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Ways & Means Committee – Week 16, 2021

SSB 1196– Investment tax credits

SSB 1196 would allow the Iowa Economic Development Authority (IEDA) to adjust the annual allocations Investment Tax Credits, otherwise known as Angel Tax Credits, and Innovation Fund tax credits under the existing $10 million cap for the two programs. Currently, Angel Tax Credits are limited to no more than $2 million annually, and Innovation Fund Investment Tax Credits are limited to not more than $8 million. The bill gives IEDA flexibility to allocate between programs as demand for the individual programs changes. Innovation Fund tax credits have been mostly accounted for as the limit of eligible funds has been reached and there is more demand for Angel Investor Tax Credits. These allocations must be determined on or before June 30 of each year. The bill keeps the overall cap on these types of credits at $10 million. The bill is effective upon enactment. [4/28: Short form (Absent: Schultz, Quirmbach)]

SSB 1273 – Cutting unemployment benefits

SSB 1273 makes numerous changes to Iowa’s unemployment insurance system. The main objective of the bill is cutting benefits for unemployed Iowans. This bill is similar to SF 492/HF 754.*

Section 1—New definitions

The bill adds new definitions to the Iowa Code for “able to work,” “available for work” and “severance pay.” Currently, the definitions of “able to work” and “available for work” are found in Iowa administrative rules. The definitions in the rules are a little different than the new definitions in the bill.

Section 2—Business Closings Layoffs, Cutting benefits

Current law allows for a different wage credit calculation and benefit duration for those laid off when an employer went out of business. This is a different calculation and duration time from an unemployment claim. For a typical claim, 1/3 of the claimant’s wage credits are used to calculate the maximum benefit amount, and the maximum amount of benefits is for 26 weeks. Under the current law for a business closing claim, the individual would receive ½ of the wage credits and 39 weeks. The bill strikes the different wage calculation and benefit duration for a business closing. These individuals will be treated like other regular claims and will see a reduction in benefits from current law.

Section 3—Work Search Requirements Waiver/Short-Term Temporary Layoff

Allows Iowa Workforce Development (IWD) to establish by a rule a process to waive or alter the work search requirements for an unemployment claim for benefits if an individual has a reasonable expectation that they’ll be returning to employment and is attached to a regular job or industry or a member in good standing of a union eligible for referral for employment. Individual must be attached to a regular job on a “short-term temporary layoff.” If work is not available at the conclusion of the layoff due to short-term circumstances beyond the employers’ control, the employer may request an extension of the waiver or alteration for up to two weeks.

The bill defines “short-term temporary layoff” as a layoff of 16 weeks or less due to seasonal weather conditions that impact performance of work related to highway contraction, repair or maintenance with a specific return-to-work date verified by the employer.

 A little background on work search requirements: Iowa law already allows Iowa Workforce Development to waive work search requirements for certain reasons, including the individual being partially unemployed and for “temporarily unemployed,” which is not to exceed four consecutive weeks; the individual is unemployed due to a plant shutdown, vacation, inventory, lack of work or emergency from their regular job or trade in which they worked full-time and will again work full-time; and if the individual’s employment, although temporarily suspended, has not been terminated (see 96.1A, subsection 37).

Section 4–One-week waiting period

The bill establishes a one-week waiting period, which is the first week of a claim for which you are eligible for unemployment benefits but not paid these benefits. There is one-week waiting period each benefit year. An individual would receive compensation for the waiting week as the last payment on their regular unemployment claim. This is troubling because maximum duration of unemployment benefits for claimants is 26 weeks. Generally, only 25% (pre-COVID) of claimants exhaust their benefits. In 2018, the average duration of benefits was 12.8 weeks. This means a claimant wouldn’t see that lost week of benefits if they went off unemployment before they exhausted their unemployment benefits. Unemployed Iowans are living paycheck to paycheck. They cannot afford to not to receive or delay compensation for that first week.

Section 5—Effective Date

Most of the bill takes effect July 1, 2022. The section that includes the changes for a work search waiver for short-term layoff takes effect upon enactment.

Fiscal Impact:

Previous fiscal note on SF 492/HF 754 had a fiscal impact to the Unemployment Trust Fund starting in FY23 regarding the business closing/wage credit changes and the introduction of the one-week waiting period.

Total of $27.9 million reduction to benefits to claimants:

*SSB 1273 does not change the definition of “suitable work” or change the amount of benefits based on the number of dependents (these changes were in SF 492/HF 754). SF 492/HF 754 did not have language regarding new waiver of work search requirements for short-term temporary layoff, which is included in SSB 1273. [4/28: 10-5, party line (Absent: Quirmbach, Schultz)]

SSB 1274 – Septic tanks – prohibit penalties for certain local ordinances

SSB 1274 would prohibit a local government from requiring a resident to pay a penalty, fine or fee for noncompliance with local rules regarding pumping as part of routine maintenance.

This legislation is in response to an ordinance adopted in Story County. The ordinance requires routine maintenance to take place on septic tanks every five years, which can include pumping the tank. Iowa Department of Natural Resources and Environmental Protection Agency guidelines recommend servicing septic systems every three to five years, but those are not regulatory requirements.

This bill is the same as HF 728, which the committee passed out last week. [4/28: 11-4 (No: Bolkcom, Jochum, Petersen, Taylor; Absent: Quirmbach, Schultz)]

SF 578– IDALS department bill

SF 578 makes various changes to the operations of the Iowa Department of Agriculture and Land Stewardship (IDALS).

Many of these issues were introduced and debated last session:

  • Department organization: Updates the Code to reflect the elimination of the Marketing News Services bureau as part of a reorganization. The department will still collect and disseminate the information as it is provided by USDA.
  • Identity theft:IDALS has been moving to an electronic licensing system and the last license to go electronic is the pet breeders license. Thus, IDALS does not want any social security numbers online or on licenses for safety.
  • Local Farm and Produce Program and Fund: IDALS will reimburse schools for expenses for purchase of fresh farm produce if the school registers. The food source must be located in within 30 miles of the school district. This bill contains no funding. For every $3 spent by schools, the fund reimburses $1. The local farm and produce program will be a part of the existing Farm to School program. The program can be used to provide food commodities along with fresh produce. Food commodities would include eggs, dairy, processed nuts, honey and syrup, as well as meat and fish.
  • Code clean up relating to: 
  • Fertilizers and soil conditioners
  • Weights and measures
  • Fee reduction from $9 to $4.50
  • Deleting oath of weighmaster
  • Eliminating mandatory servicers licenses (test is not administered anymore)

The bill also will make confidential any information the department collects from animal facilities that register under the voluntary premise ID program. The premise ID program allows for the tracking of livestock to help identify the path or threats of spread of animal diseases.

The bill returned from the House with an amendment that added language requiring a government ID or some other form of identification approved by IDALS as proof of identity for someone being issued or renewing a commercial establishment license. The House amendment also requires a recertification process every three years for veterinary assistants. This would mirror the recertification process for veterinarians and help ensure continuing education requirements are met by veterinary assistants. Additionally, the House amendment has a different version of the Farm-to-School program that does not specifically mention eggs, dairy and honey, as well as meat and fish.

Prior to passage, the Senate adopted an amendment that removed the House language relating to ID requirements for commercial establishments and veterinary assistant recertification. The amendment also re-inserted the Senate version of the Farm-to-School program, which specifically includes eggs, dairy and honey, as well as meat and fish. [4/28: 48-0 (Absent: Schultz, Nunn)]

SF 608 – Department of Revenue “modernization” proposal

SF 608 is a Department of Revenue proposal that makes a number of changes to the administration of taxes to streamline and improve the process as the department transitions to a more modern and integrated computer system.

Division I of the bill includes a number of changes to current practices for the calculation of penalties, the amounts those penalties are applied to and how the department would apply waivers to those penalties under the system being designed. The division also updates terminology (e.g., changing “tax due or shown to be due” to more simple “unpaid tax”) to eliminate inconsistencies, and updates language to conform to current department practice on the application of payments that are due across multiple payment periods.

Division II of the bill will establish a more streamlined process for the filing of returns by pass-through entities (including LLCs, S-corps, etc.). These changes are being proposed now so that they can be incorporated into the design phase of that portion of the modernization of the tax administration system. The new system will require a pass-through entity to file a composite return for all nonresident owners of the entity. Currently, the pass-through entity must withhold the nonresident owners estimated Iowa tax liability as they would withholding taxes. The nonresident owner then can file a tax return to either claim a refund for overpayment of their portion of the withholding or for any taxes due. Requiring the filing of a composite return for all nonresident owners relieves the pass-through entity of the need to withhold estimated taxes monthly, as well as maintaining the return and withholding preferences of individual owners. The pass-through entity will instead pay estimated Iowa taxes owed by the nonresident owner based on the nonresident owner’s Iowa-sourced income at the applicable Iowa tax rate. This will also eliminate the need for a nonresident owner to file their own Iowa income tax return, except to claim a credit for any out-of-state taxes paid on the Iowa-sourced income. The current system doesn’t provide a clear picture of whether the full Iowa tax liability is being paid by nonresident owners, and creates confusion among those taxpayers about the current system of withholding, estimated payments and optional composite filing.

Division III amends portions of HF 309 regarding public agency disclosures of personal information of donors to nonprofits. The department is concerned that portions of the bill would require the department to subpoena records to conduct audits or other activities. To address these concerns, this bill clarifies the applicability of HF 309 so that the department will not be construed to be in violation of the bill under these actions:

  • Identifying a person as a representative, responsible party, employee, withholding agent, or other signatory or contact of a tax-exempt entity on any return, form, application or other document required to be filed with the department;
  • Exercising powers under Code section 422.70 (general powers —— hearings);
  • Disclosing information sought pursuant to a contested case;
  • Disclosing information expressly required by law, including disclosures pursuant to Code section 411.11S (student tuition organization tax credit).

The bill additionally clarifies that the restrictions in HF 309 will not be construed to entitle any taxpayer or tax-exempt entity to any deduction, exemption, credit or other tax position that the taxpayer or exempt entity is unable to substantiate with sufficient evidence. [4/28: 48-0 (Absent: Schultz, Nunn)]

HF 523 – Flood mitigation as essential county purpose

HF 523 would add flood-mitigation practices, strategies and structures to the list of essential county purposes established in Code. Counties are generally allowed to incur debt and issue general obligation bonds for the performance of essential purposes. This will allow a county to perform flood-mitigation projects in unincorporated areas of the county. Cities currently have this authority, but they are limited in where they are allowed to perform flood mitigation work. The bill is being promoted by Muscatine County as a way for them to create flood protection for areas increasingly under the threat of flood damage but are outside of the areas where a city can perform the work. [4/28: 48-0 (Absent: Schultz, Nunn)]

HF 828 – Commercial Driver’s License testing fees

HF 828 establishes fees for scheduling a commercial driver’s license (CDL) driving skills test and administering each of the three required tests. The scheduling fee will be $25. The fee for conducting the three required tests will be $25 for each test. These fees do not apply to private third-party vendors who administer these tests. There are also certain exemptions for people who are employed and volunteer for a government entity.

The bill encourages the Iowa Department of Transportation to establish a scheduling process for applicants, other than at the same site as the required knowledge test. [4/28: 48-0 (Absent: Schultz, Nunn)]

HF 846 – Surviving spouse transfer fees

HF 846 will waive fees for the transfer of title for snowmobiles, ATVs and boating vessels when the transfer is to the surviving spouse of the owner. This process already exists for other vehicles. [4/28: 48-0 (Absent: Schultz, Nunn)]

HF 869 – Excessive weights for hauling milk products

HF 869 allows the Iowa Department of Transportation to issue annual permits to vehicles transporting fluid milk products in excess of current weight limits, but not to exceed 20,000 pounds per axle and not to exceed a gross weight of 90,000 pounds. The bill creates an annual fee of $400 for fluid milk haulers and creates penalties from $12 to $2,200, plus 10-cents per pound in excess of the 20,000-pound weight limit. The new excessive weight permits are for use on primary roads and primary road extensions in cities only. The effective date of the legislation is delayed until January 1, 2022. [4/28: 47-1 (No: Dickey; Absent: Schultz, Nunn)]