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HF 2774

A bill for an act exempting sales and use taxes incurred for constructing a regional water trail system by a nonprofit corporation, and including effective date and retroactive applicability provisions.

2025-2026 Regular Session

Implements sales/use tax exemptions on materials, equipment, and services for a designated nonprofit building a regional water trail, retroactive to Jan 1, 2025.

Fiscal note.
#corporations #nonprofitentities #salestaxes #taxexemptions #usetaxes #water
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WeVote Research Nonpartisan
Bill Summary · HF 2774

Summary of HF 2774 (Iowa, 2025-2026)

Purpose and Intent

HF 2774 proposes a targeted sales and use tax exemption for a specific nonprofit entity involved in building a regional water trail system. The bill designates a domestic nonprofit corporation with particular governance and project responsibilities as a “designated exempt entity,” enabling it to receive sales tax refunds and exemptions related to construction materials, supplies, equipment, and certain services used in the project. The overall aim is to reduce costs and facilitate the construction of the regional water trail system by removing sales/use tax burdens on inputs and related services.

Key Provisions

  • Designation as Exempt Entity: The bill adds a new subparagraph to Code section 423.4(1)(a), defining a domestic nonprofit corporation (organized under chapter 504) that:

    • Has a majority of voting board members appointed by state political subdivisions,
    • Implements a regional recreational and dam safety plan, and
    • Constructs horizontal and vertical infrastructure on land and within rivers and watersheds as part of a regional water trail system. This entity becomes a “designated exempt entity” under the tax code.

  • Sales/Use Tax Exemption for Construction:

    • For a written construction contract with the designated exempt entity, the sales price of building materials, supplies, equipment, or services is exempt from sales tax to the extent those items are completely consumed in the performance of the contract and the project property becomes public property or property of the designated exempt entity (Code 423.3(80)(c)(1)).

  • Exemption for Transactions with the Entity:

    • The nonprofit may receive refunds of sales/use tax paid on materials, supplies, equipment, or services furnished by contractors under a written contract with the designated exempt entity (i.e., construction-related refunds).

  • Tax on Purchases by the Entity:

    • Sales of tangible personal property or specified digital products, or services furnished to the designated exempt entity, would also be exempt from sales tax.

  • Effect on Construction Contracts:

    • If the property being constructed is ultimately owned by a designated exempt entity or public property, the construction-related tax exemption applies to both the materials and the services.

Effective Date and Retroactivity

  • Effective Date: Immediate upon enactment (acts as an act of immediate importance).
  • Retroactive Applicability: The bill applies retroactively to January 1, 2025, for:
    • All tangible personal property or specified digital products sold to the designated exempt entity on or after that date, and
    • Building materials, supplies, equipment, or services furnished to a contractor under a contract with the designated exempt entity on or after that date.

Who Will Be Affected

  • Primary Beneficiary: The designated exempt nonprofit entity meeting the criteria outlined (governance by state subdivisions, participation in regional recreation/ dam safety planning, and involvement in a regional water trail system).
  • Contractors and Suppliers: Those supplying building materials, equipment, services, or digital products to the nonprofit or under contract with the nonprofit for the water trail project.
  • Public Property Units: The project target is public property or property owned by the designated exempt entity, aligning tax exemptions with public development and safety planning.

Procedural and Timeline Aspects

  • The bill specifies designation procedures through the Department of Revenue for exempt status (implied by existing tax law and the new designation).
  • It takes effect immediately upon enactment and applies retroactively to a date in 2025, which may affect prior transactions and contracts.

If you’d like, I can provide a side-by-side comparison with current law (pre-HF 2774) or a plain-language quick-reference checklist for contractors and nonprofits.

Compiled from official sources — confirm details with the bill’s official record.

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