Ways & Means Committee Report – Week 14, 2019

SF 618 is the Alcoholic Beverages Division (ABD) departmental bill. It makes changes that will create clarity, improve readability and make the law easier for regulators to apply and enforce with consistency. This is largely a technical cleanup bill.

This bill removes references to percentage of alcohol by weight from the definitions for alcoholic liquor, beer, high-alcoholic content beer and wine. The definition for wine is further amended to provide percentage age of alcohol by volume.

It allows ABD to prescribe a uniform fee against certain licensees when they fail to maintain dram shop liability insurance and to assess a capped fee to recover administrative costs related to contested case proceedings through the administrative rules process.

The bill will allow confidentiality of records collected by the Division from licensees or permittees in conjunction with investigations, inspections and audits before administrative or criminal charges are filed. This proposed change will assist the regulator and protect the rights of businesses it regulates.

The bill will require liquor, wine and beer manufacturers to share with the Division the records they are required to submit to the Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury (TTB). This ensures that the Division has the information it needs to validate taxes owed to the state. Reciprocal language for class “A” native distilled spirits license holders was passed in 2017.

Other key changes in the bill include:

Authorizing the Division to adopt rules to recover operational costs arising from the failure of licensees or permittees to remain in compliance with the law.
Establishing uniform language regarding the types of action that may be taken as a result of a violation or the rules of the Division. Conforming changes are made throughout the chapter.
Eliminating the additional tax imposed on airlines for Sunday sales of liquor.
Relocating provisions in §123.144(2) and §123.146 that relate to how homemade beer can be used and how beer may be imported for personal use. These changes are intended to assist the reader by consolidating several related provisions into one section.
Allowing Hy-Vee and other stores to have a distribution center carry alcohol and deliver it to homes.

The committee adopted a technical amendment that adds “investigative” to the types of entities with access to investigative records and makes a formatting fix proposed by the bill drafter.
[4/11: Short From (Absent: Brown)]

SF 619 – Regulation of service contract providers

SF 619 combines two Code Chapters (516E Motor Vehicle Service Contracts and 523C Residential Service Contracts). The proposal is based on recommendations by the Service Contract Industry Council (SCIC), a national trade association that works with lawmakers across the country to develop fair and uniform regulation. SCIC member companies collectively offer approximately 80% of all appliance, consumer electronics, home and vehicle service contracts in the U.S.

The Iowa Insurance Division has worked on the proposal to incorporate recommendations based on the Model Act by the National Association of Insurance Commissioners. The Attorney General’s Consumer Protection Division has offered additional recommendations, such as cancellation notice provisions and a stipulation that if unlicensed service companies sell in Iowa, it is a violation of the Iowa Consumer Fraud Act and the customer’s contract is void.

The service contract providers, the Insurance Division and the Consumer Protection Division have worked on an amendment to ensure that the existing consumer protections in the two current chapters are contained in the new merged chapter. That amendment will be offered when the bill comes up for floor debate.
[4/11: Short From (Absent: Brown)]

SF 620 – Disposal of city utilities by sale

SF 620 would remove the appraisal requirement prior to the sale of a public utility in limited situations. Current law requires the appraisal of a public utility before it is disposed of through a sale. This requirement was put in place to make sure that the public receives fair market value for the utility when it is sold to a private entity. The bill would facilitate the sale of a telecommunications utility in the city of Hawarden. The city has had difficulty finding a qualified appraiser for their type of utility, and the cost of performing the appraisal would be prohibitive.

The committee adopted a strike-after amendment that will be offered to clarify that the exception to the appraisal requirement only applies to Hawarden’s telecommunications utility.
[4/11: Short From (Absent: Brown)]

SF 621 – Adult adoptees obtaining copies of original birth certificates

SF 621 provides a process for adult adoptees and their spouses or close relatives to obtain a non-certified copy of the adult adoptees original birth certificate. Current Iowa law prohibits those who were adopted from obtaining a copy of their original birth certificate. The State Registrar of Vital Statistics of the Department of Public Health will develop a contact preference form on which a biological parent may state a preference regarding contact by an adult adopted person or their relative. In addition, the Registrar is to develop a medical history form on which a biological parent may provide family medical history. If a biological parent fills out these optional forms, the Registrar will attach them to the original birth certificate, and the forms will be provided to the adult adoptee or relative who applies for and receives a copy of the original birth certificate.

The committee adopted an amendment that will ensure that the adoption decree that is provided to the adult adoptee is accompanied by the contact preference form or the medical history form associated with the adoption decree. This is meant to deal with a concern that the birth parent may have designated that they do not want to be contacted by the child they put up for adoption. Without this form, the adult adoptee could try to contact the birth parent against their wishes. The amendment also makes a technical fix to the bill and removes the August 1, 2019, date for the beginning of the public awareness program conducted by the Department of Public Health (IDPH). The start date is being removed to ensure that IDPH has sufficient time to develop the public awareness program.
[4/11: Short From (Absent: Brown)]

SF 622 – Crossing against a railroad gate or signal

SF 622 states that a driver who crosses a railroad grade when the crossing gate is lowered and in an established quiet zone faces a violation punishable by a fine of $400. In lieu of the fine, the person may at their own expense attend and successfully complete a driver improvement program approved by the Iowa Department of Transportation (DOT).
[4/11: Short From (Absent: Brown)]

SF 623 – Boat, ATV and snowmobile registration process improvements

SF 623 updates the Iowa Code regarding the process for registering and titling of boats and other vessels. Boat and vessel registration is now done using an electronic licensing system. These changes will improve the process. Changes include:

Allowing an owner to register their vessel with any county recorder rather than the county where the vessel was initially registered.
Allowing a 60-day grace period for renewal of a boat registration. Boat registrations expire on April 30, prior to the time most owners take their vessel onto the water. Owners could renew prior to June 1 without having to pay a $5 late fee.
Allowing an owner to initially register their vessel for shorter than the three-year registration period. This allows the owner to prorate the fee and align the registration with the timeline for renewal.
Allowing a title to be used to sell or transfer a vessel. Currently, the transfer or sale requires completing a form on the original registration certificate.
Removing the requirement for a notarial to witness the application for a title after acquiring a vessel.

The bill also increases from 15 to 30 the number of days a snowmobile, all-terrain vehicle or vessel dealer has to send fees and applications to transfer a vehicle requiring a title.
[4/11: Short From (Absent: Brown)]

HF 546 – SAVE extension, property tax reduction payments

HF 546 extends the 6% sales tax rate until January, 1 2051, and the allocation to the SAVE fund. The sales tax rate of 6% is reduced to 5% on January 1, 2030, and Code chapter 423F, along with other corresponding provisions, is repealed December 31, 2029. Education groups are pushing to have this sunset extended because of the need for schools to use their SAVE fund dollars to secure 20-year bonds, which go beyond the program.

HF 546 increases property tax relief in two main ways. The bill increases the amount in the Property Tax Equity Relief fund (PTER) from the current 2.1% SAVE allocation to 15% total, assuming there is at least 2% growth in sales tax receipts after 2020. The increase in distribution grows by 1% every year to the 15% max. A new Foundation Base Supplement Fund (FBSF) will supplement the other property tax relief programs by providing property tax relief to all districts by buying up the school foundation aid level of 87.5%.

Other provisions in the bill include:

Career Academy Fund Grant: The bill creates a Career Academy Fund. In FY 20, the SAVE fund would transfer $1 million to the Career Academy Fund.
- Subsequent transfers will be the equivalent of the prior year’s transfer, plus 0.5% of the sales tax growth in the fund, if the growth rate is at or exceeds 2.5%. The amendment caps the amount to be transferred at no more than $5 million in any fiscal year.
- A single grant cannot exceed $1 million to a school district. The grants would go toward infrastructure and equipment and to further the goals of establishing and operating the center.
Revenue Purpose Statements: Existing statements expire on January 2031 and require school boards to seek voter approval for revenue purpose statements (RPS) prior to December 31, 2022. The statements must include that failure to approve the RPS will result in those funds being used for property tax reduction.
Bonding: Current law authorizes a school district to anticipate its share of SAVE fund revenues by issuing bonds without voter approval. Under the bill, they must hold a public hearing on the project and how it will be funded. The public must be notified at least 10 days in advance of the hearing. Voters have a 14-day window following the public hearing to petition for a special election. Petitions require the signatures of 100 eligible voters or 30% of the voters in the last regular school election.
Athletic Facilities: Puts in place enhanced public engagement processes surrounding the use of SAVE funds for the construction of athletic facilities.
School Safety – Legislative Intent: Prioritize SAVE funds to be used for school safety and security infrastructure, before sports facilities. This would include safe rooms, remote entry technology and equipment, security camera systems, and communication systems with access to fire and police frequencies.
Certificate of Need Threshold and Cost Benefit Analysis: Currently, a school district with a certified enrollment of fewer than 250 pupils must apply to the Department of Education for a certificate of need before the school district can expend the supplemental school infrastructure. The criteria in the bill is modified to include the cost-benefit analysis of remodeling, reconstructing or repairing existing buildings versus new construction and consideration of the benefit of the new construction on student learning.

An amendment adopted by the committee will increase the amount of the SAVE penny diverted for property tax relief from 15% (in the current bill) to 30%. The amount diverted will increase by 1% each year of the extension.
[4/17: Short From (No: Chapman; Absent: Wahls)]

SSB 1193 – Empower Rural Iowa

SSB 1193 changes the Broadband Infrastructure Grant Program and the Workforce Housing Tax Credit Program. Under the bill, qualifying broadband projects eligible for grant assistance would need to meet upload/download speeds established by the Office of the Chief Information Officer. Currently, the speeds are outlined in Code at 25mbps/3mbps. The bill also extends the grant program by five years, and proposes a $5 million increase in tax credits available through the Workforce Housing Tax Credit Program. This $5 million would be set aside for projects located within the 88 lowest population counties in the 2010 census. The Workforce Housing Tax Credit Program currently has a tax credit cap of $20 million with $5 million reserved for projects in smaller communities.

The committee adopted an amendment that limits the bill to just the broadband grant program. The amendment changes the Broadband Infrastructure Grant Program speeds to mirror speeds used under the federal broadband grant program. These speeds match the current state grant program minimum speeds. The amendment also strikes a portion of the bill that makes changes to the Broadband Property Tax Exemption Program. Those changes were unnecessary because legislation passed in 2018 (SF 2388) exempted broadband infrastructure from property taxes.
[4/17: Short From (Absent: Wahls)]

SSB 1246 – Fuel excise tax for ethanol and biodiesel blended motor fuels

SSB 1246 would extend the current preferential excise tax rates for ethanol or biodiesel blended motor fuels. Currently:

Ethanol blended gasoline (E-10 or higher) is taxed at a lower rate than conventional gasoline. The excise tax is reduced up to two cents per gallon, with the discount determined by the percentage of ethanol blended gasoline distributed to retailers.
Biodiesel blended motor fuel (B-11 or higher) is taxed three cents lower than the per-gallon rate on special fuel for diesel engines of motor vehicles
High-ethanol blended gasoline (E-85) is taxed at a rate 14 cents per gallon lower than the rate on conventional gasoline.
The current motor fuel tax structure for ethanol or biodiesel blended gasoline is due to end on June 30, 2020. After that date, the special rates for ethanol and biodiesel-blended motor fuels would end, and would be taxed at the same rate as conventional fuels of the same type.

The bill would change the structure of the preferential excise tax rates for higher blends of ethanol-blended fuel by focusing on E-15. The bill:

Establishes a six-cent per gallon discounted rate for E-15 blended gasoline. The existing structure for adjusting the discount is according to the percentage of ethanol-blended gasoline distributed to retailers.
There will no longer be a discounted rate for E-10 blended motor fuel or a separate rate for E-85 blended gasoline.
The current discounted rate for biodiesel rate is extended.

The proposed ethanol and biodiesel excise tax rates in the bill are projected to divert less revenue from the Road Use Tax Fund than under the current structure and is meant to promote higher blends of renewable fuels.

The committee adopted an amendment to insert a new sunset date for the preferential excise tax rates. The new rates will end after June 30, 2026. The amendment also changes the report that is used to determine the distribution percentage to determine the discounted fuel excise tax rate. The current rates are determined based on the distribution of blended fuels delivered from a motor fuel terminal. That report shows much lower distribution rates than what is declared by retailers on the reports they submit to the Department of Revenue. The retailer reports include blending that is done after the fuel leaves the motor fuel terminal.
[4/17: Short From (Absent: Wahls)]

SSB 1249 – Omnibus tax administration bill

SSB 1249 changes existing tax policy. These include technical changes to update references in the state revenue code, amending sales and use taxes, and changes to existing tax credit programs.

The committee adopted an amendment to:

Add members to a proposed task force that will examine how computers and equipment are subject to sales taxes.
Amend the portion of the bill regarding a sales tax exemption for grain bin parts and supplies so that the change is retroactive to 2004. This issue is subject to a number of audits relating to conflicting directions by the department to taxpayers. The bill limits refunds that can be claimed under this new sales tax exemption.
Eliminate proposed changes to the targeted jobs withholding tax credit program. The amendment simply extends the program for another four years to 2023.
Clarify existing sales tax law for parking garage facilities.
Limit changes to the New Jobs Tax Credit so that it only applies to banks and franchise taxes, not credit unions/moneys and credits taxes.
Remove a portion of the bill regarding the treatment of what is classified as global intangible low-taxed income for corporations.
Include language from SSB 1186 that creates a sales tax exemption for products or services that are reimbursed under Medicaid. This applies to incontinence products and services.
Amend current law regarding the apportionment of income for broadcasters. Legislation was passed in 2015 to simplify the calculation of income for broadcasters who sell advertising in multiple states. The amendment would extend that change back to 2013 and would likely cause more taxes to be paid to Iowa.
[4/17: 11-6, Party Line]

SF 184 – Excessive weights for raw forest products

SF 184, as amended in committee, requires the Department of Transportation (DOT) to develop and implement a single statewide system to receive applications for and issue permits that allow for the operation of vehicles of excessive size or weight on highways or streets under the jurisdiction of the state or local authorities. The bill authorizes the DOT to determine, in consultation with the applicable local authorities, the network of highways and streets under the jurisdiction of local authorities, including the appropriate routes, on which vehicles issued permits under the system are authorized to operate. Permits issued under the system must be issued by the DOT for a fee established by the DOT by rule, which fees must be proportionate to the fees set forth in Code section 321E.14. The bill requires the DOT to allocate a portion of the fees collected to local authorities having jurisdiction over highways or streets on which vehicles issued permits under the system are authorized to operate. DOT must submit a report to the Legislature by December 31, 2021, regarding the development and implementation of the system.

As amended, SF 184 will allow the DOT to issue annual permits authorizing a vehicle or combination of vehicles to transport divisible loads of raw forest products from fields to storage, processing, or other commercial facilities. The annual permit fee is $175. A vehicle or combination of vehicles for which a permit is issued under the bill may exceed the maximum weights set forth under Code section 321.463 if the gross weight on any one axle does not exceed the limitations specified in Code section 321E.7. Code section 321E.7 limits the gross weight on any one axle to 20,000 pounds and the gross weight on any one tandem axle having at least four tires to 46,000 pounds. The bill prohibits a vehicle or combination of vehicles issued such a permit from exceeding the size limitations set forth in Code sections 321.454 through 321.457. The bill also prohibits a vehicle or combination of vehicles for which a permit is issued under the bill from traveling on any portion of the interstate highway system. The bill provides that such a permit issued by the DOT is valid for operation on non-primary highways if the local authority having jurisdiction over the non-primary highway has approved the route within the local authority’s jurisdiction used by the vehicle or combination of vehicles traveling under the permit.
[4/17: Short From (Absent: Wahls)]

SF 192 – Capital gains deduction for sale of real estate involved in farming

SF 192 would amend the contingent capital gains for farming property that will happen for tax year 2023 if the revenue triggers in SF 2417 from last session are met. SF 2417 amended the existing capital gains exemption for farm real estate to a new standard that would exist under the contingent tax system included in that bill. The new capital gains deduction that would exist under the contingent tax system was narrower than what currently exists, reducing the value of the existing capital gains deduction.

The current capital gains deduction is allowed for sales of six types of qualifying assets:

The qualifying sale of cattle, horses, or breeding livestock,
The qualifying sale of real property used in a farm business,
The qualifying sale of real property used in a non-farm business,
The qualifying sale of timber,
The qualifying sale of a business,
The qualifying sale of employer securities to a qualified Iowa employee stock ownership plan.

The future (contingent) capital gain deduction is limited to:

The taxpayer “materially participated” in the farming business for at least 10 years and held the real property for at least 10 years; and sold the real property to a relative.

The deduction would be revoked if the relative sells or transfers the real property used in a farming business to a non-relative on the taxpayer within five years of the original sale.

The bill would amend the future (contingent) capital gains deduction so that it would apply in the following cases:

The taxpayer “materially participated” in the farming business for at least 10 years and held the real property for at least 10 years; or the taxpayer sold the real property to a relative.
This bill expands the definition of relative to include an entity in which a relative of the taxpayer has a legal or equitable interest in the entity as an owner, member, partner, or beneficiary.
This bill strikes provisions related to restricting the capital gain deduction for the sale of real property used in a farming business if the relative sells or transfers the real property used in a farming business within five years of the original sale.
[4/17: 13-3 (No: Bolkcom, Jochum, Quirmbach; Absent: Wahls)]

SF 314 – Short-line railroad restoration tax credit

This bill would create a Short-Line Railroad Restoration Tax Credit to help finance investments in railroad infrastructure for short-line railroads that provide service through shorter hauls, switching operations and access to the larger freight network for their customers. These railroads are designated as class II or class III railroads. This credit is modeled after a federal income tax credit that has expired. The credit would be transferrable.

Then proposed amendment would establish a tax credit in Iowa Code but would not authorize the issuance of any tax credits until the legislature authorizes a cumulative value of tax credits that may be claimed annually. The tax credit would exist but none could be claimed, similar to establishing a fund and not providing any money to be used for the purpose of the fund. The amendment also restricts the eligible transferees to class II or class III railroads or a person or entity that transports property on a class II or class III railroad.
[4/17: Short From (Absent: Wahls)]

SF 444 – Beginning farmer tax credit program

SF 444 amends the Beginning Farmer Tax Credit Program, which had allowed up to $12 million in tax credits for the last five years. The legislation that increased the maximum tax credits allowed per year included a sunset of that increase after a five-year period to the review the program to ensure the increase remained necessary and that the credit was targeted to the right type of situation. After the sunset, that income tax credit was reduced to a maximum of $6 million for tax years 2019 and after.

Under this legislation, the tax credit limit for the beginning farmer program would be raised back to $12 million for tax years 2019 and beyond. The tax credit would also be reorganized as a single program rather than reverting to the Agricultural Asset Transfer Tax Credit and Custom Contract Farming Tax Credit.

The committee adopted a strike-after amendment that sets the tax credit cap at $12 million and maintains existing income and asset limitations for qualifying farmers. The amendment also restricts the cost of the lease a beginning farmer can be charged by someone who claims the tax credit. The tax credit would no longer cover custom contract farming operations.
[4/17: Short From (Absent: Wahls)]

SF 514 – Groundwater hazard statement requirement repeal

SF 514 repeals the requirement that a groundwater hazard statement be submitted with each declaration of value that is submitted to a county recorder to grant, assign, transfer or convey real property. The bill limits the filing of the statement to only when there are known hazards and sets a flat $12 county recorder fee for the filing of this record. The groundwater hazard statement is different than the residential property seller disclosure statement that sellers of residential property must provide to prospective buyers.
[4/17: Short From (Absent: Wahls)]

SJR 16 – Constitutional Amendment, supermajority for income tax increases

SJR 16 would amend the state constitution to require an affirmative vote of two-thirds of the members in each chamber of the Iowa Legislature to approve income tax changes that increase revenues. The requirement applies to bills that change state individual income tax rates and/or the taxable income ranges applied to the individual income tax rates.
[4/17: 11-5, Party Line (Absent: Wahls)]

FLOOR ACTION:

SF 604 – Probate fees

SF 604 is a bill that the Probate Section of the Bar Association has been trying to get passed for many years. It relates to court costs (fees) charged an estate when a decedent’s estate is probated (settled through the court). The Bar Association claims that counties are assessing court costs differently, resulting in inconsistencies across Iowa. This bill will exclude certain types of property when calculating court costs when an estate is being probated. Excluded property includes joint tenancy property, transfers during a decedent’s lifetime and assets payable directly to beneficiaries.
[4/17: 50-0]

SF 606 – Housing enterprise zone tax credits and transferability

SF 606 makes changes to filing dates for requesting transferability for tax credits issued under the former Housing Enterprise Zone (HEZ) incentive program. The HEZ program was replaced by the current Workforce Housing tax credit program in 2014. When the HEZ program was eliminated and the state transitioned to the Workforce Housing program, all HEZ projects were required to request transferability of credits by July 1, 2014, or they could not be transferred.

Generally, a project under the HEZ program would request transferability for the credits they were issued upon completion of the project. Some developers who were issued tax credits under the HEZ program were not made aware of the new deadline to request transferability. When they made the request after the new July 1, 2014, deadline, their request was denied.

The bill provides an exception from the deadline to request transferability for a project located in Des Moines County. The subcommittee was made aware of another project that failed to request transferability by the July 1, 2014, deadline in Woodbury County. The committee adopted an amendment to address that project as well.
[4/15: 50-0]

COMMITTEE ACTION:

SF 618 – ABD Omnibus Department Bill