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DEVELOPING THE ECONOMY BY GIVING MONEY AWAY

February 17, 2007

There are several bills in the hopper in the Iowa legislature to increase the allowable tax credits for rehabbing old buildings. One has an interesting twist: it would give money away for buildings that have already been rehabbed. HF 360, introduced by the "Committee on Economic Growth," increases the value of historic rehab credits that have already been issued but haven't been used.

Iowa's rehabilitation credit allows taxpayers to eliminate their Iowa tax tax with their credits dollar-for-dollar. If the credits exceed their tax, the state gives an actual cash subsidy of up to 75 cents for each dollar of credit, using a discounting formula. Taxpayers get a certificate showing the amount of credit they are entitled to.

HF 360 eliminates the discount for tax credits issued before 2007. This means people who have already been awarded credits will get a free windfall from the state for work that they've already done or committed to.

I think credits like this are at best questionable, but there's at least a logical argument for giving taxpayers a subsidy to rehab old buildings that haven't yet been fixed up. These credits, though, are for work that's already done, or that people have agreed to do for the credits that were already available. No business would pay a contractor that way, but that's economic growth, Iowa-syle.

Follow the progress of this bill and all other 2007 Iowa session tax legislation at our 2007 Iowa Tax Legislation page.

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