Bill Summary – FastDemocracy

Fiscal Note
                                        Fiscal Services Division
HF 606 – High Quality Jobs Program, Child Care Workers (LSB1167HZ)
Staff Contact: Eric Richardson (515.281.6767) eric.richardson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 606 creates a new onsite daycare facilities incentive component as part of the High
Quality Jobs Program (HQJP) (Iowa Code chapter 15, part 13) administered by the Iowa
Economic Development Authority (IEDA). The new component allows the IEDA to provide
HQJP tax incentives or project completion assistance to a business for a project that involves a
new or expanded onsite child care facility that offers low-cost child care for the business’s
employees. The Bill creates a simple misdemeanor offense for the false report of sales or tax
paid under the provisions of the Bill, which is punishable by confinement for no more than 30
days or a fine of at least $105 but not more than $855, or by both.
The change is effective July 1, 2021.
Background
The HQJP has a statutory cap of $105.0 million per year to use in tax credits. In FY 2020, IEDA
awarded $26.0 million in HQJP tax credits to 24 projects. Taxes eligible to be awarded as part
of the HQJP include:
• Local Property Tax Exemption — Applies to the property tax of the value added to the
    property.
• Sales Tax Refund — Applies to the sales and use tax.
• Corporation Tax Credit for Third Party Sales Tax for racks, including shelving, racks, and
    conveyor equipment — Applies to corporation income, franchise, insurance premium, and
    moneys and credits taxes.
• Investment Tax Credit — Applies to corporation income, individual income, franchise,
    insurance premium, and moneys and credits taxes.
• Supplemental Research Activities Tax Credit — Applies to corporation income and
    individual income taxes.
Assumptions
• Under current law, the expenses associated with a new or expanded onsite daycare facility
   are not qualified project costs under the HQJP.
• The average construction cost of a new or expanded onsite daycare facility is assumed to
   be $600,000, and five new or expanded onsite daycare facilities are assumed to be
   constructed and benefit from this new incentive each fiscal year.
• The HQJP offers sales/use tax refunds and investment tax credits. The average tax benefit
   of the HQJP for onsite daycare facilities is assumed to be 6.0%, the Iowa state sales tax
   rate.
• Once earned by the business, the tax credit and sales/use tax refund redemption pattern is
   assumed to be:
   • First fiscal year = 10.0%
   • Second fiscal year = 35.0%
   • Third through fifth fiscal years = 6.0% per year
   • Expiring without redemption = 37.0%
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Correctional Impact
The correctional impact of the Bill cannot be estimated, as the Bill creates a simple
misdemeanor with no historical data. A similar crime exists under current Code 15.331A and
the HQJP. The current Code penalty has not been charged in either FY 2019 or FY 2020.
Refer to the Legislative Services Agency (LSA) memo addressed to the General Assembly,
Cost Estimates Used for Correctional Impact Statements, dated January 22, 2021, for
information related to the correctional system.
Minority Impact
A minority impact cannot able to be estimated, as this is a new crime with no historical data.
Refer to the LSA memo addressed to the General Assembly, Minority Impact Statement, dated
January 27, 2021, for information related to minorities in the criminal justice system.
Fiscal Impact
The new HQJP component for onsite daycare facilities established in this Bill is projected to
reduce net General Fund revenue by the following amounts:
• FY 2022 = $18,000
• FY 2023 = $81,000
• FY 2024 = $93,000
• FY 2025 = $106,000
• FY 2026 and after = $118,000
The fiscal impact due to the introduction of a criminal penalty is unknown. The average State
cost per offense for a simple misdemeanor ranges from $40 to $350. The estimated impact to
the State General Fund includes operating costs incurred by the Judicial Branch, the Indigent
Defense Fund, and the Department of Corrections.
Sources
Legislative Services Agency
Iowa Department of Revenue
Iowa Economic Development Authority
Iowa Criminal and Juvenile Justice Planning Division
                                                                        /s/ Holly M. Lyons
                                                                        February 22, 2021
Doc ID 1213618
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: 
Reprinted: 15.327, 15.329