that does not meet the


House File 751 - Introduced continued
4 1 requirements of subsection 3 is subject to revocation,

4 2 repayment, or recapture of tax credits reserved or approved

4 3 pursuant to this chapter.

4 4 Sec. 3. Section 404A.4, Code 2009, is amended to read as

4 5 follows:

4 6 404A.4 PROJECT COMPLETION AND TAX CREDIT CERTIFICATION ==

4 7 CREDIT REFUND OR CARRYFORWARD.

4 8 1. Upon completion of the rehabilitation project, a

4 9 certification of completion must be obtained from the state

4 10 historic preservation office of the department of cultural

4 11 affairs. A completion certificate shall identify the person

4 12 claiming the tax credit under this chapter and the qualified

4 13 rehabilitation costs incurred up to the two years preceding

4 14 the completion date.

4 15 2. After verifying the eligibility for the tax credit, the

4 16 state historic preservation office, in consultation with the


4 17 department of economic development, shall issue a historic

4 18 preservation and cultural and entertainment district tax

4 19 credit certificate to be attached to the person's tax return.

4 20 The tax credit certificate shall contain the taxpayer's name,

4 21 address, tax identification number, the date of project

4 22 completion, the amount of credit, other information required

4 23 by the department of revenue, and a place for the name and tax

4 24 identification number of a transferee and the amount of the

4 25 tax credit being transferred.

4 26 3. A person receiving a historic preservation and cultural

4 27 and entertainment district tax credit under this chapter which

4 28 is in excess of the person's tax liability for the tax year is

4 29 entitled to a refund. Any credit in excess of the tax

4 30 liability shall be refunded with interest computed under

4 31 section 422.25. In lieu of claiming a refund, a taxpayer may

4 32 elect to have the overpayment shown on the taxpayer's final,

4 33 completed return credited to the tax liability for the

4 34 following year.

4 35 4. a. The total amount of tax credits that may be

House File 751 - Introduced continued

5 1 approved for a fiscal year under this chapter shall not exceed

5 2 ten million dollars in the fiscal year beginning July 1, 2007,



5 3 fifteen million dollars in the fiscal year beginning July 1,

5 4 2008, and twenty million dollars in the fiscal year beginning

5 5 July 1, 2009, and each fiscal year thereafter fifty million

5 6 dollars.

5 7 b. Of the tax credits approved for a fiscal year under

5 8 this chapter, ten the amount of the tax credits shall be

5 9 allocated as follows:

5 10 (1) Ten percent of the dollar amount of tax credits shall

5 11 be allocated for purposes of new projects with final qualified

5 12 rehabilitation costs of five hundred thousand dollars or less,


5 13 and forty.

5 14 (2) Thirty percent of the dollar amount of tax credits

5 15 shall be allocated for purposes of new projects located in

5 16 cultural and entertainment districts certified pursuant to

5 17 section 303.3B or identified in Iowa great places agreements

5 18 developed pursuant to section 303.3C. Any of the tax credits


5 19 allocated for projects located in certified cultural and

5 20 entertainment districts or identified in Iowa great places

5 21 agreements and for projects with a cost of five hundred

5 22 thousand dollars or less that are not reserved during a fiscal

5 23 year shall be applied to reserved tax credits issued in

5 24 accordance with section 404A.3 in order of original

5 25 reservation. The department of cultural affairs shall

5 26 establish by rule the procedures for the application, review,

5 27 selection, and awarding of certifications of completion.

5 28 (3) Twenty percent of the dollar amount of tax credits



5 29 shall be allocated for disaster recovery projects or emergency

5 30 preservation projects. For purposes of this subparagraph,

5 31 "disaster recovery project" means a property meeting the

5 32 requirements of an eligible property as described in section

5 33 404A.1, subsection 2, which is located in an area declared a

5 34 disaster area by the governor or by a federal official and

5 35 which has been physically impacted as a result of a natural

House File 751 - Introduced continued
6 1 disaster. "Emergency preservation project" means a property

6 2 meeting the requirements of an eligible property as described

6 3 in section 404A.1, subsection 2, which is under threat of

6 4 physical damage as a result of an emergency event that

6 5 requires timely action to preserve the physical integrity of

6 6 the property. "Emergency preservation project" does not

6 7 include a project threatened by physical damage that is the

6 8 result of neglect or delinquency on the part of the property

6 9 owner.

6 10 (4) Twenty percent of the dollar amount of the tax credits



6 11 shall be allocated for projects that involve the creation of

6 12 more than five hundred new jobs.

6 13 (5) Twenty percent of the dollar amount of the tax credits



6 14 shall be allocated for any eligible project.

6 15 c. If in any fiscal year an amount of tax credits



6 16 allocated pursuant to paragraph "b", subparagraph (1), (2),

6 17 (3), or (4), goes unclaimed, the amount of the unclaimed tax


6 18 credits shall be reserved for and allocated to projects under

6 19 subparagraph (5) for the subsequent fiscal year.

6 20 d. The departments of cultural affairs and revenue shall

6 21 each adopt rules to jointly administer this subsection and

6 22 shall provide by rule for the method to be used to determine

6 23 for which fiscal year the tax credits are available.

6 24 e. With the exception of tax credits issued pursuant to

6 25 contracts entered into prior to July 1, 2007, tax credits

6 26 shall not be reserved for more than three years.

6 27 5. a. Tax credit certificates issued under this chapter

6 28 may be transferred to any person or entity.

6 29 b. Within ninety days of transfer, the transferee must

6 30 submit the transferred tax credit certificate to the

6 31 department of revenue along with a statement containing the

6 32 transferee's name, tax identification number, and address, and

6 33 the denomination that each replacement tax credit certificate

6 34 is to carry and any other information required by the

6 35 department of revenue.
House File 751 - Introduced continued

7 1 c. Within thirty days of receiving the transferred tax

7 2 credit certificate and the transferee's statement, the

7 3 department of revenue shall issue one or more replacement tax

7 4 credit certificates to the transferee. Each replacement

7 5 certificate must contain the information required under

7 6 subsection 2 and must have the same expiration date that

7 7 appeared in the transferred tax credit certificate.

7 8 d. Tax credit certificate amounts of less than the minimum

7 9 amount established by rule of the state historic preservation

7 10 office department of revenue shall not be transferable.

7 11 e. A tax credit shall not be claimed by a transferee under

7 12 this chapter until a replacement tax credit certificate

7 13 identifying the transferee as the proper holder has been

7 14 issued.

7 15 f. The transferee may use the amount of the tax credit

7 16 transferred against the taxes imposed under chapter 422,

7 17 divisions II, III, and V, and chapter 432 for any tax year the

7 18 original transferor could have claimed the tax credit. Any

7 19 consideration received for the transfer of the tax credit

7 20 shall not be included as income under chapter 422, divisions

7 21 II, III, and V. Any consideration paid for the transfer of

7 22 the tax credit shall not be deducted from income under chapter

7 23 422, divisions II, III, and V.

7 24 Sec. 4. Section 404A.5, Code 2009, is amended to read as

7 25 follows:

7 26 404A.5 ECONOMIC IMPACT == RECOMMENDATIONS.

7 27 1. The department of cultural affairs, in consultation

7 28 with the department of economic development revenue, shall be

7 29 responsible for keeping the general assembly and the

7 30 legislative services agency informed on the overall economic

7 31 impact to the state of the rehabilitation of eligible

7 32 properties.

7 33 2. An annual report shall be filed which shall include,

7 34 but is not limited to, data on the number and potential value

7 35 of rehabilitation projects begun during the latest


House File 751 - Introduced continued
8 1 twelve=month period, the total historic preservation and

8 2 cultural and entertainment district tax credits originally

8 3 granted during that period, the potential reduction in state

8 4 tax revenues as a result of all tax credits still unused and

8 5 eligible for refund, and the potential increase in local

8 6 property tax revenues as a result of the rehabilitated

8 7 projects.

8 8 3. The department of cultural affairs, to the extent it is

8 9 able, shall provide recommendations on whether a limit on tax

8 10 credits should be established, the need for a broader or more

8 11 restrictive definition of eligible property, and other

8 12 adjustments to the tax credits under this chapter.

8 13 EXPLANATION

8 14 This bill makes changes to the administration of the

8 15 historic preservation and cultural and entertainment district

8 16 tax credit program by the department of cultural affairs.

8 17 Current law provides that the rehabilitation costs of

8 18 residential property or barns must equal $25,000 or 25 percent

8 19 of the fair market value of the structure, whichever is less.

8 20 The bill provides that the 25 percent provision is calculated

8 21 against the assessed value, instead of the fair market value.

8 22 Current law provides that the approval process for a

8 23 project applying for the credit must be completed within 90

8 24 days of the date on which the project is submitted to the

8 25 department. The bill provides that the 90=day period is

8 26 measured from the date on which the completed application is

8 27 received by the department.

8 28 Current law provides that a project not acted upon by the

8 29 department within the 90=day period is automatically approved.

8 30 The bill provides that it is not automatically approved unless

8 31 the department has failed within the 90=day period to either

8 32 deny the application or contact the applicant for further

8 33 information.

8 34 The bill provides that an approved project shall begin

8 35 rehabilitation before the end of the fiscal year in which the
House File 751 - Introduced continued
9 1 project is approved. The project must be completed and placed

9 2 in service within 36 months of the date of approval unless the

9 3 historic preservation office has granted additional time in

9 4 which to complete the project.

9 5 Current law requires the department to consult with the

9 6 department of economic development regarding certain aspects

9 7 of the program. The bill eliminates these requirements or

9 8 provides instead for consultation with the department of

9 9 revenue.

9 10 Current law provides that not more than $20 million in tax

9 11 credits may be issued in a fiscal year. The bill increases

9 12 that amount to $50 million.

9 13 Current law provides that the amount of tax credits

9 14 approved shall be allocated toward certain types of projects

9 15 as follows: (1) 10 percent to projects costing less than

9 16 $500,000; (2) 40 percent to projects in cultural and

9 17 entertainment districts or identified in Iowa great places

9 18 agreements; and (3) the remainder to all other projects.

9 19 The bill provides a new allocation for the approved

9 20 projects: (1) 10 percent to projects costing less than

9 21 $500,000; (2) 30 percent to projects in cultural and

9 22 entertainment districts or identified in Iowa great places

9 23 agreements; (3) 20 percent to disaster recovery or emergency

9 24 preservation projects; (4) 20 percent to projects that involve

9 25 the creation of more than 500 new jobs; and (5) 20 percent to

9 26 any eligible project. If any of the tax credits allocated

9 27 pursuant to (1), (2), (3), or (4) goes unclaimed, the amount

9 28 of the unclaimed tax credits shall be reserved for any

9 29 eligible project in the subsequent fiscal year.

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