Ways & Means Committee – Week 9, 2022


SF 2350 – Alcoholic beverages control and licensing

SF 2350 contains a number of changes to alcoholic beverage licensing process. Some of these changes were originally proposed by the Alcoholic Beverages Division (ABD) as part of their department omnibus, while others are part of a larger move to reduce the number of licenses that retailers and manufacturers must hold to sell products and the fees they must pay.

The ABD proposals make a number of changes, including:

  • Allowing the automatic renewal of certain license and certificate types provided the licensee/certificate holder has remained in compliance with all applicable laws, rules and regulations during the previous year.
  • Creating Sunday sales equity across all retail license/permit classifications by removing the special permit for Sunday sales.
  • Reducing the number of licenses/permits required to sell alcoholic liquor, wine and beer from three to one. This allows a class “E” liquor license holder to sell beer and wine without having to acquire separate beer-to-go and wine permits.
  • Simplifying the criteria used to determine certain license fees. The bill removes the sale of gasoline as criteria for determining the fee a licensee must pay.
  • Combining two separate permits (special auction and event) obtained by charities so that they only need to obtain one permit to conduct special events.
  • Streamlining the keg registration process to make it easier for beer retailers and to reduce time and resources expended by ABD.
  • Making other non-substantive technical changes to make the law easier to understand and enforce.

The larger portion of the bill makes changes to the existing license structure to reduce the number of permits and licenses needed. These changes include:

  • Change the name of the Class “A” liquor license for non-profits to a Class “F” retail alcohol license. This does not change the regulations associated with the permit.
  • Eliminates the current Class “B” liquor license for hotels/motels. These establishments will fall under the Class “C” retail alcohol license for bars/taverns and restaurants.
  • Grocery stores, liquor stores and convenience stores will be licensed for retail sales of liquor, wine and beer-to-go as a Class “B” retail alcohol licenses.
  • Establishes a special Class “B” retail alcohol license for the sale of Iowa native wine only. This is for sale in original packaging and for off-premises consumption only.
  • The bill also reduces fees for most current license holders, but not all.

The committee adopted an amendment that allows for the purchase of beer, high-alcohol beer, canned cocktails and wine by licensed establishments (e.g., bars, restaurants, taverns) from licensed retail sellers. Those sales are limited to small amounts during a 24-hour period. This provision would address concerns from some bars and restaurants that run out of product during their operating hours, which has become more common as some wholesalers have reduced the frequency of deliveries to those establishments. The amendment also equalized the amount of product a native distillery can sell to an individual on their premises. Current law allows the sale of up to 9 liters by larger distilleries, while smaller distilleries were limited to 1.5 liters. All native distilleries could sell up to 9 liters of product at retail on their premises under the new proposal.
[3/8: Short form (Absent: Dickey)]

SSB 3154 – Various sales and use tax/other tax changes

SSB 3154 is a wide-ranging bill that makes a number of changes to taxes, including sales/use, individual and corporate income, automobile rental excise taxes, franchise taxes and insurance premiums tax. These changes include:

  • Taxation of computer services – The bill updates the term for “software as a service” to “cloud computing.”
  • Additional taxable services – The bill adds web hosting, digital automated services and scooter rentals as taxable services.
  • Sales tax exemption for agricultural equipment – The bill adds “specified digital products” to the existing sales tax exemption on farm machinery and auxiliary equipment.
  • Sales tax exemption for designated entities – The bill adds county fairs and nonprofit facility licensed by the state that provides residential addiction recovery and emergency shelter services for children to the existing list of designated exempt entities that are provided special sales tax exemptions for construction projects. These exemptions are used by the construction companies so they do not have to pay sales tax during the construction on an exempt project.
  • Removes sales tax exemption on computers and peripherals for certain industries – The bill strikes an existing sales tax exemption in Code for the purchase of computers and peripherals that are used in processing or storage of data or information by an insurance company, financial institution or commercial enterprise.
  • Digital products sales tax exemption – This provision clarifies that the commercial enterprise sales tax exemption for the purchase of specified digital products applies to public utilities, meaning RECs and municipal utilities. Those entities had been excluded under the previous exemption.
  • New sales tax exemptions – The bill will exempt “period products” and child and adult diapers from the sales tax.
  • Automobile rental excise tax – The bill makes a number of changes to the automobile rental excise tax regarding peer-to-peer rentals (Uber/Lyft).
  • Manufactured food sales tax exemption – This section resolves an issue that was raised during the rulemaking process on the definition of food sold for human consumption. The rules restricted the exemption to food products primarily for human consumption. The new legislation would allow the exemption to also apply to food ingredients that could be sold for human consumption but are sold for another use. If a product is sold for human consumption but also animal consumption, the product will be exempt regardless of use by human or animal.
  • National Guard pay – The bill would extend an income tax exemption to full-time and annual training duty pay (Title 32). Current National Guard pay exempt from taxes is active duty deployment pay (Title 10).
  • Net operating loss (NOL) deduction – The bill makes changes to the calculation of the net operating loss deduction for businesses. The original legislation was passed in 2018, effective for Tax Year 2023. Since then, there have been changes to the federal calculation of NOL. The bill reflects those changes, but will allow situations where companies can take a larger NOL deduction, as they were eligible to receive under current Iowa law.
  • Fixes to qualified stock exemptions – The bill also fixes an issue with the language on employee-owned stock option programs (ESOP) income tax exemption that was included in HF 2317.
  • Franchise tax – The bill phases in a reduction in the franchise tax rate from the current 5% rate to a lower 3.9% rate.
  • Insurance premiums tax – The bill reduces the tax rate on the insurance premiums tax from 1% to .9%.
    [3/8: Short form (Absent: Dickey)]

SF 2363 – Lake Manawa & Waubonsie user fee pilot program

SF 2363 extends the Lake Manawa and Lake Waubonsie state parks use fee pilot program until December 31, 2025. The pilot programs authorize the Iowa Department of Natural Resources to charge an entrance fee for each nonresident vehicle. A one-day entrance of fee is $5 per vehicle. An annual pass is $40 for one vehicle, with the option to buy a second pass for $15.
[3/8: Short form (Absent: Dickey)]