Session Week 6
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Iowa Investment Initiative

 Update

The Iowa Investment Initiative -- the Republican economic stimulus plan to spark Iowa’s economy -- is rapidly moving forward in the legislative process.  Already, three of the initiatives have been approved by both the House and Senate, and are on their way to the Governor’s desk. 

*The Iowa Capital Formation Act of 2002 (HF 2078) is a venture capital initiative modeled after the Oklahoma Capital Formation Act of 1995.  This bill 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 a for-profit limited partnership or limited liability company.  The Iowa Fund of Funds will issue preferred stock to investors, which is backed by contingent investment tax credits.  The Iowa Capital Investment Board is authorized to issue $100 million of contingent investment tax credits 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 (created by the investments) in several high-quality venture capital funds outside and within Iowa.   The goals of this initiative are to mobilize private capital through these contingent investment tax credits and increase venture capital investment within Iowa.  This initiative was amended by the Senate to include the Subchapter S bill (HF 2081).  This bill has been approved by the Legislature.

*The Small Business Growth Initiative – Subchapter S (included in HF 2078) permits taxpayers who elect to allocate income from S-corporations (also known as Subchapter S) between Iowa and other states, to allow 100% of the federal income taxes paid when determining the share of the S-corporation income that is subject to Iowa income tax.  Currently, only 50% of federal income taxes paid may be deducted when determining the amount of S-corporation income that is subject to Iowa income tax.   This bill has been approved by the Legislature.

*The Angel Investment/Community-Based Seed Capital Investment Initiative (HF 2271) creates a tax credit for investments in qualifying businesses and community-based seed capital funds.  The credits are only allowed for an investment made in the form of cash to purchase equity in a qualifying business or in a community-based seed capital fund.  HF 2271 provides that for tax years beginning on or after January 1, 2002, a tax credit shall be allowed against personal and corporate income tax, the franchise tax for financial institutions, the

amount of credits is capped each year.  For fiscal years 2003 and 2004, the total amount of the credits issued cannot exceed $3 million each year, and for FY 2005, the amount cannot exceed $4 million.  This bill has been approved by the Legislature. .

*The Iowa Start-Up Company Initiative (HSB 504) provides a deferral of taxable income for start-up companies whose primary place of business is in Iowa and that are 25% percent funded in venture capital money.  The tax deferral is all state income tax for the first three years of operation, and the repayment of all deferred taxes is in five equal installments over the subsequent five years.  The goal of this initiative is to provide more incentive for new companies to locate in Iowa and create needed jobs, at little or no cost to the state.  This bill is currently in the Ways and Means Committee, and is expected to move out of committee as early as next week.

Each piece of this package will help grow Iowa’s tax base and make Iowa not only competitive, but an economic force in the Midwest.  This package also provides the necessary incentives Iowa needs to advance our economy

Revenue Estimating

Conference Meets

The Revenue Estimating Conference (REC) met on Thursday, February 21, 2002, to lower the revenue estimate for FY 02 and FY 03.

The REC lowered the growth rate for FY 02 from 1.5 % (positive) to –0.7 % (negative).  This means that the FY 02 budget will have to be reduced by $121.7 million, or one-time revenue will have to be shifted into the General Fund to cover the appropriations.  The final package will likely contain a combination of additional cuts, furloughs and one-time revenue shifts. 

For FY 03, the REC lowered the growth rate from 2.2 % to 1.8 %.  If the FY 02 budget was balanced with budget cuts, that would mean there would be $15.5 million in new money to spend in FY 03.  However, any of the $121 million in spending that is covered by one-time revenue will reduce this figure.

  Ways & Means Update

Bills Passed in the Ways & Means Committee this week:
No bills were passed out of committee this week.

Bills Assigned in the Ways & means Committee This Week:
No bills were assigned in committee this week.

   Week in Review Archives

2002 Session
02-15-02
02-08-02
02-01-02
01-25-02
01-18-02

2001 Session
05-04-01
04-27-01
04-20-01
04-13-01
04-06-01
03-30-01
03-23-01
03-16-01
03-09-01
03-02-01
02-23-01
02-16-01
02-09-01
02-02-01
01-26-01
01-19-01
01-12-01

2000 Session
04-28-00
04-21-00
04-14-00
04-07-00
03-31-00
03-24-00
03-17-00
03-10-00
03-03-00
02-25-00