House Study Bill 738 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SHOMSHOR) A BILL FOR An Act relating to taxation, including the administration and 1 review of certain economic development programs and certain 2 tax incentive programs and the reenactment of the estate 3 tax and including effective date and retroactive and other 4 applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5795YC (31) 83 tw/sc

H.F. _____ DIVISION I 1 REVIEW AND REAUTHORIZATION OF PROGRAMS 2 Section 1. INTENT AND PURPOSE. 3 1. It is the intent of the general assembly that each tax 4 credit, withholding credit, and revenue division program should 5 effectuate the purposes for which it was enacted and that the 6 cost of such programs should be included more readily in the 7 yearly budgeting process. 8 2. The purposes of this Act are to provide for the regular 9 review of all tax credit, withholding credit, and revenue 10 division programs in order to facilitate the reauthorization 11 of successful programs and to do so at a cost that can be 12 accommodated by the state’s annual budget. 13 DIVISION II 14 LEGISLATIVE TAX EXPENDITURE COMMITTEE 15 Sec. 2. Section 2.45, Code Supplement 2009, is amended by 16 adding the following new subsection: 17 NEW SUBSECTION . 5. a. The legislative tax expenditure 18 committee which shall be composed of ten members of the general 19 assembly, consisting of five members from each house, to be 20 appointed by the legislative council. 21 b. The legislative tax expenditure committee shall have the 22 powers and duties described in section 2.48. 23 Sec. 3. NEW SECTION . 2.48 Legislative tax expenditure 24 committee —— review of tax incentive programs. 25 1. Statement of principles of sound tax policy. The 26 legislative tax expenditure committee shall do all of the 27 following: 28 a. Issue a statement of principles of sound tax policy. 29 (1) In issuing the statement, the committee may consult with 30 the department of revenue, the legislative services agency, 31 and independent experts who have demonstrated expertise in 32 matters of tax policy, fiscal policy, and public finance such 33 as that typically found among tax attorneys, certified public 34 accountants, and faculty members at institutions of higher 35 -1- LSB 5795YC (31) 83 tw/sc 1/ 29

H.F. _____ learning in the state. 1 (2) The statement shall reflect to the extent practicable 2 the best practices of state and local taxation as recognized 3 by experts in the fields of economics, fiscal policy, law, 4 accounting, and public finance. 5 (3) The statement shall address issues of equity, 6 simplicity, competitiveness, public purpose, and adequacy as 7 those issues pertain to taxation in Iowa. 8 b. Evaluate any tax expenditure available under Iowa law 9 and assess its conformance with the statement of principles of 10 sound tax policy issued pursuant to paragraph “a” . For purposes 11 of this section, “tax expenditure” means an exclusion from 12 the operation or collection of a tax imposed in this state. 13 Tax expenditures include tax credits, exemptions, deductions, 14 and rebates. Tax expenditures also include sales tax refunds 15 issued pursuant to section 423.3 or section 423.4. 16 c. Establish and maintain a system for making available 17 to the public information about the amount and effectiveness 18 of tax expenditures, and the extent to which tax expenditures 19 comply with the statement of principles of sound tax policy. 20 2. Review of tax expenditures —— budget estimates. The 21 legislative tax expenditure committee shall do all of the 22 following: 23 a. Engage in the regular review of the state’s tax 24 expenditures. 25 (1) In reviewing tax expenditures, the committee may review 26 any tax expenditure at any time, but shall at a minimum perform 27 the reviews described in subsection 3. 28 (2) For each tax expenditure reviewed, the committee shall 29 submit a report to the legislative council containing the 30 results of the review. The report shall contain a statement 31 of the policy goals of the tax expenditure and a return on 32 investment calculation for the tax expenditure. For purposes 33 of this subparagraph, “return on investment calculation” 34 means analyzing the cost to the state of providing the tax 35 -2- LSB 5795YC (31) 83 tw/sc 2/ 29

H.F. _____ expenditure, analyzing the benefits realized by the state from 1 providing the tax expenditure, and reaching a conclusion as to 2 whether the benefits of the tax expenditure are worth the cost 3 to the state of providing the tax expenditure. 4 (3) The report described in subparagraph (2) may include 5 recommendations for better aligning tax expenditures with the 6 principles of sound tax policy issued pursuant to subsection 1. 7 b. (1) Estimate for each fiscal year, in conjunction with 8 the legislative services agency and the department of revenue, 9 the cost of each individual tax expenditure and the total cost 10 of all tax expenditures, and by December 15 provide those 11 estimates to the governor for use in the preparation of the 12 budget message under section 8.22 and to the general assembly 13 to be used in the budget process. 14 (2) The estimates provided pursuant to subparagraph (1) may 15 include the committee’s recommendations for the imposition of a 16 limitation on a specified tax expenditure, a limitation on the 17 total amount of tax expenditures, or any other recommendation 18 for a specific tax expenditure or the program under which the 19 tax expenditure is provided. 20 3. Schedule of review of certain tax expenditures. The 21 committee shall review the following tax expenditures and 22 incentives according to the following schedule: 23 a. In 2011: 24 (1) The high quality jobs program under chapter 15, 25 subchapter II, part 13. 26 (2) The tax credits for increasing research activities 27 available under sections 15.335, 15A.9, 422.10, and 422.33. 28 (3) Property tax revenue divisions for urban renewal areas 29 under section 403.19. 30 (4) Funding of urban renewal projects with increased local 31 sales and services tax revenues under section 423B.10. 32 b. In 2012: 33 (1) The targeted jobs withholding credits available under 34 section 403.19A. 35 -3- LSB 5795YC (31) 83 tw/sc 3/ 29

H.F. _____ (2) School tuition organization tax credits under sections 1 422.11S and 422.33. 2 (3) Tuition and textbook tax credits under section 422.12. 3 c. In 2013: the child and dependent care and early 4 childhood development tax credits under section 422.12C. 5 d. In 2014: 6 (1) Tax credits for investments in qualifying businesses 7 and community-based seed capital funds under chapter 15E, 8 division V. 9 (2) Historic preservation and cultural and entertainment 10 district tax credits under chapter 404A. 11 (3) Wind energy production tax credits under chapter 476B. 12 (4) Renewable energy tax credits under chapter 476C. 13 e. In 2015: 14 (1) The agricultural assets transfer tax credit under 15 section 175.37. 16 (2) The claim of right tax credit under section 422.5. 17 (3) The reduction in allocating income to Iowa by S 18 corporation shareholders under section 422.8. 19 (4) The minimum tax credit under sections 422.11B, 422.33, 20 and 422.60. 21 (5) The assistive device corporate tax credit under section 22 422.33. 23 (6) The charitable conservation contribution tax credit 24 under sections 422.11W and 422.33. 25 (7) The motor vehicle fuel tax credit under section 422.110. 26 4. A tax expenditure or incentive reviewed pursuant to 27 subsection 3 shall be reviewed again not more than five years 28 after the tax expenditure or incentive was most recently 29 reviewed. 30 DIVISION III 31 MAXIMUM AGGREGATE TAX CREDIT LIMIT FOR CERTAIN ECONOMIC 32 DEVELOPMENT PROGRAMS 33 Sec. 4. Section 15.119, subsection 1, Code Supplement 2009, 34 is amended by striking the subsection and inserting in lieu 35 -4- LSB 5795YC (31) 83 tw/sc 4/ 29

H.F. _____ thereof the following: 1 1. a. Notwithstanding any provision to the contrary in any 2 of the programs listed in subsection 2, the department, except 3 as provided in paragraph “b” , shall not authorize for any one 4 fiscal year an amount of tax credits for the programs specified 5 in subsection 2 that is in excess of one hundred twenty million 6 dollars. 7 b. The department may authorize an amount of tax credits 8 during a fiscal year that is in excess of the amount specified 9 in paragraph “a” , but the amount of such excess shall be counted 10 against the total amount of tax credits that may be authorized 11 for the next fiscal year. 12 DIVISION IV 13 FILM PROGRAM SUSPENSION 14 Sec. 5. Section 15.393, Code Supplement 2009, is amended by 15 adding the following new subsection: 16 NEW SUBSECTION . 5. The department shall not register a new 17 project pursuant to this section until July 1, 2012. 18 Sec. 6. EFFECTIVE UPON ENACTMENT. This division of this 19 Act, being deemed of immediate importance, takes effect upon 20 enactment. 21 DIVISION V 22 SUPPLEMENTAL RESEARCH ACTIVITIES CREDIT 23 Sec. 7. Section 15.335, Code Supplement 2009, is amended to 24 read as follows: 25 15.335 Research activities credit. 26 1. a. An eligible business may claim a corporate tax credit 27 for increasing research activities in this state during the 28 period the eligible business is participating in the program. 29 b. For purposes of this section, “research activities” 30 includes the development and deployment of innovative renewable 31 energy generation components manufactured or assembled in this 32 state. For purposes of this section, “innovative renewable 33 energy generation components” does not include a component 34 with more than two hundred megawatts of installed effective 35 -5- LSB 5795YC (31) 83 tw/sc 5/ 29

H.F. _____ nameplate capacity. 1 c. The tax credits for innovative renewable energy 2 generation components shall not exceed two million dollars. 3 2. a. (1) The In the case of an eligible business whose 4 gross revenues do not exceed twenty million dollars per year, 5 the credit equals the sum of the following: 6 (a) (1) Six and one-half Ten percent of the excess of 7 qualified research expenses during the tax year over the base 8 amount for the tax year based upon the state’s apportioned 9 share of the qualifying expenditures for increasing research 10 activities. 11 (b) (2) Six and one-half Ten percent of the basic research 12 payments determined under section 41(e)(1)(A) of the Internal 13 Revenue Code during the tax year based upon the state’s 14 apportioned share of the qualifying expenditures for increasing 15 research activities. 16 b. In the case of an eligible business whose gross revenues 17 exceed twenty million dollars per year, the credit equals the 18 sum of the following: 19 (1) Three percent of the excess of qualified research 20 expenses during the tax year over the base amount for the tax 21 year based upon the state’s apportioned share of the qualifying 22 expenditures for increasing research activities. 23 (2) Three percent of the basic research payments determined 24 under section 41(e)(1)(A) of the Internal Revenue Code during 25 the tax year based upon the state’s apportioned share of the 26 qualifying expenditures for increasing research activities. 27 (2) 3. The For purposes of subsection 2, the state’s 28 apportioned share of the qualifying expenditures for increasing 29 research activities is a percent equal to the ratio of 30 qualified research expenditures in this state to total 31 qualified research expenditures. 32 b. 4. a. In lieu of the credit amount computed in 33 paragraph “a” , subparagraph (1) subsection 2 , an eligible 34 business may elect to compute the credit amount for qualified 35 -6- LSB 5795YC (31) 83 tw/sc 6/ 29

H.F. _____ research expenses incurred in this state in a manner consistent 1 with the alternative incremental credit described in section 2 41(c)(4) of the Internal Revenue Code. The taxpayer may make 3 this election regardless of the method used for the taxpayer’s 4 federal income tax. The election made under this paragraph is 5 for the tax year and the taxpayer may use another or the same 6 method for any subsequent year. 7 c. b. For purposes of the alternate credit computation 8 method in paragraph “b” “a” , the credit percentages applicable 9 to qualified research expenses described in clauses (i), (ii), 10 and (iii) of section 41(c)(4)(A) of the Internal Revenue Code 11 are one and sixty-five hundredths percent, two and twenty 12 hundredths percent, and two and seventy-five hundredths 13 percent, respectively. 14 2. 5. The credit allowed in this section is in addition 15 to the credit authorized in section 422.10 and section 422.33, 16 subsection 5. However, if the alternative credit computation 17 method is used in section 422.10 or section 422.33, subsection 18 5, the credit allowed in this section shall also be computed 19 using that method. 20 3. 6. If the eligible business is a partnership, S 21 corporation, limited liability company, or estate or trust 22 electing to have the income taxed directly to the individual, 23 an individual may claim the tax credit allowed. The amount 24 claimed by the individual shall be based upon the pro rata 25 share of the individual’s earnings of the partnership, S 26 corporation, limited liability company, or estate or trust. 27 4. 7. a. For purposes of this section, “base amount” , 28 “basic research payment” , and “qualified research expense” mean 29 the same as defined for the federal credit for increasing 30 research activities under section 41 of the Internal Revenue 31 Code, except that for the alternative incremental credit such 32 amounts are for research conducted within this state. 33 b. For purposes of this section, “Internal Revenue Code” 34 means the Internal Revenue Code in effect on January 1, 2009. 35 -7- LSB 5795YC (31) 83 tw/sc 7/ 29

H.F. _____ 5. 8. Any credit in excess of the tax liability for the 1 taxable year shall be refunded with interest computed under 2 section 422.25. In lieu of claiming a refund, a taxpayer may 3 elect to have the overpayment shown on its final, completed 4 return credited to the tax liability for the following year. 5 6. 9. The department of revenue shall by February 15 6 of each year issue an annual report to the general assembly 7 containing the total amount of all claims made by employers 8 under this section, and the portion of the claims issued as 9 refunds, for all claims processed during the previous calendar 10 year. The report shall contain the name of each claimant for 11 whom a tax credit in excess of five hundred thousand dollars 12 was issued and the amount of the credit received. 13 Sec. 8. RETROACTIVE APPLICABILITY. This division of this 14 Act applies retroactively to January 1, 2010, for tax years 15 beginning on or after the date. 16 DIVISION VI 17 MAXIMUM AMOUNT OF ACCELERATED CAREER EDUCATION JOB CREDITS 18 Sec. 9. Section 260G.4B, subsection 1, Code 2009, is amended 19 to read as follows: 20 1. The total amount of program job credits from all 21 employers which shall be allocated for all accelerated career 22 education programs in the state in any one fiscal year shall 23 not exceed the sum of three million dollars in the fiscal 24 year beginning July 1, 2000, three million dollars in the 25 fiscal year beginning July 1, 2001, three million dollars 26 in the fiscal year beginning July 1, 2002, four million 27 dollars in the fiscal year beginning July 1, 2003, and six 28 million dollars in the fiscal year beginning July 1, 2004, 29 and every fiscal year thereafter five million four hundred 30 thousand dollars . Any increase in program job credits above 31 the six-million-dollar limitation per fiscal year shall be 32 developed, based on recommendations in a study conducted by 33 the department of economic development, pursuant to this 34 section , Code Supplement 2003, of the needs and performance of 35 -8- LSB 5795YC (31) 83 tw/sc 8/ 29

H.F. _____ approved programs in the fiscal years beginning July 1, 2000, 1 and July 1, 2001. A community college shall file a copy of 2 each agreement with the department of economic development. 3 The department shall maintain an annual record of the proposed 4 program job credits under each agreement for each fiscal year. 5 Upon receiving a copy of an agreement, the department shall 6 allocate any available amount of program job credits to the 7 community college according to the agreement sufficient for 8 the fiscal year and for the term of the agreement. When the 9 total available program job credits are allocated for a fiscal 10 year, the department shall notify all community colleges that 11 the maximum amount has been allocated and that further program 12 job credits will not be available for the remainder of the 13 fiscal year. Once program job credits have been allocated to 14 a community college, the full allocation shall be received by 15 the community college throughout the fiscal year and for the 16 term of the agreement even if the statewide program job credit 17 maximum amount is subsequently allocated and used. 18 DIVISION VII 19 MAXIMUM AMOUNT OF AGRICULTURAL ASSET TRANSFER TAX CREDITS 20 Sec. 10. Section 175.37, subsection 10, Code Supplement 21 2009, is amended to read as follows: 22 10. The amount of tax credit certificates that may be issued 23 pursuant to this section shall not exceed six two million 24 dollars in any fiscal year. The authority shall issue the tax 25 credit certificates on a first-come, first-served basis. 26 DIVISION VIII 27 ECONOMIC DEVELOPMENT REGION REVOLVING LOAN FUND TAX CREDIT 28 Sec. 11. Section 15E.231, subsection 2, Code Supplement 29 2009, is amended by striking the subsection. 30 Sec. 12. Section 15E.232, subsections 1 and 2, Code 2009, 31 are amended by striking the subsections. 32 Sec. 13. Section 422.33, subsection 17, Code Supplement 33 2009, is amended by striking the subsection. 34 Sec. 14. Section 422.60, subsection 9, Code Supplement 35 -9- LSB 5795YC (31) 83 tw/sc 9/ 29

H.F. _____ 2009, is amended by striking the subsection. 1 Sec. 15. Section 533.329, subsection 2, paragraph k, Code 2 Supplement 2009, is amended by striking the paragraph. 3 Sec. 16. REPEAL. Sections 422.11K and 432.12F, Code 2009, 4 are repealed. 5 Sec. 17. RETROACTIVE APPLICABILITY. This division of this 6 Act applies retroactively to January 1, 2010, for tax years 7 beginning on or after that date. 8 DIVISION IX 9 MAXIMUM AMOUNT OF ENDOW IOWA TAX CREDITS 10 Sec. 18. Section 15E.305, subsection 2, unnumbered 11 paragraph 1, Code Supplement 2009, is amended to read as 12 follows: 13 The aggregate amount of tax credits authorized pursuant to 14 this section shall not exceed a total of three two million 15 seven hundred thousand dollars plus such additional credit 16 amount as provided by this section annually. The maximum 17 amount of tax credits granted to a taxpayer shall not exceed 18 five percent of the aggregate amount of tax credits authorized. 19 DIVISION X 20 MAXIMUM AMOUNT OF SCHOOL TUITION ORGANIZATION TAX CREDITS 21 Sec. 19. Section 422.11S, subsection 7, paragraph a, 22 subparagraph (2), Code 2009, is amended to read as follows: 23 (2) “Total approved tax credits” means for the tax year 24 beginning in the 2006 calendar year, two million five hundred 25 thousand dollars, for the tax year beginning in the 2007 26 calendar year, five million dollars, and for tax years 27 beginning on or after January 1, 2008, seven 2011, six million 28 five seven hundred fifty thousand dollars. 29 DIVISION XI 30 VENTURE CAPITAL —— IOWA FUND OF FUNDS 31 Sec. 20. Section 15E.66, subsections 1 and 7, Code 2009, are 32 amended to read as follows: 33 1. The board may issue certificates and related tax 34 credits to designated investors which, if redeemed for the 35 -10- LSB 5795YC (31) 83 tw/sc 10/ 29

H.F. _____ maximum possible amount, shall not exceed a total aggregate 1 of one hundred sixty million dollars of tax credits. The 2 certificates shall be issued contemporaneously with a 3 commitment to invest in the Iowa fund of funds by a designated 4 investor. A certificate issued by the board shall have a 5 specific maturity date or dates designated by the board and 6 shall be redeemable only in accordance with the contingencies 7 reflected on the certificate or incorporated therein by 8 reference. A certificate and the related tax credit shall be 9 transferable by the designated investor. A tax credit shall 10 not be claimed or redeemed except by a designated investor or 11 transferee in accordance with the terms of a certificate from 12 the board. A tax credit shall not be claimed for a tax year 13 that begins earlier than the maturity date or dates stated 14 on the certificate. An individual may claim the credit of a 15 partnership, limited liability company, S corporation, estate, 16 or trust electing to have the income taxed directly to the 17 individual. The amount claimed by the individual shall be 18 based upon the pro rata share of the individual’s earnings from 19 the partnership, limited liability company, S corporation, 20 estate, or trust. Any tax credit in excess of the taxpayer’s 21 tax liability for the tax year may be credited to the tax 22 liability for the following seven years, or until depleted, 23 whichever is earlier. 24 7. In determining the one hundred million dollar maximum 25 aggregate limit in subsection 1 and the twenty million 26 dollar fiscal year limitation in subsection 5, the board shall 27 use the cumulative amount of scheduled aggregate returns on 28 certificates issued by the board to designated investors. 29 However, certificates and related tax credits which have 30 expired shall not be included and certificates and related tax 31 credits which have been redeemed shall be included only to the 32 extent of tax credits actually allowed. 33 Sec. 21. EFFECTIVE UPON ENACTMENT. This division of this 34 Act, being deemed of immediate importance, takes effect upon 35 -11- LSB 5795YC (31) 83 tw/sc 11/ 29

H.F. _____ enactment. 1 DIVISION XII 2 VENTURE CAPITAL —— INVESTMENT TAX CREDIT 3 Sec. 22. Section 422.33, subsection 13, Code Supplement 4 2009, is amended by striking the subsection. 5 Sec. 23. Section 422.60, subsection 6, Code Supplement 6 2009, is amended by striking the subsection. 7 Sec. 24. Section 533.329, subsection 2, paragraph i, Code 8 Supplement 2009, is amended by striking the paragraph. 9 Sec. 25. REPEAL. Sections 15E.51, 422.11G, and 432.12B, 10 Code 2009, are repealed. 11 Sec. 26. RETROACTIVE APPLICABILITY. This division of this 12 Act applies retroactively to January 1, 2010, for tax years 13 beginning on or after that date. 14 DIVISION XIII 15 REFUNDABLE INVESTMENT TAX CREDITS FOR VALUE-ADDED AGRICULTURAL 16 PRODUCTS 17 Sec. 27. Section 15.333, subsection 3, Code Supplement 18 2009, is amended by striking the subsection. 19 Sec. 28. RETROACTIVE APPLICABILITY. This division of this 20 Act applies retroactively to January 1, 2010, for tax years 21 beginning on or after that date. 22 DIVISION XIV 23 MAXIMUM AMOUNT OF HISTORIC TAX CREDITS 24 Sec. 29. Section 404A.4, subsection 2, Code Supplement 25 2009, is amended by adding the following new paragraph: 26 NEW PARAGRAPH . d. For the fiscal year beginning July 1, 27 2012, and for each fiscal year thereafter, the department shall 28 reserve not more than forty-five million dollars worth of tax 29 credits for any one taxable year. 30 Sec. 30. Section 404A.4, subsection 4, paragraph a, Code 31 Supplement 2009, is amended to read as follows: 32 a. The total amount of tax credits that may be approved 33 for a fiscal year prior to the fiscal year beginning July 34 1, 2012, under this chapter shall not exceed fifty million 35 -12- LSB 5795YC (31) 83 tw/sc 12/ 29

H.F. _____ dollars. The total amount of tax credits that may be approved 1 for a fiscal year beginning on or after July 1, 2012, shall not 2 exceed forty-five million dollars. 3 DIVISION XV 4 ESTATE TAX REENACTED 5 Sec. 31. NEW SECTION . 451.1 Definitions. 6 As used in this chapter, unless the context otherwise 7 requires: 8 1. “Adjusted taxable estate” means the taxable estate 9 computed for federal estate tax purposes reduced by sixty 10 thousand dollars. 11 2. “Federal estate tax” means the tax imposed by the 12 provisions of the Federal Estate Tax Act. 13 3. “Federal Estate Tax Act” and all such similar terms, 14 means Title III of chapter 27 of the Acts of the Sixty-ninth 15 Congress of the United States, first session, appearing in 16 44 Statutes at Large, chapter 27, as of January 1, 2000, as 17 amended. 18 4. “Gross estate” means the gross estate as determined under 19 section 451.3. 20 5. “Internal Revenue Code” means the Internal Revenue Code 21 as of the implementation date of this chapter, as specified in 22 section 451.13. 23 6. “Iowa estate tax” means the tax imposed by this chapter. 24 7. “Month” means a calendar month. 25 8. “Net estate” means the net estate as determined under the 26 provisions of section 451.3. 27 9. “Personal representative” means the executor of the will 28 or administrator of the estate of the decedent, or if there 29 is no such executor or administrator appointed, qualified and 30 acting, then any person in actual or constructive possession of 31 any property included in the gross estate of the decedent. 32 Sec. 32. NEW SECTION . 451.2 Additional tax. 33 1. An amount equal to the federal estate tax credit for 34 state inheritance and estate taxes as allowed in the Internal 35 -13- LSB 5795YC (31) 83 tw/sc 13/ 29

H.F. _____ Revenue Code is imposed upon every transfer of the net estate 1 of every decedent being a resident of, or owning property in, 2 this state. 3 2. If the decedent is a resident of Iowa and all property 4 is located in Iowa, or is subject to the jurisdiction of the 5 courts of Iowa, an amount equal to the tax imposed under 6 subsection 1 shall be paid to the state of Iowa. If the 7 decedent is a nonresident or if property is located outside the 8 state of Iowa and not subject to jurisdiction of Iowa courts, 9 the tax shall be prorated on the basis that the Iowa property 10 bears to the total gross estate for federal tax purposes. 11 3. The total tax or the Iowa share of the total tax shall be 12 credited with the amount of any inheritance tax due the state 13 of Iowa as provided in chapter 450. 14 Sec. 33. NEW SECTION . 451.3 Gross and net estate. 15 The gross estate shall be the same as finally determined for 16 federal estate tax and the net estate shall be the gross estate 17 less deductions as permitted by federal law, in arriving at the 18 net taxable federal estate, all determined as provided in the 19 Internal Revenue Code. 20 Sec. 34. NEW SECTION . 451.4 Tax on net estate. 21 The tax imposed by this chapter shall be upon the transfer 22 of the total net estate of every decedent dying after the 23 implementation date of this chapter as provided in section 24 451.13. 25 Sec. 35. NEW SECTION . 451.5 Duty of personal 26 representative. 27 The personal representative of a decedent whose estate may 28 be subject to the tax imposed by this chapter, shall file 29 in the office of the director of revenue, on or before the 30 last day of the ninth month after the death of the decedent, 31 duplicate copies of the estate tax return provided for in the 32 Federal Estate Tax Act, and in like manner, duplicate copies 33 of all supplemental or amended returns. The values of all 34 items included in the gross estate, as shown by those returns, 35 -14- LSB 5795YC (31) 83 tw/sc 14/ 29

H.F. _____ or supplemental or amended returns, shall be considered as 1 the values of those items for the purposes of this chapter. 2 In case of revaluation or correction of valuation of any of 3 those items, either by supplemental or amended returns, or 4 by the federal commissioner of internal revenue, or by an 5 appellate tribunal by which the value is finally determined, 6 the corrected values shall be considered as the values of those 7 items for the purposes of this chapter. 8 Sec. 36. NEW SECTION . 451.6 Payment of tax. 9 The tax imposed by this chapter shall be paid by the personal 10 representative to the department of revenue on or before the 11 last day of the ninth month after the death of the decedent. 12 Sec. 37. NEW SECTION . 451.7 Disposal of tax. 13 The proceeds of this tax shall be paid into the general fund 14 of the state. 15 Sec. 38. NEW SECTION . 451.8 Claim for credit or refund. 16 If the personal representative of a resident decedent 17 shall have paid to the treasurer of the United States or 18 to a collector of internal revenue an estate tax under the 19 provisions of the Federal Estate Tax Act in respect of property 20 included in the gross estate, determined as herein provided, 21 and shall have claimed as credits or deductions against the 22 federal estate tax a sum less than the maximum credits or 23 deductions allowed by the provisions of the Federal Estate Tax 24 Act for any estate, inheritance, legacy or succession taxes 25 actually paid to any state or territory of the United States, 26 or to the District of Columbia, it shall be the personal 27 representative’s duty, with due diligence, to file in the 28 bureau of internal revenue a claim for credit or refund for 29 such amount, if any, as such estate shall be properly entitled 30 to receive under the provisions of the Federal Estate Tax Act 31 and of this chapter. 32 Sec. 39. NEW SECTION . 451.9 Appeal. 33 If any claim for refund or credit, or any part thereof, 34 shall be denied or disallowed by the commissioner of internal 35 -15- LSB 5795YC (31) 83 tw/sc 15/ 29

H.F. _____ revenue, the personal representative, the director of revenue, 1 or any person having an interest in said estate which may be 2 adversely affected by such denial or disallowance, may apply 3 to the judge of the court having jurisdiction of such estate, 4 for an order directing such personal representative to take, 5 perfect, and prosecute an appeal from the decision of the 6 commissioner of internal revenue to such court or tribunal as 7 may have jurisdiction of such matter, and, upon the granting 8 of such order, the director of revenue may assist in the 9 prosecution of such appeal. The judge of the court granting 10 such order may make a reasonable allowance for attorney fees 11 for the prosecution of such appeal, and direct the manner in 12 which the same, together with any other costs or expenses which 13 may be allowed by said court in connection therewith, shall be 14 paid. 15 Sec. 40. NEW SECTION . 451.10 Effect of allowance. 16 If any claim for credit or refund, or any part thereof, shall 17 be finally determined in favor of such personal representative, 18 any amount refunded or credited thereon shall inure to the 19 benefit of such estate. 20 Sec. 41. NEW SECTION . 451.11 Effect of disallowance. 21 If any claim for credit or refund or any part thereof, 22 shall be finally determined adversely to such personal 23 representative, for any reason other than lack of diligence or 24 other failure of duty on the personal representative’s part, 25 the amount so denied or disallowed, or so much thereof as 26 shall have been paid to the department of revenue under the 27 provisions of this chapter, shall, upon a claim duly filed 28 with, and proper showing made to, the director of revenue, 29 be refunded by the department of revenue to such personal 30 representative, and shall inure to the benefit of such estate. 31 Sec. 42. NEW SECTION . 451.12 Applicable statutes 32 penalties. 33 All the provisions of chapter 450 with respect to the lien 34 provisions of section 450.7, and the determination, imposition, 35 -16- LSB 5795YC (31) 83 tw/sc 16/ 29

H.F. _____ payment, and collection of the tax imposed under that chapter, 1 including penalty and interest upon delinquent taxes and the 2 confidentiality of the tax return, are applicable to this 3 chapter, except as they are in conflict with this chapter. The 4 exceptions to the lien provisions found in section 450.7 do 5 not apply to this chapter. The penalty provisions set out in 6 section 450.53 shall apply to a person in possession of assets 7 to be reported for purposes of taxation who willfully makes a 8 false or fraudulent return or willfully fails to pay the tax, 9 supply the information, make, sign, or file the required return 10 within the time required by law or a person who willfully 11 attempts in any manner to evade taxes imposed by this chapter 12 or avoid payment of the tax. The director of revenue shall 13 adopt rules necessary for the enforcement of this chapter. 14 Sec. 43. NEW SECTION . 451.13 Contingent implementation 15 —— applicability. 16 1. This chapter shall be implemented as of the date on 17 which an amendment to the Internal Revenue Code providing for 18 a credit against federal estate taxes owed for the amount of 19 state inheritance and estate taxes paid, pursuant to chapter 20 450 and this chapter, is applicable. 21 2. This chapter applies to the estates of persons dying on 22 or after the implementation date specified in subsection 1. 23 CONFORMING AMENDMENTS 24 Sec. 44. Section 12.71, subsection 8, Code 2009, is amended 25 to read as follows: 26 8. Bonds issued under the provisions of this section are 27 declared to be issued for a general public and governmental 28 purpose and all bonds issued under this section shall be exempt 29 from taxation by the state of Iowa and the interest on the 30 bonds shall be exempt from the state income tax and the state 31 inheritance and estate tax. 32 Sec. 45. Section 12.80, subsection 3, Code 2009, is amended 33 to read as follows: 34 3. Bonds issued under this section are declared to be 35 -17- LSB 5795YC (31) 83 tw/sc 17/ 29

H.F. _____ issued for an essential public and governmental purpose and all 1 bonds issued under this section shall be exempt from taxation 2 by the state of Iowa and the interest on the bonds shall be 3 exempt from the state income tax and the state inheritance and 4 estate tax. 5 Sec. 46. Section 12.81, subsection 8, Code 2009, is amended 6 to read as follows: 7 8. Bonds issued under the provisions of this section are 8 declared to be issued for a general public and governmental 9 purpose and all bonds issued under this section shall be exempt 10 from taxation by the state of Iowa and the interest on the 11 bonds shall be exempt from the state income tax and the state 12 inheritance and estate tax. 13 Sec. 47. Section 12.87, subsection 8, Code Supplement 2009, 14 is amended to read as follows: 15 8. Any bonds issued and sold under the provisions of this 16 section are declared to be issued and sold for an essential 17 public and governmental purpose, and all bonds issued and sold 18 under this section except as otherwise provided in any trust 19 indentures, resolutions, or other instruments authorizing their 20 issuance shall be exempt from taxation by the state of Iowa and 21 the interest on the bonds shall be exempt from the state income 22 tax and the state inheritance and estate tax. 23 Sec. 48. Section 12.90A, subsection 9, Code Supplement 24 2009, is amended to read as follows: 25 9. Annual appropriation bonds issued under this section are 26 declared to be issued for an essential public and governmental 27 purpose and all annual appropriation bonds issued under this 28 section shall be exempt from taxation by the state of Iowa 29 and the interest on the annual appropriation bonds shall be 30 exempt from the state income tax and the state inheritance and 31 estate tax. 32 Sec. 49. Section 12.91, subsection 9, Code 2009, is amended 33 to read as follows: 34 9. Bonds issued under the provisions of this section are 35 -18- LSB 5795YC (31) 83 tw/sc 18/ 29

H.F. _____ declared to be issued for a general public and governmental 1 purpose and all bonds issued under this section shall be exempt 2 from taxation by the state of Iowa and the interest on the 3 bonds shall be exempt from the state income tax and the state 4 inheritance and estate tax. 5 Sec. 50. Section 16.177, subsection 8, Code 2009, is amended 6 to read as follows: 7 8. Bonds issued under this section are declared to be 8 issued for an essential public and governmental purpose and all 9 bonds issued under this section shall be exempt from taxation 10 by the state of Iowa and the interest on the bonds shall be 11 exempt from the state income tax and the state inheritance and 12 estate tax. 13 Sec. 51. Section 321.47, subsection 2, Code 2009, is amended 14 to read as follows: 15 2. The persons entitled under the laws of descent and 16 distribution of an intestate’s property to the possession 17 and ownership of a vehicle owned in whole or in part by a 18 decedent, upon filing an affidavit stating the name and date of 19 death of the decedent, the right to possession and ownership 20 of the persons filing the affidavit, and that there has been 21 no administration of the decedent’s estate, which instrument 22 shall also contain an agreement to indemnify creditors of 23 the decedent who would be entitled to levy execution upon 24 the motor vehicle to the extent of the value of the motor 25 vehicle, are entitled upon fulfilling the other requirements of 26 this chapter, to the issuance of a registration card for the 27 interest of the decedent in the vehicle and a certificate of 28 title to it. If a decedent dies testate, and either the will is 29 not probated or is admitted to probate without administration, 30 the persons entitled to the possession and ownership of a 31 vehicle owned in whole or in part by the decedent may file 32 an affidavit and, upon fulfilling the other requirements of 33 this chapter, are entitled to the issuance of a registration 34 card for the interest of the decedent in the vehicle and a 35 -19- LSB 5795YC (31) 83 tw/sc 19/ 29