Fiscal Note
Fiscal Services Division
HF 679 – Economic Development Authority Policy Bill (LSB1164HZ.1)
Staff Contact: Molly Kilker (515.725.1286) molly.kilker@legis.iowa.gov
Fiscal Note Version – Revised (Fiscal Impact)
Description
House File 679 relates to various programs within the Iowa Economic Development Authority
(IEDA).
Division I — Tax Credits
Description
Division I of the Bill amends the Renewable Chemical Production Tax Credit (RCPTC) program
and the Innovation Fund Tax Credit (IFTC). The Division removes serine, threonine, lysine, and
nonfuel ethanol from the definition of “building block chemical” and increases the annual tax
credit limit for companies that have been in existence for five years or more to $1.0 million. The
Division extends the availability of the tax credit through FY 2036 and extends the future repeal
date to July 1, 2039. Division I of the Bill also extends the future repeal date for taxes imposed
under Iowa Code sections 422.10B and 422.33 from January 1, 2033, to January 1, 2041.
The IFTC is amended by eliminating the wait list and extending the time the IEDA may certify an
Innovation Fund from FY 2023 to FY 2028.
Iowa Code section 15E.52 defines an “innovative business” as including those engaged in the
industries of advanced manufacturing, biosciences, finance, insurance, and information
technology. The Division adds “educational technology” to this definition.
Background
The RCPTC is available to approved businesses that produce renewable chemicals from
biomass feedstock in Iowa. The tax credit is equal to $0.05 per pound of renewable chemicals
produced. To qualify for the credit, a business must apply to and enter into an agreement with
the IEDA prior to the production of any pound of chemical that will earn the tax credit. The tax
credit is available for qualified renewable chemicals produced from January 1, 2017, through
December 31, 2035.
The IFTC allows equity investments to be made into an Innovation Fund, which is administered
by the IEDA. A certified Innovation Fund makes investments in promising early-stage
companies whose principal business operations are located in Iowa if those companies are
engaged primarily in advanced manufacturing, biosciences, and information technology.
Assumptions
• The proposed changes to the RCPTC program will not impact current RCPTC award
recipients. Participating companies will continue to receive certificates prior to the existing
deadline until five certificates have been awarded to each eligible business.
• Changes to program limits will not have a significant impact to the General Fund and are not
included in the fiscal estimate.
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• One new renewable chemical facility will qualify under the terms of Division I in each of the
next three years.
• For the first renewable chemical facility, the production will begin in CY 2025, the first
certificate will be issued in FY 2026, and the first fiscal impact will occur in FY 2027. The
other two plants will follow the same fiscal pattern as the first renewable chemical facility.
• The production in each of the new plants will be sufficient each year to be awarded the
maximum credit of $1.0 million per year for five years.
• The timing of future RCPTC claims will be similar to the historic timing of claims.
• The elimination of the wait list for the RCPTC and the IFTC will not reduce revenue as
neither program has reached the tax credit cap.
• The IEDA assumes that there would be a negligible net impact to the General Fund for
currently participating companies that have been in existence for five or more years.
• Table 1 shows the timing of RCPTC claims by year based on historical trends.
Table 1
Timing of Refundable
Tax Credits
Year 1 35.4%
Year 2 37.6%
Year 3 26.1%
Year 4 0.9%
Total 100.0%
Fiscal Impact
The initial impact of the RCTPC program to the General Fund under Division I is projected to
occur by FY 2027. The revenue reductions in the first four years, FY 2028 to FY 2031, are a
result of the new awards and additional companies participating in the RCTPC program. The
RCTPC program is estimated to reduce General Fund revenue by a total of $9.2 million by
FY 2031, as shown in Table 2.
Table 2
General Fund
Revenue Reduction
($ Millions)
FY 2027 $ -0.4
FY 2028 -1.1
FY 2029 -2.1
FY 2030 -2.7
FY 2031 -3.0
The extension of the sunset from FY 2023 to FY 2028 for the IFTC will decrease General Fund
revenue as shown in Table 3. The fiscal impact of expanding the definition of an “innovative
business” cannot be estimated with current data.
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Division II — Iowa Wine, Beer, and Spirits Promotion Board
Description
Division II of HF 679 broadens the membership of the Iowa Wine and Beer Promotion Board to
include spirits. Correspondingly, the Board’s membership is increased from three members to
four, each representing one of the three entities of the Board (wine, beer, and spirits) with a
single representative from the IEDA. Moneys appropriated to the Authority from the Wine
Gallonage Tax, Barrel Tax Revenue, and Beer and Liquor Control Fund as well as moneys
transferred to the Authority may be used by the Authority to promote Iowa wine, beer, and
spirits, including administrative expenses incurred under the promotion.
Division II transfers the lesser of $250,000 or up to 1.0% of native distilled spirits revenue to the
Board. The transfer from the Department of Commerce to the IEDA would be used to promote
beer, wine, and spirits made in Iowa, as well as for administrative expenses related to the
Board.
Assumptions
• Native distilled spirit sales are estimated to be between $1.4 million and $1.6 million annually.
• The predictions are based on historical sales data.
Fiscal Impact
House File 679 decreases revenue to the General Fund by between $130,000 and $160,000
per year beginning in FY 2024 and transfers the money to the IEDA to be used to support the
Wine and Beer Promotion Board.
Summary of Fiscal Impact
Table 3 summarizes the projected fiscal impacts of HF 679.
Table 3 — Estimated Total Fiscal Impact ($ in Millions)
Division General Fund Impact FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
I Renewable Chemical Production Tax Credit $ 0.0 $ 0.0 $ 0.0 $ -0.4 $ -1.1
I Innovation Fund Tax Credit -0.1 -1.3 -3.2 -2.9 -4.4
II Wine and Beer Promotion Board -0.1 -0.1 -0.1 -0.1 -0.1
Total Revenue Reduction $ -0.2 $ -1.4 $ -3.3 $ -3.4 $ -5.6
Sources
Iowa Department of Revenue
Iowa Economic Development Authority
Alcoholic Beverages Division, Department of Commerce
Tax Credit Award, Claim, and Transfer Administration System
/s/ Jennifer Acton
April 7, 2023
Doc ID 1371533
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 15.119, 15.315, 15.316, 15.318, 15E.52, 422.10B, 422.12, 422.33, 15E.117, 123.143