Better late than never but I found a solution to Error 000229 when using an iterator in model builder. Little background, the model was to loop through a folder of shapefiles and project each one to a specified coordinate system. I'm seen many others getting this issue when trying to clip, dissolve, ect. My solution was the add a spatial index to each shapefile. Through catalog, right click each shapefile, index tab, add index, hit apply. After doing so, everything worked as planned.