403.19A - WITHHOLDING AGREEMENT -- TAX CREDIT.
403.19A WITHHOLDING AGREEMENT -- TAX CREDIT. 1. For purposes of this section, unless the context otherwise requires: a. "Business" means any professional services, or industrial enterprise, including medical treatment facilities, manufacturing facilities, corporate headquarters, and research facilities. "Business" does not include a retail operation or a business which closes or substantially reduces its operation in one area of this state and relocates substantially the same operation to another area of this state. b. "Employee" means the individual employed in a targeted job that is subject to a withholding agreement. c. "Employer" means a business creating targeted jobs in an urban renewal area of a pilot project city pursuant to a withholding agreement. d. "Pilot project city" means a city that has applied and been approved as a pilot project city pursuant to subsection 2. e. "Qualifying investment" means a capital investment in real property including the purchase price of land and existing buildings, site preparation, building construction, and long-term lease costs. "Qualifying investment" also means a capital investment in depreciable assets. f. "Targeted job" means a job in a business which is or will be located in an urban renewal area of a pilot project city that pays a wage at least equal to the countywide average wage. "Targeted job" includes new jobs from Iowa business expansions or retentions within the city limits of the pilot project city and those jobs resulting from established out-of-state businesses, as defined by the department of economic development, moving to or expanding in Iowa. g. "Withholding agreement" means the agreement between a pilot project city and an employer concerning the targeted jobs withholding credit authorized in subsection 3. 2. a. An eligible city may apply to the department of economic development to be designated as a pilot project city. An eligible city is a city that contains three or more census tracts and is located in a county meeting one of the following requirements: (1) A county that borders Nebraska. (2) A county that borders South Dakota. (3) A county that borders a state other than Nebraska or South Dakota. b. (1) The department of economic development shall approve four eligible cities as pilot project cities, one pursuant to paragraph "a", subparagraph (1), one pursuant to paragraph "a", subparagraph (2), and two pursuant to paragraph "a", subparagraph (3). If two eligible cities are approved which are located in the same county and the county has a population of less than forty-five thousand, the two approved eligible cities shall be considered one pilot project city. If more than two cities meeting the requirements of paragraph "a", subparagraph (3), apply to be designated as a pilot project city, the department of economic development shall determine which two cities hold the most potential to create new jobs or generate the greatest capital within their areas. Applications from eligible cities filed on or after October 1, 2006, shall not be considered. (2) If a pilot project city does not enter into a withholding agreement within one year of its approval as a pilot project city, the city shall lose its status as a pilot project city. If two pilot project cities are located in the same county, the loss of status by one pilot project city shall not cause the second pilot project city in the county to lose its status as a pilot project city. Upon such occurrence, the department of economic development shall take applications from other eligible cities to replace that city. Another city shall be designated within six months. 3. a. A pilot project city may provide by ordinance for the deposit into a designated account in the special fund described in section 403.19, subsection 2, of the targeted jobs withholding credit described in this section. The targeted jobs withholding credit shall be based upon the wages paid to employees pursuant to a withholding agreement. b. An amount equal to three percent of the gross wages paid by an employer to each employee under a withholding agreement shall be credited from the payment made by the employer pursuant to section 422.16. If the amount of the withholding by the employer is less than three percent of the gross wages paid to the employees covered by the withholding agreement, the employer shall receive a credit against other withholding taxes due by the employer or may carry the credit forward for up to ten years or until depleted, whichever is the earlier. The employer shall remit the amount of the credit quarterly, in the same manner as withholding payments are reported to the department of revenue, to the pilot project city to be allocated to and when collected paid into a designated account in the special fund for the urban renewal area in which the targeted jobs are located. All amounts so deposited shall be used or pledged by the pilot project city for an urban renewal project related to the employer pursuant to the withholding agreement. c. (1) The pilot project city shall enter into a withholding agreement with each employer concerning the targeted jobs withholding credit. The withholding agreement shall provide for the total amount of withholding tax credits awarded. An agreement shall not provide for an amount of withholding credits that exceeds the amount of the qualifying investment made in the project. An agreement shall not be entered into by a pilot project city with a business currently located in this state unless the business either creates ten new jobs or makes a qualifying investment of at least five hundred thousand dollars within the urban renewal area. The withholding agreement may have a term of up to ten years. An employer shall not be obligated to enter into a withholding agreement. An agreement shall not be entered into with an employer not already located in a pilot project city when another Iowa community is competing for the same project and both the pilot project city and the other Iowa community are seeking assistance from the department. (2) The pilot project city shall not enter into a withholding agreement after June 30, 2013. (3) The pilot project city shall provide on an annual basis to the department of economic development information documenting the total amount of payments and receipts under a withholding agreement, including all agreements with an employer to suspend, abate, exempt, rebate, refund, or reimburse property taxes, to provide a grant for property taxes paid or a grant not related to property taxes, or to make a direct payment of taxes, with moneys in the special fund. The department of economic development shall verify the information provided by the pilot project city. (4) The department shall have the authority to approve or deny a withholding agreement and shall only deny an agreement if the agreement fails to meet the requirements of this paragraph "c" or the local match requirements in paragraph "j", or if an employer is not in good standing as to prior or existing agreements with the department of economic development. The department may suggest changes to an agreement. d. A withholding agreement shall be disclosed to the public and shall contain but is not limited to all of the following: (1) A copy of the adopted development agreement plan of the employer. (2) A list of any other amounts of incentives or assistance the employer may be receiving from other economic development programs, including grants, loans, forgivable loans, and tax credits. (3) The approval of local participating authorities. (4) The amount of local incentives or assistance received for each project of the employer. e. (1) The employer shall certify to the department of revenue that the targeted jobs withholding credit is in accordance with the withholding agreement and shall provide other information the department may require. Notice of any withholding agreement shall be provided promptly to the department of revenue following execution of the agreement by the pilot project city and the employer. (2) Following termination of the withholding agreement, the employer credits shall cease and any money received by the pilot project city after termination shall be remitted to the treasurer of state to be deposited into the general fund of the state. Notice shall be provided promptly to the department of revenue following termination. f. If the employer ceases to meet the requirements of the withholding agreement, the agreement shall be terminated and any withholding tax credits for the benefit of the employer shall cease. However, in regard to the number of new jobs that are to be created, if the employer has met the number of new jobs to be created pursuant to the withholding agreement and subsequently the number of new jobs falls below the required level, the employer shall not be considered as not meeting the new job requirement until eighteen months after the date of the decrease in the number of new jobs created. g. A pilot project city shall certify to the department of revenue the amount of the targeted jobs withholding credit an employer has remitted to the city and shall provide other information the department may require. h. An employee whose wages are subject to a withholding agreement shall receive full credit for the amount withheld as provided in section 422.16. i. An employer may participate in a new jobs credit from withholding under section 260E.5, or a supplemental new jobs credit from withholding under section 15E.197 or under section 15.331, Code 2005, at the same time as the employer is participating in the withholding credit under this section. Notwithstanding any other provision in this section, the new jobs credit from withholding under section 260E.5, and the supplemental new jobs credit from withholding under section 15E.197 or under section 15.331, Code 2005, shall be collected and disbursed prior to the withholding credit under this section. j. (1) A pilot project city entering into a withholding agreement shall arrange for matching local financial support for the project. The local match required under this paragraph "j" shall be in an amount equal to one dollar for every dollar of withholding credit received by the pilot project city. (2) For purposes of this paragraph "j", "local financial support" means cash or in-kind contributions to the project from a private donor, a business, or the pilot project city. (3) If the project, when completed, will increase the amount of an employer's taxable capital investment by an amount equal to at least ten percent of the amount of withholding credit dollars received by the pilot project city, then the pilot project city shall itself contribute at least ten percent of the local match amount computed under subparagraph (1). (4) If the project, when completed, will not increase the amount of an employer's taxable capital investment by an amount at least equal to ten percent of the amount of withholding credit dollars received by the pilot project city, then the pilot project city shall not be required to make a contribution to the local match. (5) A pilot project city's contribution, if any, to the local match may include the dollar value of any tax abatement provided by the city to the business for new construction. k. At the time of submitting its budget to the department of management, the pilot project city shall submit to the department of management and the department of economic development a description of the activities involving the use of withholding agreements. The description shall include but is not limited to the following: (1) The total number of targeted jobs and a breakdown as to those that are Iowa business expansions or retentions within the city limits of the pilot project city and those that are jobs resulting from established out-of-state businesses moving to or expanding in Iowa. (2) The number of withholding agreements and the amount of withholding credits involved. (3) The types of businesses that entered into agreements, and the types of businesses that declined the city's proposal to enter into an agreement. l. The department of economic development in consultation with the department of revenue shall coordinate the pilot project program with the pilot project cities under this section. The department of economic development is authorized to adopt, amend, and repeal rules to implement the pilot project program under this section.
Section History: Recent Form 2006 Acts, ch 1141, §1; 2007 Acts, ch 2, §1, 2; 2007 Acts, ch 126, §63; 2008 Acts, ch 1122, §15; 2009 Acts, ch 103, §1, 2 Referred to in § 15.104
Footnotes 2007 amendment to subsection 2, paragraph b, applies retroactively to July 1, 2006, for pilot project city applications received prior to October 1, 2006; 2007 Acts, ch 2, §2