INITIAL ANALYSIS OF THE 2021 LEGISLATIVE SESSION | May 20, 2021
2021 Session Adjourned

The 2021 session of the 89th Iowa General Assembly has now concluded. Three weeks of overtime was used by House and Senate leaders working with Governor Reynolds to negotiate final compromises on pro-growth tax legislation, required budget bills and other key policy measures. The final week was spent executing on the agreed initiatives and the session adjourned sine die late Wednesday night, May 19. The 2021 session was the first year of elected office for 27 legislators.

ABI registered a position on more than 200 bills this session and tracked more than 300 bills during the 2021 session.

The public policy team worked to ensure the voice of Iowa business was heard at the Capitol. The session was defined by the passage of a robust, pro-business omnibus bill related to tax and economic growth issues. ABI also worked to ensure a number of perennial proposals related to mandates were not passed. ABI was successful thanks to the support and leadership of ABI members. Thank you!
2021 Session: Workforce and Infrastructure

The ABI board of directors established three legislative priorities for 2021. Workforce and Infrastructure priorities were accomplished legislative and action continues to take place on regulatory reform through the administrative process outside of the legislative session. Although ABI’s legislative proposals took a different direction this session, it was a solid year for the business community. ABI successfully lobbied on key legislation that fit within the scope of ABI's priorities for 2021 that you can see below. For a full analysis and behind-the-scenes look at the end of session discussion, join us for our final MEMBERS ONLY legislative update FRIDAY at 8:00 am.

Workforce

ABI applauds the Legislature and the Governor for their leadership in investing in workforce housing and child care, which were two specific policy areas that members highlighted as workforce challenges and a priority for the association. Several workforce initiatives passed, and many of them were wrapped into a large tax policy bill.

SF 619: This is the tax and economic growth compromise that was spearheaded by Governor Reynolds and passed by the Legislature. The legislation contains a number of legislative priorities for ABI including housing, childcare and implementation of sound tax policy. The 28 division omnibus enacts a number of significant policies outlined below:
  • Eliminates the 2018 revenue growth triggers which will ensure the full implementation of the 2018 tax legislation beginning in tax year 2023.
  • Couples Iowa with Section 168(k) federal bonus depreciation and ensures we remain uncoupled from Section 163(j) which preserves expensing changes put into Iowa Code in 2020.
  • Establishes a Manufacturing 4.0 grant program. Eligible recipients would receive up to $75,000 in a matching grant to bring Manufacturing 4.0 technology investments to small manufacturing.
  • Exempts COVID-19 grants issued by certain state agencies from income tax.
  • Implements Paycheck Protection Program (PPP) equity regarding income tax exemptions and deductions for all taxpayers who have a forgiven PPP loan regardless of when they received it.
  • Phases out and eliminates the inheritance tax over four years.
  • Expands the amount of money that can flow into the Housing Trust Fund each year from $3 million to $7 million.
  • Allows the Iowa Economic Development Authority (IEDA) to consider the creation of a child care facility as “bonus criteria” when a project is being considered under the High Quality Jobs Program.
  • Increases income threshold from $45,000 to $90,000 for the early childhood and child and dependent care tax credits.
  • Lowers IEDA’s tax credit cap under the High Quality Jobs program to $70 million.
  • Increases the workforce housing tax credit program from $25 million to $40 million for FY22 and $35 million thereafter. $17.5 million is allocated to the small city set-aside portion of the program, beginning in FY23 to improve housing stock in more rural parts of Iowa.
  •  Phases out and ends the commercial and industrial property tax backfill payments to local governments beginning in FY23. Jurisdictions that have seen their tax base grow faster than the statewide average will see their backfill end over four years. Jurisdictions that haven’t will have their backfill end over seven years. 
  • Imposes telehealth parity for mental health services.
  • Phases out the county mental health property tax levy, shifting funding responsibility for mental health services from counties to the state.

Unemployment Insurance

As the Iowa Unemployment Trust Fund (IUTF) balance was drawn down making payments to jobless during the pandemic, ensuring solvency and preventing increases in employer paid unemployment taxes became paramount to ABI members as we looked at ways to shore up the fund. ABI staff worked to ensure Governor Reynolds and other policymakers in the Legislature were aware that tax increases would hit businesses if action wasn’t taken.

The association was disappointed the Legislature did not enact legislation to ensure sustainability of the employer funded unemployment trust fund. We look forward to continued education and discussion on the issue with legislators during the interim and the next legislative session. 

However, thanks to the leadership of Governor Reynolds and advocacy of ABI members and staff, employers are poised to remain in Tax Table 7 in 2022. This is a significant victory for Iowa businesses as they will see no increase in unemployment insurance taxes while employers in other jurisdictions will face sharp increases. ABI is pleased that Governor Reynolds sought and received federal guidance allowing the deposit of money from the American Rescue Plan Act into the unemployment insurance trust fund to keep us at Table 7 for 2022. The governor had previously deposited $490 million into the IUTF in 2020. Without her actions, employers of all sizes would have seen significant unemployment tax increases in 2021 and again in 2022.

Also due to Governor Reynolds leadership, Iowa will no longer participate in the supplemental federal unemployment benefits after June 12. This is another significant victory for employers as more than 60,000 jobs available in Iowa. ABI members are ready to hire and this action by the governor will encourage people to rejoin the workforce. 

Workplace Safety

HF 283: This bipartisan legislation spearheaded by ABI creates criminal penalties for those who would manufacture, market, distribute, sell, use or possess synthetic urine for the purposes of defrauding a drug or alcohol test. The penalties, a simple misdemeanor for a first offense and a serious misdemeanor for each subsequent offense, would also apply to those who expel their urine beforehand or use another person’s urine for the purposes of defrauding a drug or alcohol test. ABI members brought this issue forward a few years ago as employers were seeing an increase in this activity. The legislation acts as a deterrent to cheating on tests and will increase the safety of workplaces. It passed the House 61-30 on February 16. It passed the Senate 32-16 on February 17. Governor Reynolds signed the bill into law on March 8.

SF 361: Changes to modernize Iowa’s private sector drug testing law passed the Iowa Senate on March 17. The legislation was referred to the House Labor Committee where it will be alive for ABI to work to advance in the 2022 legislative session.

Infrastructure

HF 848: Expanding high-speed broadband access across the state was a priority for Governor Reynolds, legislative leaders and ABI since the beginning of the 2021 session. A bipartisan policy bill that will put Iowa near the top of the country when it comes to deploying the kinds of speeds necessary for businesses to operate in the 21st century was unanimously approved and signed by the governor. Some key details include:
  • Grants to provide broadband service with minimum download and upload speeds of 100 megabits per second
  • Defines “Tier 1” as a maximum download speed of less than 25 megabits per second and a maximum upload speed of three megabits per second
  • Modifies “underserved area” to mean any portion of a targeted service area in which no communications service provider facilitates broadband service meeting the Tier 1 download and upload speeds
  • 80 percent of grants will go to projects that facilitate minimum download and upload speeds of 100 megabits per second
  • Up to 20 percent of grants will go to projects that facilitate minimum download speeds of 100 megabits per second and upload speeds of 20 megabits per second
ABI Stops Job Crushers

Legislation is introduced each year that would have a negative effect on Iowa’s business climate. The 2021 legislative session was no exception. Though one healthcare mandate did pass the Legislature and got sent to Governor Reynolds, dozens of other anti-jobs bills were defeated. ABI would like to thank all of the members who engaged their legislators on these key issues. As a reminder, each session of the Iowa General Assembly is two years and all of the legislation that did not pass will be alive for the next legislative session. Your continued education and outreach to your legislator is essential in helping stop bad for business bills. You can view some of the job crushers ABI stopped below.

Eroding Iowa’s status as an “at-will” employment state. As the Legislature addressed the issue of vaccine passports, there were multiple attempts by some to enact policy that would have interfered with the employer/employee relationship as it relates to vaccines. ABI staff worked diligently to ensure that employers will continue to have the right to decide and enforce what kind of employment policies work best for their businesses.

SF 339: E-Verify. The bill would mandate all employers regardless of size use the federal electronic verify system for their employees. The legislation would impose draconian penalties for violations and make it unnecessarily burdensome for small businesses to comply. The Senate Judiciary Committee passed the bill, but it did not advance out of the full Senate.

SF 485: Pregnancy Accommodations. The bill would require employers to provide reasonable pregnancy accommodations to employees based on medical conditions related to pregnancy or childbirth. The end result of this legislation would be an increase of litigation against employers. It passed out of the Senate Labor Committee, but didn’t come to the floor.

ABI was also successful in opposing and stopping a number of other bills that would have raised costs on employers and harmed Iowa’s business climate. All of those bills will remain eligible in 2022.
By the Numbers: ABI's 2021 Legislative Session

ABI lobbyists: 2
Number of bills registered: 207
Number of bills supported: 90
Number of bills against: 35
Number of bills registered to monitor: 82
Number of ABI-supported bills passed by both chambers: 11
30-day Veto Window

Now that session is over, Gov. Reynolds has 30 days to veto or approve bills received in the last three days of session. She can veto a whole policy or budget bill or item-veto specific appropriations or policy language in an appropriations bill. During this time, the governor and her staff will carefully review the language to ensure it fits within the state's budget targets and her policy goals. Groups who want items signed or vetoed typically use the 30-day time to send letters of support or opposition to the governor. If she vetoes or item-vetoes an appropriations bill, she provides an explanation about the reason for the veto. Bills have enactment dates of July 1, unless otherwise specified. Here is an overview of budget bills from the business perspective.

Appropriations Bills

ABI follows the appropriations process, watching for policy or appropriations that affect businesses and the agencies with which they interact. ABI weighed in on several budget bills this session, some of which contained ABI priority appropriations. Below are the appropriations bills and the issues that ABI followed.

HF 867: One of the first appropriations bills to pass the Legislature this year was the Administration & Regulation budget. A critical component of this legislation was the $100 million line item for the Empower Rural Iowa Broadband Grant Fund. ABI was very much in support of this appropriation as it shows a commitment by the Legislature and Governor Reynolds to take on the challenge of expanding high-speed broadband in a bold, robust manner.  

HF 871: The Economic Development Budget contains $4.2 for the Future Ready Iowa Employer Innovation Fund. This matching grant fund is aimed at providing resources for employers to help upskill the workforce. $3 million of the total will be put into the Child Care Challenge Fund. This fund puts money into regional and community projects aimed at establishing child care facilities. The bill also allows Iowa Workforce Development to promulgate rules to waive or alter work search requirements for those who are attached to a regular job, will be returning to work and fall under a short-term temporary layoff in the highway construction industry.

HF 868: The Education Budget includes just over $23 million for the Future Ready Iowa Last-Dollar Scholarship Program. The funding will go to individuals seeking to receive their two-year degree in a high-demand field.
Save the Date: Summer Public Policy Meetings

With the Legislature having adjourned, in-person regional meetings will take place between now and mid-July. The dates for the meetings are being set and once they are finalized, we will highlight them in the weekly newsletter. You can find out more about the meetings by going to the ABI Events Calendar.

In August, the ABI public policy team will host five public policy committee meetings in person in Des Moines to formulate the 2022 policies. The committees – Tax, Economic Growth, Workplace and Product Safety, Environment, and Employment and Workforce –will review our current policies and provide recommendations to the Legislative Committee. The Legislative Committee will review those recommendations, and then the Board of Directors will vote on our policies for 2022 in September. This is a great opportunity for your company to bring forward issues and ideas that they would like to see addressed by the Legislature.
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