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Iowa Venture Capital Bill Passes House of
Representatives
On
Thursday, January 24, the Iowa House of Representatives saw
passage of House File 2078 (formerly HSB 507), otherwise known as
the “Iowa Capital Formation Act of 2002.” House File 2078 is a
venture capital initiative modeled after the Oklahoma Capital
Formation Act of 1995.
House
File 2078 authorizes the formation of the Iowa Capital Investment
Board (a state advisory board) and the Iowa Capital Investment
Corporation (a non-profit corporation).
The Iowa Capital Investment Corporation will in turn form
the Iowa “Fund of Funds,” which will be either a for-profit
limited partnership or a limited liability company.
The
Iowa Fund of Funds will issue preferred stock to investors, which
will be backed by contingent investment tax credits.
The Iowa Capital Investment Board will be authorized to
issue $100 million worth of contingent investment tax credits.
These credits are meant to be issued contemporaneously with an
investment in the Iowa Fund of Funds by an investor.
The Iowa Capital Investment Corporation and the Iowa Fund
of Funds are directed to invest the capital (which is created by
the investments) in several high-quality venture capital funds
outside and within the State of Iowa.
The
goals of this initiative are to mobilize private capital through
these contingent investment tax credits and increase venture
capital investments within Iowa.
Iowa/Illinois
Tax Reciprocity
Agreement
Under Fire
Residents along Iowa’s eastern
border who live in Iowa but work in Illinois should start bracing
for a tax increase. In
his budget released last Friday, Governor Vilsack lays out his
intent to sever the Iowa/Illinois tax reciprocity agreement.
This tax agreement, which has been in current law since
1972, allows residents of one state to work in the other, but
still pay the income tax in the state of their residence.
If
the reciprocal agreement is terminated, Iowa residents working in
Illinois, and Illinois residents working in Iowa will begin filing
individual income tax returns in both states.
In addition, Illinois businesses that employ Iowa
residents, along with Iowa businesses that employ Illinois
residents, will have to begin remitting
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withholding taxes for these
employees to their own state rather than to the state of residence
of the employees.
The decision to sever the agreement does not require
Legislative approval, nor does it require approval by the state of
Illinois. According to
the Code, where the agreement is set up, the final decision to sever
the agreement is made by the Director of the Iowa Department of
Revenue and Finance, Gerald Bair.
Iowans’
Retirement Spared
From Tax Penalties
This past
Wednesday, the House Ways and Means Committee approved House Study
Bill 506. This HSB makes certain that Iowans who are saving for
retirement will not be penalized by Iowa’s tax code.
This
past June, President Bush signed the Economic Growth and Tax Relief
Reconciliation Act of 2001. At
the time of the Act’s signage, there were several differences
between federal tax law and state tax law, especially in concern to
the taxation of IRAs, 401(k)s. 403b’s, etc.
House Study Bill 506 changes Iowa’s tax code to reflect the
federal changes.
Ways
& Means Update
Bills
Passed in the Ways & Means Committee this week:
HSB
506
An act updating the Iowa Code references to the Internal Revenue
Code, repealing an adjustment to net income for capital gains from
installment sales, relating to an adjustment to income for school
district income surtax paid, providing that refunds from the federal
rebate are not taxable, correcting a reference in the innocent
spouse statute.
Bills
Assigned in the Ways & means Committee This Week:
HSB
538
An act relating to the tax rate on the adjusted gross
receipts from gambling games at certain racetrack enclosures.
HF
2035
An act relating to the state historic property rehabilitation tax
credit.
SF
335
An
act relating to species of animals by classifying certain species as
livestock and providing exemptions from the sales and use tax for
feed used to support the species.
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