A Look at What Did, and Didn’t, Happen On Three Priorities For Iowa Business In The 2020 Legislative Session

July 31, 2020

By Michael Crumb, Buiness Record 

When this year’s Iowa Legislature adjourned in mid-June after a session cut short by the coronavirus pandemic, lawmakers had passed several measures they say will benefit the state’s business community. 

From easing what were some of the most restrictive professional licensing laws in the nation to continuation of the Future Ready Iowa and Empower Rural Iowa acts, people we spoke with said progress was made. 

Future Ready Iowa aims to connect residents to education and training with the goal of having 70% of the state’s workforce receive training and education beyond high school by 2025. This year’s measure expanded the Apprenticeship Opportunities Program and created the Child Care Challenge Fund, among other things.

Empower Rural Iowa is designed to provide resources and technology to help boost the state’s rural economy, and a big component of this year’s bill was expanding broadband capability statewide.

Lawmakers also passed a bill protecting businesses from being sued because of COVID-19.

While some progress was made, those we spoke with said more still needs to be done.

During recent interviews, three areas gravitated to the top of the priority list of things advocates and business leaders say they will watch closely when the Legislature convenes in January 2021. 

Broadband

Iowa lawmakers approved a bill that expands the Broadband Grant Program, increasing the state match from 15% to 35% to communities working to expand high-speed internet.

It also split the funding into two pots: one for something called future-proof build-outs, which offer 100-megabit download and 20-megabit upload speeds, and another pot for build-outs of 25-megabit download and three-megabit upload speeds, which is considered the minimum level of useful service. 

Dave Duncan, CEO of the Iowa Communications Alliance, which represents community-based internet companies statewide, said another measure that passed eliminated taxes on grants awarded to communities by the federal or state government to expand broadband access.

A bill that didn’t pass directed the Iowa Economic Development Authority to certify programs that promote broadband deployment throughout the state.
One of those, Duncan said, was the designation of communities as a “Broadband Forward Community,” where the community could hold itself as being connected and use that as a recruiting tool for economic development. The other, he said, was certification as a “Telecommuting Forward” community.

“And didn’t we just find out that was one of the most important things we have learned because of the COVID-19 crisis and everyone working from home?” Duncan said.

He said that the bill had a good chance of passing, but that the Legislature just ran out of time.

“So we’re going to help promote that one next year, I believe,” Duncan said.

Tax Reform

Business leaders agree that the need to reform Iowa’s tax structure is critical to make the state more competitive. The Tax Foundation ranks Iowa’s corporate tax structure 48th of our 50 states, and its individual tax structure 42nd out of 50 states.

“We have a lot of work to do in those two areas, and that’s something that you’ll continue to see the Iowa Business Council engaged in,” said Joe Murphy, the group’s executive director.

For Iowa to be more competitive, its tax structure needs to become less complicated with a consolidation of brackets and a reduction of rates, he said.

“As we emerge out of the pandemic, there will be a strong effort to recruit more companies to this state so we’ll have more jobs and opportunities for Iowa moving forward. And as economic development groups try to do that work, Iowa is at a competitive disadvantage because of its higher tax structure compared to the rest of the country,” Murphy said.

Tom Sands, president and CEO of the Iowa Taxpayers Association, said that while more is needed on tax reform, there were some successes this year.
A huge win was the Legislature and governor agreeing to decouple from two provisions in the Internal Revenue Code. The first is limits on the amount of business expense interest that can be deducted, increasing taxable value. The other is known as the Global Intangible Low-Taxed Income, commonly referred to as GILTI. Both went into effect in 2018, but Iowa did not conform to them until last year, Sands said.

“Neither one really makes sense at the state level; we just automatically conform to them when we conform to that code,” he said.

Another win was stopping a tax increase that would have occurred with the elimination of rules no longer in compliance with federal law defining computer peripherals.

“That stopped that tax increase and just codifies a better definition of computer peripherals,” Sands said.

What are computer peripherals? They are anything that can be physically or electronically connected to a computer to help it function, such as keyboards and mice, Sands said.

Child Care

The last area that will likely see renewed attention in 2021 is child care, specifically closing the gap on what is commonly called the child care cliff.
The cliff is that income level where someone is no longer eligible to receive child care assistance, oftentimes leaving them in worse financial shape than they were before.

To better understand the costs involved, one has to understand the expense of child care. In Iowa, it can be as much as $12,000 a year per child.

The limit for child care assistance for a family of four was 145% of poverty, or $37,990. If a parent gets even the smallest of raises, they might go over that cliff.

Dave Stone, advocacy officer for the United Way of Central Iowa, said one bill that did not pass this year would have increased the income cap for eligibility for child care assistance to 250% of poverty, or $65,500, or the minimum amount needed to be self-supporting.

There were some wins for child care in 2020.

The creation of the Child Care Challenge Fund, a matching grant program to expand access or open new facilities. Even in metropolitan areas of the state, deserts in available services exist. It’s commonly understood that available child care is a tool to attract new companies and workers to a community, Stone said.

Another measure provides exemptions to the number of children a provider can care for in times of emergency, such as the pandemic. 

There was also another win, but with it comes more challenges, Stone said.
A rule change increased income eligibility to 225% of poverty, or $58,950. The problem, Stone said, is that someone must still be at 145% of poverty or less to start receiving assistance. The good news, he said, is they remain eligible up to that 225% threshold, so if they get a raise, they no longer fall over that cliff that was here at the lower threshold. The bad news, if someone is at 146% of poverty, or just a few hundred dollars over the level needed to participate, they lose out. 

“We have work to do there, because that’s a lot of folks between 145 and 225,” Stone said.

“Everyone between those income levels should be eligible and be able to access that program. That’s what would really help people.” 

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