Iowa lawmakers weigh sales tax exemption for nuclear energy projects

PALO, Iowa (IOWA CAPITAL DISPATCH) - Lawmakers in both the Iowa House and Senate moved forward two measures Wednesday related to sales tax exceptions for nuclear energy facilities.

House Study Bill 767, passed by a House subcommittee Wednesday, adds exemptions for some state sales and use taxes when an entity is working to restart a decommissioned nuclear facility. This measure would provide exemptions for efforts to restart the Duane Arnold Energy Center in Palo, which NextEra Energy plans to make operational by 2029.

Julie Voeck, executive director of regulatory and legislative affairs at NextEra Energy, told lawmakers the Duane Arnold plant is expected to provide more than $9 billion in economic benefits to Iowa, alongside bringing more than 400 full-time jobs to the Palo area and making the state’s electric grid more stable and reliable. While the Duane Arnold project is already moving forward, providing these tax exemptions would put Iowa in a beneficial spot for attracting nuclear energy projects in the future, she said.

“If Iowa wants to take a lead role in attracting investment here, the policy that you’re going to be considering will be a big step forward in encouraging nuclear generation for Iowa,” Voeck said.

She said NextEra, alongside other energy companies, is already looking at potential investments in small modular nuclear reactors, also known as SMRs.

“We’re looking at putting those throughout the country,” Voeck said. “Certainly, areas that have existing infrastructure that supports the nuclear generation technology are a viable site — you’ve already got community acceptance, you’ve got infrastructure, you’ve got emergency preparedness in place. So, certainly, Iowa would be a place that would be very attractive for investment.”

Rep. Shannon Lundgren, R-Peosta, said she supports reopening the Duane Arnold Energy Center, but requested more information on how much money the state would potentially lose in revenue through the sales tax exemption.

“I guess the only thing I would like to see is — just because of the budget year we’re in, and we’re cutting taxes — what that financial obligation would look like, or loss would look like,” Lundgren said.

Rep. Eric Gjerde, D-Cedar Rapids, similarly asked for more information, and also said lawmakers should have a conversation about “whether or not there should be a sunset at some point on this.”

Senate Study Bill 3181, which was approved by Republican Sens. Dan Dawson and Jeff Taylor, includes both the sales and use tax exemptions for restarting nuclear facilities, and extends it to “web search portal” and data center businesses — referring to entities like Google seeking to build infrastructure in the state.  NextEra Energy has made an agreement with Google for the energy from the Iowa nuclear facility to be used for Google’s cloud and AI infrastructure in Iowa.

The Senate proposal also includes language requiring the businesses receiving these tax breaks to enter an agreement with the Iowa Economic Development Authority requiring at least 5% of the aggregate funding saved through the tax exemption goes to an Iowa Regents university for the purpose of creating or maintaining a nuclear engineering program.

Dawson said the proposal was still a “work in progress,” but that he believed the policy would help provide incentives for both nuclear energy production and data centers, which he said will “help propel our economy to the next generation.” However, he said the proposal to add a required investment in higher education programs was his initial idea on how lawmakers can ensure these tax exemptions result in long-term benefits for Iowa’s economy.

“Ultimately, in the end, perpetual exemptions have got to come to a stop in the state without more of a buy-in and more of an investment into the state than what we currently see right now,” Dawson said.

Jillian Carlson with the Iowa Board of Regents, said the board overseeing Iowa’s public universities appreciated the idea, which could potentially bring back the Iowa State University nuclear engineering program that ended in 1996. But she called for changes to language to allow for minor certificates and other options outside of investments outside of creating a major not currently offered at Regents institutions.

Some speakers with business groups like the Microsoft Corp. and Technology Association of Iowa expressed concerns about the required 5% investment making Iowa a less attractive location for businesses seeking to build nuclear energy and data center facilities in Iowa.

Pam Mackey-Taylor with the Iowa Chapter of the Sierra Club, said she opposed tax breaks for both the data center and nuclear industries — and said she disagreed with the proposal to put funding toward a university nuclear engineering program.

“What would normally be spent on taxes and giving it to the university to start a nuclear engineering program — this is coming across as a kickback,” Mackey-Taylor said. “And I would suggest to you that any money should be collected as taxes put in the general fund, and if the university wants to start program in nuclear energy, they can do that, but they don’t need a kickback from all of these industries.”

Sen. Herman Quirmbach, D-Ames, did not sign off on the bill, citing both his “ongoing hesitance about government trying to pick winners and losers in the marketplace through tax policy or subsidies” and concerns about restarting the Duane Arnold energy center.

“Duane Arnold isn’t new small scale” like the potential SMR projects discussed, Quirmbach said, “it’s old large scale. And as far as I’m concerned, it still has the ongoing issues with safety and disposal of waste, speaking as someone who was living about 150 miles downwind from Three Mile Island back in the day.”

Dawson said “whether people like nuclear or not, it is coming back because of federal policy.” He said the goal of the legislation was a way to both help build these growing industries in Iowa while investing in ways to make sure Iowans can meet the skilled workforce needs required at these facilies.

” My hope and goal in this … is that if United States is going to start to support a long-term nuclear policy, I would like the people helping to build these facilities, the higher-end, coming from the state, as opposed to temporary plopping in, building it and then leaving the state,” Dawson said. “I think it would behoove our state, well, to actually bring about this talent, grow the talent.”

Both measures advanced to their respective chambers’ Ways and Means committees for further consideration.