Current through Register Vol. 47, No. 6, September 18, 2024
(1)
Designated account. An approved pilot project city may provide
by city resolution for the deposit of funds generated through withholding
agreements into a designated withholding project fund under the targeted jobs
withholding tax credit program.
(2)
Entering into a withholding agreement.
a.
Agreement between a pilot project
city, the authority, and a business. The authority and a pilot project
city may enter into a withholding agreement with a business locating to the
community from another state that is creating or retaining targeted jobs in a
pilot project city. The authority and a pilot project city may enter into a
withholding agreement with a business currently located in Iowa only if the
business is creating or retaining at least ten jobs or making a qualifying
investment of at least $500,000 within the pilot project city.
b.
Total amount of withholding tax
credits. The withholding agreement shall provide for the total amount
of withholding tax credits awarded, as negotiated by the economic development
authority, the pilot project city, and the employer. An agreement shall not
provide for an amount of withholding tax credits that exceeds the amount of
qualifying investment made in the project.
c.
Ineligibility if there is
competition between pilot project city and non-pilot project city. A
withholding agreement shall not be entered into with an employer not already
located in a pilot project city when another Iowa community is competing for
the same project and both the pilot project city and the other Iowa community
are seeking assistance from the authority.
d.
Option of a business to enter into
withholding agreement. A business shall not be obligated to enter into
a withholding agreement with a pilot project city and the authority.
e.
Board approval of withholding
agreements. Prior to entering into a withholding agreement with a
business, a pilot project city shall request board approval of the withholding
agreement. The process for requesting approval from the board is described in
subrule 71.5(1).
(3)
Required components of a withholding agreement. A withholding
agreement shall be disclosed to the public and shall contain all of the
following:
a. A copy of the adopted local
development agreement between the pilot project city and employer that outlines
local incentives or assistance for the project using urban renewal or urban
revitalization incentives, if applicable, and how withholding funds generated
by the city will be used.
b. A list
of all other incentives or financial assistance the business has requested or
is receiving from other federal, state, or local economic development programs
including loans, grants, forgivable loans, and tax credits.
c. The amount of assistance provided by the
pilot project city for the project.
d. Documentation of the approval of the
project by local participating authorities.
e. The total amount of withholding tax
credits awarded.
f. The total number
of created and retained jobs included in the project.
g. The required countywide average
wage.
h. The total qualifying
investment included in the project.
i. The total required matching local
financial support for the project.
(4)
Length of withholding
agreements. A withholding agreement may have a term of up to ten
years, as negotiated by the authority, the pilot project city, and the
employer. A withholding agreement specifying a term of years or a total amount
of withholding credits shall either terminate upon the expiration of the term
of years specified in the agreement or upon the award of the total amount of
withholding credits specified in the agreement, whichever occurs
first.
(5)
Withholding
generated through the program.
a.
Once a pilot project city, the authority, and an employer have entered into a
withholding agreement, an amount equal to 3 percent of the gross wages paid by
the business to each employee under a withholding agreement shall be credited
from the payment made by the employer pursuant to Iowa Code section
422.16.
If the amount of withholding by the employer is less than 3 percent of the
gross wages paid to the employees covered by the withholding agreement, the
employer shall receive a credit against other withholding taxes due by the
employer or may carry the credit forward for up to ten years or until depleted,
whichever occurs first.
b. The
employer shall submit the amount of the credit quarterly, in the same manner as
withholding payments are made to the department of revenue, to the pilot
project city.
c. An employee whose
wages are subject to a withholding agreement shall receive full credit for the
amount withheld under the targeted jobs withholding tax credit program as
provided in Iowa Code section
422.16.
(6)
Use of withholding
funds. A pilot project city shall allocate the withholding funds into
a designated withholding project fund for the project. All funds deposited
shall be used or pledged by the pilot project city for a project related to the
employer pursuant to the withholding agreement.
(7)
Local match requirement.
The intent of the program is to require a pilot project city to contribute to
projects that result in an increase in the city's tax collections. If a pilot
project city realizes an increase in tax revenues due to the project, then the
pilot project city is required to contribute at least 10 percent of the
required local match. For example, if a project includes the purchase and
remodeling of a building that results in increased tax collections to the pilot
project city by an amount equal to 10 percent of the total amount of the
withholding tax credit award, then the pilot project city is required to
contribute at least 10 percent of the required local match for the project. In
cases in which a project would include the purchase of a building but there is
no increase in tax collections to the pilot project city, the pilot project
city is not required to contribute to the required local match.
a. A pilot project city entering into a
withholding agreement shall arrange for matching local financial support for
the project. The local match required shall be in an amount equal to one dollar
for every one dollar of withholding tax credit received by the pilot project
city.
b. If the project, when
completed, will increase the amount of an employer's taxable capital investment
by an amount equal to at least 10 percent of the amount of withholding tax
credit dollars received by the pilot project city, then the pilot project city
shall itself contribute at least 10 percent of the local match amount computed
under paragraph"a."
c. If the project, when completed, will not
increase the amount of the employer's taxable capital investment by an amount
equal to at least 10 percent of the amount of withholding tax credit dollars
received by the pilot project city, then the pilot project city shall not be
required to make a contribution to the local match.
d. A pilot project city's contribution, if
any, to the local match may include the dollar value of any new tax abatement
provided by the city to the business for new construction. For purposes of this
paragraph, new construction includes building additions, remodeling,
renovations, and updates.
(8)
Termination of a withholding
agreement. Following the termination of a withholding agreement, the
employer credits shall cease and any funds received by the pilot project city
after the agreement has been terminated shall be remitted to the state
treasurer to be deposited in the general fund of the state. The pilot project
city shall notify the department of revenue within 30 days of the termination
of the withholding agreement. If the authority, following an 18-month
performance period beginning on the date the withholding agreement is approved
by the board, determines that the employer does not meet the requirements of
the withholding agreement relating to retaining jobs, if applicable, the
agreement shall be terminated by the authority and the pilot project city and
any withholding credits for the employer shall cease. If the authority,
following a three-year performance period beginning on the date the withholding
agreement is approved by the board, determines that the employer has not met or
is incapable of meeting the requirements of the withholding agreement relating
to creating jobs, if applicable, or the requirement of the withholding
agreement relating to the qualifying investment prior to the end of the
withholding agreement, the authority may reduce the future benefits to the
employer under the agreement or negotiate with the other parties to terminate
the agreement early.
(9)
Participation in other programs. An employer may participate
in the Iowa industrial new jobs training program under Iowa Code section
260E.5
or may claim a supplemental withholding credit under Iowa Code section
15E.197, at the same
time the employer is participating in the targeted jobs withholding tax credit
program. The withholding credit under section
260E.5
and the supplemental withholding credit under section
15E.197 shall be
collected and disbursed prior to the collection and disbursement of the
withholding credit under the targeted jobs withholding tax credit
program.
