House File 617 - Introduced HOUSE FILE BY PETTENGILL and COWNIE Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the providing of income tax, franchise tax, 2 premium tax, and moneys and credits tax credits for employers 3 paying part of their employees' student loans and including a 4 retroactive applicability date provision. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 1513YH 83 7 mg/rj/5 PAG LIN 1 1 Section 1. NEW SECTION. 261.130 DEFINITIONS. 1 2 As used in this division, unless the context otherwise 1 3 requires: 1 4 1. "Accredited higher education institution" means an 1 5 institution of higher education as defined in section 261.92. 1 6 2. "Commission" means the college student aid commission 1 7 created in section 261.1. 1 8 3. "Qualified undergraduate loan" means a federally 1 9 guaranteed student loan authorized under the federal Higher 1 10 Education Act of 1965, 20 U.S.C. } 1071 et seq., or a loan 1 11 originated by banks, savings and loans, or credit unions 1 12 located in Iowa for purposes of attending an accredited higher 1 13 education institution. 1 14 Sec. 2. NEW SECTION. 261.131 STUDENT LOAN REPAYMENT TAX 1 15 CREDIT PROGRAM. 1 16 1. The commission shall establish a student loan repayment 1 17 tax credit program for employers who repay qualified 1 18 undergraduate loans of students employed in this state by the 1 19 employer. Under the program eligible employers shall be 1 20 entitled to a tax credit to be allowed against the taxes 1 21 imposed under chapter 422, division II, III, or V, or chapter 1 22 432, or against the moneys and credits tax imposed in section 1 23 533.329. 1 24 2. An eligible employer shall receive a credit equal to 1 25 thirty percent of the amount of the qualified undergraduate 1 26 loan repaid by the employer for an employee in the tax year. 1 27 However, in computing the amount of the tax credit only the 1 28 following repayment amount shall be used in the computation: 1 29 a. For the first tax year, not more than fifteen percent 1 30 of the maximum qualified undergraduate loan. 1 31 b. For the second tax year, not more than fifteen percent 1 32 of the maximum qualified undergraduate loan. 1 33 c. For the third tax year, not more than twenty percent of 1 34 the maximum qualified undergraduate loan. 1 35 d. For the fourth tax year, not more than twenty=five 2 1 percent of the maximum qualified undergraduate loan. 2 2 e. For the fifth tax year, not more than twenty=five 2 3 percent of the maximum qualified undergraduate loan. 2 4 For purposes of the computation of the tax credit pursuant 2 5 to this subsection, "maximum qualified undergraduate loan" 2 6 equals twenty=five thousand dollars. 2 7 3. To qualify as an eligible employer for purposes of the 2 8 tax credit under subsection 2, an employer shall meet all of 2 9 the following: 2 10 a. Pay the employee for whom the loan repayment is to be 2 11 made an annualized salary or wage of at least twenty=five 2 12 thousand dollars. 2 13 b. Employ the individual primarily in this state. 2 14 c. Begin repayment of the qualified undergraduate loan 2 15 within six months of the initial hiring date of the employee. 2 16 For purposes of this paragraph, an employee who is already 2 17 employed by the employer as of July 1, 2009, shall be 2 18 considered to be initially hired as of that date. 2 19 4. If the employer is a partnership, S corporation, 2 20 limited liability company, estate, or trust electing to have 2 21 the income taxed directly to the individual, an individual may 2 22 claim the tax credit allowed. The amount claimed by the 2 23 individual shall be based upon the pro rata share of the 2 24 individual's earnings of the partnership, S corporation, 2 25 limited liability company, estate, or trust. 2 26 5. Any credit in excess of the tax liability for the tax 2 27 year shall be refunded with interest computed under section 2 28 422.25. In lieu of claiming a refund, a taxpayer may elect to 2 29 have the overpayment shown on its final, completed return 2 30 credited to the tax liability for the following tax year. 2 31 Sec. 3. NEW SECTION. 261.132 TAX CREDIT CERTIFICATE 2 32 PROCEDURE. 2 33 1. An employer seeking the student loan repayment tax 2 34 credit under this division shall apply to the commission on 2 35 the form prescribed by the commission, provide verification 3 1 that the employer is eligible as required under section 3 2 261.131, subsection 3, and any other information required by 3 3 the commission or the department of revenue. 3 4 2. After verifying the eligibility for the tax credit, the 3 5 commission, in consultation with the department of revenue, 3 6 shall issue a student loan repayment tax credit certificate to 3 7 be attached to the person's tax return. The tax credit 3 8 certificate shall contain the taxpayer's name, address, tax 3 9 identification number, the dates of loan repayment, the amount 3 10 of credit, and other information required by the department of 3 11 revenue. 3 12 Sec. 4. NEW SECTION. 422.11X STUDENT LOAN REPAYMENT TAX 3 13 CREDIT. 3 14 The taxes imposed under this division, less the credits 3 15 allowed under section 422.12, shall be reduced by a student 3 16 loan repayment tax credit authorized pursuant to sections 3 17 261.130 through 261.132. 3 18 Sec. 5. Section 422.33, Code 2009, is amended by adding 3 19 the following new subsection: 3 20 NEW SUBSECTION. 27. The taxes imposed under this division 3 21 shall be reduced by a student loan repayment tax credit 3 22 authorized pursuant to sections 261.130 through 261.132. 3 23 Sec. 6. Section 422.60, Code 2009, is amended by adding 3 24 the following new subsection: 3 25 NEW SUBSECTION. 15. The taxes imposed under this division 3 26 shall be reduced by a student loan repayment tax credit 3 27 authorized pursuant to sections 261.130 through 261.132. 3 28 Sec. 7. NEW SECTION. 432.12M STUDENT LOAN REPAYMENT TAX 3 29 CREDIT. 3 30 The taxes imposed under this chapter shall be reduced by a 3 31 student loan repayment tax credit authorized pursuant to 3 32 sections 261.130 through 261.132. 3 33 Sec. 8. Section 533.329, subsection 2, Code 2009, is 3 34 amended by adding the following new paragraph: 3 35 NEW PARAGRAPH. n. The moneys and credits tax imposed 4 1 under this section shall be reduced by a student loan 4 2 repayment tax credit authorized pursuant to sections 261.130 4 3 through 261.132. 4 4 Sec. 9. RETROACTIVE APPLICABILITY DATE. This Act applies 4 5 retroactively to January 1, 2009, for tax years beginning on 4 6 or after that date. 4 7 EXPLANATION 4 8 This bill provides a tax credit for an employer who repays 4 9 any portion of an employee's undergraduate student loan. The 4 10 tax credits are allowable under the individual and corporate 4 11 income taxes, franchise tax, insurance premiums tax, and 4 12 moneys and credits tax of credit unions. 4 13 To be eligible for the tax credit the employer must pay an 4 14 annualized salary or wage of at least $25,000, employ the 4 15 person in this state, and begin repayment of the student loan 4 16 within six months of the hiring date. However, the bill 4 17 provides that the hiring date for an employee already employed 4 18 as of July 1, 2009, shall be considered July 1, 2009. 4 19 The amount of the tax credit equals 30 percent of the 4 20 amount of the loan repaid not to exceed a certain percentage 4 21 of the first $25,000 of the student loan. This percentage may 4 22 be claimed over a five=year period, 15 percent for the first 4 23 and second tax years, 20 percent for the third tax year, and 4 24 25 percent for the fourth and fifth tax years. 4 25 The bill applies retroactively to January 1, 2009, for tax 4 26 years beginning on or after that date. 4 27 LSB 1513YH 83 4 28 mg/rj/5