Iowa-2013-HF2211-Introduced

H.F. 2211 Section 1. NEW SECTION . 261.61 Medical student promise tax 1 credit. 2 1. Definitions. For purposes of this section, unless the 3 context otherwise requires: 4 a. “Commission” means the college student aid commission. 5 b. “Eligible degree” means a master of physician assistant 6 studies or a doctor of medicine, pharmacy, dental surgery, or 7 osteopathy degree. 8 c. “Eligible university” means the state university of Iowa 9 college of medicine or Des Moines university – osteopathic 10 medical center. 11 d. “Fund” means the medical student promise fund. 12 e. “Medical student” means an individual who has entered 13 into a promise agreement and is enrolled full-time in an 14 eligible university in a curriculum leading to an eligible 15 degree. 16 f. “Promise agreement” means the agreement entered into in 17 subsection 3. 18 2. Tax credit. 19 a. A tax credit shall be allowed against the taxes imposed 20 in chapter 422, divisions II, III, and V, and in chapter 432, 21 and against the moneys and credits tax imposed in section 22 533.329, for a portion of the amount of the voluntary cash or 23 noncash contributions made by the taxpayer during the tax year 24 to the medical student promise fund. 25 b. An individual may claim a tax credit under this section 26 of a partnership, limited liability company, S corporation, 27 estate, or trust electing to have income taxed directly to 28 the individual. The amount claimed by the individual shall 29 be based upon the pro rata share of the individual’s earnings 30 from the partnership, limited liability company, S corporation, 31 estate, or trust. 32 c. The amount of a tax credit allowed under this section 33 shall equal twenty-five percent of the amount of the taxpayer’s 34 voluntary cash contributions made by the taxpayer during the 35 -1- LSB 5464YH (3) 85 kh/sc 1/ 11

H.F. 2211 tax year to the medical student promise fund. 1 d. (1) To receive a tax credit, a taxpayer must submit 2 an application to the commission. The commission shall issue 3 certificates under this section on a first-come, first-served 4 basis, which certificates may be redeemed for tax credits. In 5 allocating tax credits pursuant to this section, the commission 6 shall allocate one million dollars in aggregate for purposes 7 of this section, unless the commission determines that the tax 8 credits awarded will be less than that amount. 9 (2) If in a fiscal year the aggregate amount of tax credits 10 applied for exceeds the amount allocated for that fiscal year 11 under this paragraph “d” , the commission shall establish a 12 wait list for certificates. Applications that were approved 13 but for which certificates were not issued shall be placed 14 on the wait list in the order the applications were received 15 by the commission and shall be given priority for receiving 16 certificates in succeeding fiscal years. 17 e. The commission shall, in cooperation with the 18 department of revenue, establish criteria and procedures 19 for the allocation and issuance of tax credits by means of 20 certificates issued by the commission. The criteria shall 21 include the contingencies that must be met for a certificate 22 to be redeemable in order to receive a tax credit. The 23 procedures established by the commission, in cooperation with 24 the department of revenue, shall relate to the procedures for 25 the issuance and transfer of the certificates and for the 26 redemption of a certificate and related tax credit. 27 f. A certificate and related tax credit issued pursuant to 28 this section shall be deemed a vested right of the original 29 holder or any transferee thereof, and the state shall not cause 30 either to be redeemed in such a way that amends or rescinds the 31 certificate or that curtails, limits, or withdraws the related 32 tax credit, except as otherwise provided in this section or 33 upon consent of the proper holder. A certificate issued 34 pursuant to this section cannot pledge the credit of the state 35 -2- LSB 5464YH (3) 85 kh/sc 2/ 11

H.F. 2211 and any such certificate so pledged to secure the debt of the 1 original holder or a transferee shall not constitute a contract 2 binding the state. 3 g. Any tax credit in excess of the taxpayer’s liability 4 for the tax year may be credited to the tax liability for the 5 following five years or until depleted, whichever is earlier. 6 A tax credit shall not be carried back to a tax year prior to 7 the tax year in which the taxpayer claims the tax credit. 8 h. Tax credit certificates issued pursuant to this section 9 may be transferred, in whole or in part, to any person. A tax 10 credit certificate shall only be transferred once. Within 11 ninety days of transfer, the transferee shall submit the 12 transferred tax credit certificate to the department of revenue 13 along with a statement containing the transferee’s name, tax 14 identification number, and address, the denomination that each 15 replacement tax credit certificate is to carry, and any other 16 information required by the department of revenue. 17 i. Within thirty days of receiving the transferred tax 18 credit certificate and the transferee’s statement, the 19 department of revenue shall issue one or more replacement 20 tax credit certificates to the transferee. Each replacement 21 tax credit certificate must contain the information required 22 for the original tax credit certificate. A replacement tax 23 credit certificate may designate a different tax than the tax 24 designated on the original tax credit certificate. A tax 25 credit shall not be claimed by a transferee under this section 26 until a replacement tax credit certificate identifying the 27 transferee as the proper holder has been issued. 28 j. The transferee may use the amount of the tax credit 29 transferred against the taxes imposed in chapter 422, divisions 30 II, III, and V, and in chapter 432, and against the moneys and 31 credits tax imposed in section 533.329, for any tax year the 32 original transferor could have claimed the tax credit. Any 33 consideration received for the transfer of the tax credit shall 34 not be included as income under chapter 422, divisions II, 35 -3- LSB 5464YH (3) 85 kh/sc 3/ 11

H.F. 2211 III, and V. Any consideration paid for the transfer of the tax 1 credit shall not be deducted from income under chapter 422, 2 divisions II, III, and V. 3 3. Promise agreement. A promise agreement shall be entered 4 into by a medical student and the commission when the medical 5 student begins the curriculum leading to an eligible degree. 6 Under the promise agreement, a medical student shall agree to 7 and shall fulfill all of the following requirements: 8 a. If the medical student is enrolled in a curriculum 9 leading to a doctor of medicine, pharmacy, dental surgery, or 10 osteopathy degree, or master of physician assistant studies, 11 apply for, enter, and complete an Iowa-based residency program. 12 b. Apply for and obtain a license to practice as a physician 13 assistant pursuant to chapter 148C, a license to practice as a 14 physician and surgeon or an osteopathic physician and surgeon 15 licensed pursuant to chapter 148, or pharmacist pursuant to 16 chapter 155A, or a dentist licensed pursuant to chapter 153. 17 c. Within nine months of graduating from a residency 18 program, if applicable, and receiving a permanent license in 19 accordance with paragraph “b” , reside in Iowa and engage in the 20 full-time practice in Iowa as a physician assistant, a dentist, 21 or a doctor of medicine and surgery or osteopathic medicine 22 and surgery or a pharmacist for a period of sixty consecutive 23 months. 24 4. Postponement and satisfaction of service obligation. 25 a. The obligation to engage in practice in accordance with 26 subsection 3 may be postponed for the following purposes: 27 (1) Active duty status in the armed forces, the armed forces 28 military reserve, or the national guard. 29 (2) Service in volunteers in service to America. 30 (3) Service in the federal peace corps. 31 (4) A period of service commitment to the United States 32 public health service commissioned corps. 33 (5) A period of religious missionary work conducted by an 34 organization exempt from federal income taxation pursuant to 35 -4- LSB 5464YH (3) 85 kh/sc 4/ 11

H.F. 2211 section 501(c)(3) of the Internal Revenue Code. 1 (6) Any period of temporary medical incapacity during which 2 the person obligated is unable, due to a medical condition, to 3 engage in full-time practice as required under subsection 3, 4 paragraph “c” . 5 b. Except for a postponement under paragraph “a” , 6 subparagraph (6), an obligation to engage in practice under 7 a promise agreement shall not be postponed for more than 8 two years from the time the full-time practice was to have 9 commenced under the promise agreement. 10 c. An obligation to engage in full-time practice under a 11 promise agreement shall be considered satisfied when any of the 12 following conditions are met: 13 (1) The terms of the promise agreement are completed. 14 (2) The person who entered into the promise agreement dies. 15 (3) The person who entered into the promise agreement is 16 unable, due to a permanent disability, to practice as provided 17 in the agreement. 18 d. If an individual fails to fulfill the obligation to 19 engage in practice in accordance with the promise agreement, 20 the individual shall be subject to repayment to the commission 21 of the amount paid by the commission to reduce the individual’s 22 educational loan interest rate plus interest as specified by 23 rule. 24 5. Fund created. 25 a. A medical student promise fund is created as a 26 revolving fund in the state treasury under the control of the 27 commission. The fund shall consist of all moneys deposited 28 in the fund pursuant to this section, any funds received 29 from other sources, and interest and earnings thereon. The 30 commission is the trustee of the fund and shall administer 31 the fund. Any loss to the fund shall be charged against the 32 fund and the commission shall not be personally liable for 33 such loss. Moneys in the fund are not subject to section 34 8.33. Notwithstanding section 12C.7, subsection 2, interest or 35 -5- LSB 5464YH (3) 85 kh/sc 5/ 11

H.F. 2211 earnings on moneys in the fund shall be credited to the fund. 1 b. Moneys in the fund shall be used by the commission to 2 reduce the interest rate charged to a medical student for an 3 educational loan to a rate that is not more than one-half of 4 the interest rate currently charged for federal educational 5 loans under the federal Higher Education Act of 1965, as 6 amended and codified in 20 U.S.C. §1071 et seq. 7 6. Information upon request. An eligible university shall 8 collect and provide to the commission any information required 9 by the commission for the administration of this section in the 10 manner and form prescribed by the commission. 11 7. Report. On or before January 15 of each year, the 12 commission, in cooperation with the department of revenue, 13 shall submit to the general assembly and the governor a report 14 describing the activities of the medical student promise fund 15 during the preceding fiscal year. The report shall at a 16 minimum include the following information: 17 a. The amount of tax credit certificates issued to 18 individuals pursuant to this section. 19 b. The amount of approved tax credit applications that were 20 placed on the wait list for certificates. 21 c. The amount of tax credits claimed. 22 d. The amount of tax credits transferred to other persons. 23 e. The amount of the voluntary cash or noncash contributions 24 made by taxpayers during the tax year to the medical student 25 promise fund. 26 Sec. 2. NEW SECTION . 422.11C Medical student promise tax 27 credits. 28 The taxes imposed under this division, less the credits 29 allowed under section 422.12, shall be reduced by a medical 30 student promise tax credit allowed under section 261.61. 31 Sec. 3. Section 422.33, Code 2014, is amended by adding the 32 following new subsection: 33 NEW SUBSECTION . 22. The taxes imposed under this division 34 shall be reduced by a medical student promise tax credit 35 -6- LSB 5464YH (3) 85 kh/sc 6/ 11

H.F. 2211 allowed under section 261.61. 1 Sec. 4. Section 422.60, Code 2014, is amended by adding the 2 following new subsection: 3 NEW SUBSECTION . 12. The taxes imposed under this division 4 shall be reduced by a medical student promise tax credit 5 allowed under section 261.61. 6 Sec. 5. NEW SECTION . 432.12N Medical student promise tax 7 credit. 8 The taxes imposed under this chapter shall be reduced by 9 a medical student promise tax credit allowed under section 10 261.61. 11 Sec. 6. Section 533.329, subsection 2, Code 2014, is amended 12 by adding the following new paragraph: 13 NEW PARAGRAPH . k. The moneys and credits tax imposed under 14 this section shall be reduced by a medical student promise tax 15 credit allowed under section 261.61. 16 Sec. 7. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 17 immediate importance, takes effect upon enactment. 18 Sec. 8. RETROACTIVE APPLICABILITY. This Act applies 19 retroactively to January 1, 2014, for tax years beginning on 20 or after that date for purposes of the medical student promise 21 tax credit and for cash and noncash contributions made to 22 the medical student promise fund created pursuant to section 23 261.61, if enacted, made on or after that date. 24 EXPLANATION 25 The inclusion of this explanation does not constitute agreement with 26 the explanation’s substance by the members of the general assembly. 27 This bill establishes a medical student promise tax credit 28 and a medical student promise fund under the control of the 29 college student aid commission for the purpose of providing 30 a means for reducing the interest rate charged to a medical 31 student for an educational loan to an amount of interest that 32 is not more than one-half of the interest rate currently 33 charged for federal educational loans. 34 TAX CREDIT. The tax credit is allowed against the personal 35 -7- LSB 5464YH (3) 85 kh/sc 7/ 11

H.F. 2211 and corporate income tax, franchise tax, insurance premium tax, 1 and the moneys and credits tax. 2 To receive a certificate which may be redeemed for a tax 3 credit, the taxpayer must submit an application to the college 4 student aid commission. The commission must issue certificates 5 on a first-come, first-served basis. In allocating tax 6 credits, the commission shall allocate $1 million in the 7 aggregate for certificates for tax credits, unless the 8 commission determines that the tax credits awarded will be 9 less than that amount. If the amount of applications exceeds 10 the available tax credits in a fiscal year, the commission is 11 required to establish a wait list and give priority in later 12 years to applications on the wait list. 13 The taxpayer may transfer a tax credit once, and the bill 14 establishes procedures for transferring the credit to another 15 person. Within 90 days of transfer, the transferee must submit 16 the transferred tax credit certificate to the department of 17 revenue along with a statement containing information specified 18 in the bill. Within 30 days of receiving the transferred 19 tax credit certificate and the transferee’s statement, the 20 department of revenue must issue one or more replacement tax 21 credit certificates to the transferee. A replacement tax 22 credit certificate may designate a different tax than the 23 tax designated on the original tax credit certificate. Any 24 consideration received for the transfer of the tax credit shall 25 not be included as income. Any consideration paid for the 26 transfer of the tax credit shall not be deducted from income. 27 The commission must, in cooperation with the department of 28 revenue, establish criteria and procedures for the allocation 29 and issuance of tax credits by means of certificates issued by 30 the commission. The criteria shall include the contingencies 31 that must be met for a certificate to be redeemable in order to 32 receive a tax credit. 33 Any tax credit in excess of the taxpayer’s liability for the 34 tax year may be credited to the tax liability for the following 35 -8- LSB 5464YH (3) 85 kh/sc 8/ 11

H.F. 2211 five years or until depleted, whichever is earlier. A tax 1 credit shall not be carried back to a tax year prior to the tax 2 year in which the taxpayer claims the tax credit. 3 PROMISE AGREEMENT. To be eligible for the reduction in 4 the interest rate charged for an educational loan, a medical 5 student must enter into a promise agreement with the commission 6 and be enrolled full-time in an eligible university in a 7 curriculum leading to an eligible degree. “Eligible degree” 8 means a master of physician assistant studies or a doctor of 9 medicine, pharmacy, dental surgery, or osteopathy degree; 10 and “eligible university” means the state university of Iowa 11 college of medicine or Des Moines university — osteopathic 12 medical center. 13 Under the promise agreement, a medical student shall agree 14 to and shall fulfill certain requirements, including completing 15 a residency if applicable, applying for and obtaining a license 16 to practice, residing in Iowa, and engaging in full-time 17 practice in the state as a physician assistant, a dentist, or 18 a doctor of medicine and surgery or osteopathic medicine and 19 surgery, or pharmacist for a period of 60 consecutive months. 20 The bill provides for the postponement and satisfaction 21 of the obligation to practice full time in Iowa. Practice 22 may be postponed for certain purposes, such as active duty 23 status in the armed forces, the armed forces military reserve, 24 or the national guard; service in volunteers in service to 25 America; service in the federal peace corps; a period of 26 service commitment to the United States public health service 27 commissioned corps; a period of religious missionary work; or 28 any period of temporary medical incapacity during which the 29 person obligated is unable to engage in full-time practice. 30 However, except for medical incapacity, an obligation to engage 31 in practice shall not be postponed for more than two years from 32 the time the full-time practice was to have commenced under the 33 promise agreement. 34 The practice obligation shall be considered satisfied when 35 -9- LSB 5464YH (3) 85 kh/sc 9/ 11

H.F. 2211 the terms of the agreement are completed or the person dies or 1 is unable to practice due to a permanent disability. 2 If an individual’s obligation is not postponed or satisfied, 3 and the person fails to fulfill the obligation to practice, 4 the individual is subject to repayment to the commission of 5 the amount paid by the commission to reduce the individual’s 6 educational loan interest rate plus interest as specified by 7 rule. 8 MEDICAL STUDENT PROMISE FUND CREATED. A medical student 9 promise fund is created as a revolving fund in the state 10 treasury under the control of the commission and administered 11 by the commission. Moneys in the fund shall be used by the 12 commission to reduce the interest rate charged to a medical 13 student for an educational loan to a rate that is not more 14 than half of the interest rate currently charged for federal 15 educational loans. The fund shall consist of all moneys 16 deposited in the fund pursuant to this section, any funds 17 received from other sources, and interest and earnings thereon. 18 Any loss to the fund shall be charged against the fund and 19 the commission shall not be personally liable for such loss. 20 Moneys in the fund do not revert to the general fund of the 21 state and interest or earnings on moneys in the fund are to be 22 credited to the fund. 23 INFORMATION/REPORTS/REVIEW. On or before January 15 of each 24 year, the commission, in cooperation with the department of 25 revenue, must submit to the general assembly and the governor 26 a report describing the commission’s activities relating to 27 the medical student promise fund during the preceding fiscal 28 year, including information regarding the applications placed 29 on the wait list, contributions made, certificates issued, and 30 tax credits claimed. An eligible university shall collect 31 and provide to the commission any information required by the 32 commission for administration of the fund. 33 EFFECTIVE DATE AND RETROACTIVE APPLICABILITY PROVISIONS. 34 The bill takes effect upon enactment and applies retroactively 35 -10- LSB 5464YH (3) 85 kh/sc 10/ 11