Fiscal Note
Fiscal Services Division
SF 574 – Economic Development Authority, Major Economic Growth Attraction Program
(LSB1228SV.2)
Staff Contact: Evan Johnson (515.281.6301) evan.johnson@legis.iowa.gov
Fiscal Note Version – Final Action
Description
Senate File 574 creates the Major Economic Growth and Attraction (MEGA) Program under the
Iowa Economic Development Authority (IEDA). The Bill allows foreign businesses to acquire
agricultural land in Iowa and receive tax credits if the foreign business meets certain
requirements. Program tax credits under the Bill include a Qualifying Investment Tax Credit, a
sales tax refund, and a Withholding Tax Credit. The IEDA Board must not authorize tax
incentives available under the Program, or an exemption to restrictions on agricultural land
holdings, for more than two eligible businesses, or on or after January 1, 2027, whichever
occurs first.
Applications for the MEGA Program will be submitted to the IEDA and must include an
application fee set by the IEDA. The terms and value of tax incentives under the Program may
be negotiated by the IEDA and the eligible business. If the eligible business fails to comply with
requirements of the Program or agreements with the IEDA, the eligible business may be
required to repay tax incentives or may be subject to a reduction or elimination of tax incentives.
To be eligible for the Program, a business must meet certain requirements, including having a
minimum proposed project cost of $1.000 billion.
The IEDA may authorize an investment tax credit for an eligible business of up to 5.0% of the
business’s qualifying investment. The tax credit is allowed against individual and corporate
income taxes, the franchise tax, and the moneys and credits tax. The tax credit may not be
claimed until after the project has been placed in service and at least 50.0% of the project jobs
specified in the contract have been created.
An eligible business that has been issued a tax incentive under the Program will receive a
refund of the sales and use taxes paid for gas, electricity, water, and sewer utility services;
tangible personal property; or services rendered, furnished, or performed that contributed to the
construction or equipping of the facility. The refund will be paid by the Iowa Department of
Revenue (IDR) equally over five years. A contractor or subcontractor who willfully makes a
false report of tax paid under the Program commits an aggravated misdemeanor.
An eligible business may claim a withholding tax credit of up to 3.0% of the gross wages paid to
each employee in a project job that pays at least the qualifying wage threshold under the
agreement. If the amount withheld is less than 3.0% of the gross wages, the business will
receive a credit against the remaining withholding tax due or the business may carry forward the
credit for up to five consecutive years or until it is depleted.
An eligible business may apply for additional federal, State, and local incentives except for
those under the High Quality Jobs Program, the Targeted Jobs Withholding Tax Credit, or other
incentives at the discretion of the IEDA.
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A community in which an eligible business’s project is located may grant the eligible business a
property tax exemption for a portion of the actual value added by improvements to real property
directly related to the eligible business’s project jobs. The exemption is not applied to levies on
school districts within the taxing jurisdiction.
Division II of the Bill provides that of the $11.7 million appropriation that the IEDA received in
FY 2024 from the Skilled Worker and Job Creation Fund for the High Quality Jobs Program in
2023 Iowa Acts, SF 559 (Economic Development Appropriations Act), $300,000 will be
allocated for the Certified Sites Program. Moneys allocated must be used to certify sites in
counties with a population of less than 50,000 and to certify at least two sites in each
congressional district. Division II of the Bill takes effect upon enactment.
Background
Under current law, a foreign business may not acquire agricultural land in the State except as
stated in Iowa Code section 9I.3(3). A foreign business is defined under Iowa Code section 9I.1
as a corporation incorporated under the laws of a foreign country, or a business entity whether
or not incorporated, in which a majority interest is owned directly or indirectly by nonresident
aliens. Legal entities, holding companies, multiple corporations, and other business
arrangements do not affect the determination of ownership or control of a foreign business.
An aggravated misdemeanor is punishable by confinement for no more than two years and a
fine of between $855 and $8,540.
Assumptions
Correctional Impact Assumptions
• The following will not change over the projection period: charge, conviction, and sentencing
patterns and trends; prisoner length of stay (LOS); revocation rates; plea bargaining; and
other criminal justice policies and practices.
• A lag effect of six months is assumed from the effective date of the Bill to the date of first
entry of affected offenders into the correctional system.
• Marginal costs for county jails cannot be estimated due to a lack of data. For purposes of
this analysis, the marginal cost for county jails is assumed to be $50 per day.
Fiscal Impact Assumptions
• The Program will be enacted on July 1, 2024; the first agreement will be entered into by the
IEDA during FY 2025; and the first claims will be made in FY 2028.
• Because there are no program caps in the Bill, it is assumed that the full amount of the
award will be made for each of the tax credits proposed and that all credits will be fully
refunded rather than carried forward against future tax liability.
• All credits will be remitted in the same year they are claimed.
• Up to two projects may qualify under the terms of the Bill over the next five years.
• The IEDA will allocate the full amount of the award in the first year of the project, but claims
will not be made until three years after the award is granted, upon project completion.
• The 50.0% requirement for jobs created will be met in the first year of the project completion.
• The withholding tax credit will be remitted over a maximum of five years due to the
restriction of not withholding more than 3.0% of wages in any one year.
• An amount equal to 25.0% of a project investment will be eligible for a sales tax refund
under the Program.
• Businesses eligible for the Program will have no defaults on the contracts causing the IDR
to recoup the remitted credits.
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• Growth trends in future fiscal years are based on Consumer Price Index estimated increases
of 2.0%.
Correctional Impact
Senate File 574 creates a new criminal offense, and the correctional impact cannot be
estimated due to a lack of existing conviction data. Figure 1 shows estimates for sentencing to
State prison, parole, probation, or community-based corrections (CBC) residential facilities; LOS
in months under those supervisions; and supervision marginal costs per day for aggravated
misdemeanors. Refer to the Legislative Services Agency (LSA) memo addressed to the
General Assembly, Cost Estimates Used for Correctional Impact Statements, dated January 16,
2024, for information related to the correctional system.
Figure 1 — Sentencing Estimate and LOS
Percent
FY 2023 Avg Marginal Sentenced FY 23 Marginal
Percent LOS in Prison Percent FY23 Field Avg Cost to CBC Marginal Percent Marginal Field Avg Cost Per
Ordered to Prison (All Cost Per Ordered to Avg LOS on Per Day on Residential Cost CBC Ordered to Cost Per LOS on Day
Conviction Offense Class State Prison Releases) Day Probation Probation Probation Facility Per Day County Jail Day Jail Parole Parole
Aggravated Misdemeanor (Non-
30.4% 7.5 $ 24.94 45.0% 25.1 $ 7.67 3.6% $ 20.00 71.7% $50.00 11.9 $ 7.67
Persons)
Minority Impact
Senate File 574 creates a new criminal offense. As a result, Criminal and Juvenile Justice
Planning (CJJP) of the Department of Management (DOM) cannot use existing data to estimate
the minority impact of the Bill. Refer to the LSA memo addressed to the General Assembly,
Minority Impact Statement, dated January 16, 2024, for information related to minorities in the
criminal justice system.
Fiscal Impact
The Bill is estimated to reduce General Fund revenue by $18.2 million in FY 2028 to $18.9
million per project per year in FY 2032 when fully phased in. The fiscal impact of the property
tax exemption will be borne by the local government authority and is unknown. Figure 2 shows
the estimated fiscal impact of the Program for one project over the five-year period.
Figure 2 — MEGA Program Award Fiscal Impact Per Project (in Millions)
Qualifying
Investment Sales Withholding Total Tax
Tax Credit* Tax Refund** Tax Refund*** Credits/Refunds
Award in FY 2025 $ 50.0 $ 15.0 $ 27.7 $ 92.7
Claims by Year
FY 2026 $ 0.0 $ 0.0 $ 0.0 $ 0.0
FY 2027 0.0 0.0 0.0 0.0
FY 2028 10.0 3.0 5.2 18.2
FY 2029 10.0 3.0 5.4 18.4
FY 2030 10.0 3.0 5.5 18.5
FY 2031 10.0 3.0 5.7 18.7
FY 2032 10.0 3.0 5.9 18.9
*Qualifying Investment Tax Credit = 5.0% of $1.000 billion investment, claimed over five years.
**Sales Tax Refund = 6.0% of 25.0% of the $1.000 billion investment, claimed over five years.
***Withholding Tax Refund = 3.0% of withholding, claimed over five years.
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Sources
Iowa Department of Revenue
Iowa Economic Development Authority
Legislative Services Agency
/s/ Jennifer Acton
April 26, 2024
Doc ID 1449226
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: 9I.3
Enrolled: 9I.3, 15.498