Many Iowa companies will have the opportunity to earn a tax credit of up to 10 percent of the salary and benefits of each new employee they hire and retain for at least a year, under a provision of the new Grow Iowa Values Fund.

Also through the Values Fund, those businesses that create “high-quality” jobs and make significant capital investments may be rewarded with up to a 10 percent investment tax credit, plus a local property tax exemption, a sales tax refund and a research and development tax credit.

At the same time, counties will be able to tap into $1 million of “regional assistance” dollars from the Values Fund each year by organizing themselves into economic development regions and competing for funding toward their marketing or infrastructure projects. They’ll also be able to set up regional revolving loan funds that can earn contributors a 20 percent tax credit.

Such tax credit programs and regional development efforts are among dozens of initiatives that are part of the Values Fund legislation the Legislature approved earlier this month. The program, which received an annual funding commitment of $50 million for the next 10 years, replaces a seven-year, $100 million program created in 2003 that was financed largely by a one-time federal allocation to the state.

The program, whose single largest investment was $10 million to Wells Fargo & Co. for two major expansion projects in Des Moines and West Des Moines, was thrown into limbo last year after the Iowa Supreme Court ruled that Gov. Tom Vilsack’s governor’s line-item veto of portions of the bill that created the Values Fund rendered the entire measure null and void. A special legislative session in September 2004 enacted a stopgap measure that enabled the Iowa Department of Economic Development’s board of directors to administer the fund until this new legislation was approved.

The new Values Fund emphasizes the use of tax credits to leverage state dollars, and will make those credits available to much smaller projects than before, said Mary Lawyer, chief of staff for the IDED. Additionally, it codifies a regional development approach that had been considered but not approved as part of the original legislation.

“The tax credits are probably the most significant change in the legislation,” said Lawyer, who noted that companies seeking assistance will otherwise see relatively few changes in how they apply for the $35 million in funds that have been allocated annually for direct business loans and grants. Those companies that apply for loan or grant assistance, however, will be required to show that the jobs created will pay wages that exceed 130 percent of the average wage for the county in which the business is located.

Under the legislation, the New Jobs and Income Program and the New Capital Investment tax credit programs have been merged into a new High Quality Job Creation Program, so that companies that make capital investments or add jobs can apply through one program to receive tax credits based on a sliding scale of how much is invested or number of new jobs created. The dollar threshold for the capital investment needed to qualify for these tax credits has also been lowered from $1 million to less than $100,000, which should make more businesses eligible for the credits, Lawyer said.

Another program within the Values Fund, the Wage-Benefits Tax Credit Program, will allow non-retail, non-service businesses to apply to the Iowa Department of Revenue to receive a tax credit of 5 to 10 percent of the total wages and benefits of each new job created. The $10 million in credits, available on a first-come, first-served basis, can be renewed for up to four years, provided the employees are still with the company

The state’s Fiscal Services Division estimates that the cost of all of the Values Fund’s tax credits programs will reach $28.7 million by 2011, a figure that state Rep. Clarence Hoffman, a member of the original Values Fund Board and a chairman of the House Economic Growth Committee, said should be well offset by additional revenues the assisted businesses bring in through new taxes.

“Our returns on investment should exceed that amount by a large percentage,” he said. “If our program is working, that should be the case.”

According to estimates from the IDED, the Values Fund in its first two years led to the creation or retention of more than 14,000 high-paying and high-tech jobs, primarily in the targeted life sciences, advanced manufacturing and financial services sectors, and leveraged $2.2 billion in new capital investments.