Senate sends tax-credit revamp to governor

DES MOINES – A legislative package of caps, reforms and suspensions designed to scale back Iowa's tax credit program and provide more transparency is on its way to Gov. Chet Culver.

The Senate voted 31-19 Monday to accept some House changes that restored funding to beginning farmers and tuition grant programs and added another year's suspension to the beleaguered film tax incentive program. Sen. Dick Dearden, D-Des Moines, joined 18 Republicans in opposing the measure.

As approved, Senate File 2380 would keep the film tax credit program in abeyance until July 1, 2013 and bring all state-issued tax credits under review every five years.

Sen. Joe Bolkcom, D-Iowa City, the bill's floor manager, said the House changes were “pretty basic” and acceptable. Sen. Paul Shomshor, D-Council Bluffs, chairman of the House Ways and Means Committee, said “95 percent of a loaf is better than no loaf at all” in supporting the decision to send the bill to the governor.

The House voted to maintain a $6 million cap on the Iowa Beginning Farmer Tax Credit program rather than follow the Senate lead to cut it in half a program that encourages established farmers to lease or sell land or equipment to new farmers.

Senators also accepted a House change to keep the annual cap on a tax credit for private-school tuition at $7.5 million rather than trim it 10 percent.

The state's tax credit program came under intense scrutiny when allegations of mismanagement, lax oversight, irregularities and theft surfaced last September concerning the film tax credit program. Lawmakers agreed to suspend any new commitments while they look at ways to revamp the program and to allow the Iowa's Attorney General Office time to sort through criminal and civil matters involving the film tax credits.

A fiscal note issued by the nonpartisan Legislative Services Agency projected the savings under S.F. 2380 would be $5.4 million next fiscal year, $25.2 million in fiscal 2012 and $35.9 million in fiscal 2013 – with most of those reductions tied to the film credit suspension.

The bill would establish a statutory panel of legislators to review state tax credits over the next five years and lower the caps on certain business tax credits – including reducing the cap on economic development credits from $185 million to $120 million. It also would cut the Iowa Fund of Funds contingent tax credits from $100 million to $60 million and place more focus of research tax credits to smaller-sized businesses.

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