HF 2470 (LSB 5249YH (9) 85)

HOUSE FILE 2470

BY  ISENHART

A BILL FOR

An Act relating to state financial matters, including state sales and use taxes, the natural resources and outdoor recreation trust fund, and the state individual income tax, and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

SALES AND USE TAXES AND THE NATURAL RESOURCES AND OUTDOOR RECREATION TRUST FUND
    Section 1.  Section 423.2, subsection 1, unnumbered paragraph 1, Code 2014, is amended to read as follows:

   There is imposed a tax of six and three-eighths percent upon the sales price of all sales of tangible personal property, consisting of goods, wares, or merchandise, sold at retail in the state to consumers or users except as otherwise provided in this subchapter.
    Sec. 2.  Section 423.2, subsections 2 and 3, Code 2014, are amended to read as follows:
   2.  A tax of six and three-eighths percent is imposed upon the sales price of the sale or furnishing of gas, electricity, water, heat, pay television service, and communication service, including the sales price from such sales by any municipal corporation or joint water utility furnishing gas, electricity, water, heat, pay television service, and communication service to the public in its proprietary capacity, except as otherwise provided in this subchapter, when sold at retail in the state to consumers or users.
   3.  A tax of six and three-eighths percent is imposed upon the sales price of all sales of tickets or admissions to places of amusement, fairs, and athletic events except those of elementary and secondary educational institutions. A tax of six and three-eighths percent is imposed on the sales price of an entry fee or like charge imposed solely for the privilege of participating in an activity at a place of amusement, fair, or athletic event unless the sales price of tickets or admissions charges for observing the same activity are taxable under this subchapter. A tax of six and three-eighths percent is imposed upon that part of private club membership fees or charges paid for the privilege of participating in any athletic sports provided club members.
    Sec. 3.  Section 423.2, subsection 4, paragraph a, Code 2014, is amended to read as follows:
   a.  A tax of six and three-eighths percent is imposed upon the sales price derived from the operation of all forms of amusement devices and games of skill, games of chance, raffles, and bingo games as defined in chapter 99B, and card game tournaments conducted under section 99B.7B, that are operated or conducted within the state, the tax to be collected from the operator in the same manner as for the collection of taxes upon the sales price of tickets or admission as provided in this section. Nothing in this subsection shall legalize any games of skill or chance or slot-operated devices which are now prohibited by law.
    Sec. 4.  Section 423.2, subsection 5, Code 2014, is amended to read as follows:
   5.  There is imposed a tax of six and three-eighths percent upon the sales price from the furnishing of services as defined in section 423.1.
    Sec. 5.  Section 423.2, subsection 7, paragraph a, unnumbered paragraph 1, Code 2014, is amended to read as follows:

   A tax of six and three-eighths percent is imposed upon the sales price from the sales, furnishing, or service of solid waste collection and disposal service.
    Sec. 6.  Section 423.2, subsection 8, paragraph a, Code 2014, is amended to read as follows:
   a.  A tax of six and three-eighths percent is imposed on the sales price from sales of bundled transactions. For the purposes of this subsection, a “bundled transaction” is the retail sale of two or more distinct and identifiable products, except real property and services to real property, which are sold for one nonitemized price. A “bundled transaction” does not include the sale of any products in which the sales price varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.
    Sec. 7.  Section 423.2, subsection 9, Code 2014, is amended to read as follows:
   9.  A tax of six and three-eighths percent is imposed upon the sales price from any mobile telecommunications service, including all paging services, that this state is allowed to tax pursuant to the provisions of the federal Mobile Telecommunications Sourcing Act, Pub. L. No. 106-252, 4 U.S.C. § 116 et seq. For purposes of this subsection, taxes on mobile telecommunications service, as defined under the federal Mobile Telecommunications Sourcing Act that are deemed to be provided by the customer’s home service provider, shall be paid to the taxing jurisdiction whose territorial limits encompass the customer’s place of primary use, regardless of where the mobile telecommunications service originates, terminates, or passes through and shall in all other respects be taxed in conformity with the federal Mobile Telecommunications Sourcing Act. All other provisions of the federal Mobile Telecommunications Sourcing Act are adopted by the state of Iowa and incorporated into this subsection by reference. With respect to mobile telecommunications service under the federal Mobile Telecommunications Sourcing Act, the director shall, if requested, enter into agreements consistent with the provisions of the federal Act.
    Sec. 8.  Section 423.2, subsection 11, paragraph b, subparagraph (2), Code 2014, is amended to read as follows:
   (2)  Transfer from the remaining revenues the amounts required under Article VII, section 10, of the Constitution of the State of Iowa to the natural resources and outdoor recreation trust fund created in section 461.31, if applicable.
    Sec. 9.  Section 423.2, subsection 13, Code 2014, is amended to read as follows:
   13.  The sales tax rate of six and three-eighths percent is reduced to five and three-eighths percent on January 1, 2030.
    Sec. 10.  Section 423.5, subsection 1, unnumbered paragraph 1, Code 2014, is amended to read as follows:

   Except as provided in paragraph “c”, an excise tax at the rate of six and three-eighths percent of the purchase price or installed purchase price is imposed on the following:
    Sec. 11.  Section 423.5, subsection 5, Code 2014, is amended to read as follows:
   5.  The use tax rate of six and three-eighths percent is reduced to five and three-eighths percent on January 1, 2030.
    Sec. 12.  Section 423.43, subsection 1, paragraph b, Code 2014, is amended to read as follows:
   b.  Subsequent to the deposit into the general fund of the state and after the transfer of such pursuant to paragraph “a”, the department shall do the following in the order prescribed:
   (1)  Transfer the revenues collected under chapter 423B, the department shall transfer one-sixth.
   (2)  Transfer fifteen and six thousand eight hundred sixty-three ten-thousandths percent of such remaining revenues to the secure an advanced vision for education fund created in section 423F.2. This paragraph subparagraph (2) is repealed December 31, 2029.
    Sec. 13.  PURPOSE.  The purpose of this division of this Act is to provide for the implementation of Article VII, section 10, of the Constitution of the State of Iowa by fully funding the natural resources and outdoor recreation trust fund as created in section 461.31, pursuant to Article VII, section 10, of the Constitution of the State of Iowa.
    Sec. 14.  EFFECTIVE DATE.  This division of this Act takes effect on July 1, 2015.

DIVISION II

INDIVIDUAL INCOME TAXES
    Sec. 15.  Section 422.12, subsection 2, paragraph a, Code 2014, is amended by striking the paragraph.
    Sec. 16.  NEW SECTION.  422.12A  Personal exemption credits.
   1.  The taxes imposed under this division less the credits allowed under this division except for the credits for withheld tax and estimated tax paid in section 422.16, shall be reduced by a personal exemption credit in the following amounts:
   a.  For an estate or trust, a single individual, or a married person filing a separate return, ninety-five dollars.
   b.  For a head of household, or a husband and wife filing a joint return, one hundred ninety dollars.
   c.  For each dependent, an additional seventy dollars.
   d.  For a single individual, husband, wife, or head of household, an additional exemption of twenty dollars for each of said individuals who has attained the age of sixty-five years before the close of the tax year or on the first day following the end of the tax year.
   e.  For a single individual, husband, wife, or head of household, an additional exemption of twenty dollars for each of said individuals who is blind at the close of the tax year. For the purposes of this subparagraph, an individual is blind only if the individual’s central visual acuity does not exceed twenty-two hundredths in the better eye with correcting lenses, or if the individual’s visual acuity is greater than twenty-two hundredths but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than twenty degrees.
   2.  Any credit in excess of the tax liability is refundable. However, for nonresidents or part-year residents the amount of the credit in excess of the tax liability that may be refunded shall be in the ratio of their Iowa source net income to their all source net income under rules prescribed by the director.
   3.  For purposes of this section, “dependent” has the same meaning as provided by the Internal Revenue Code.
    Sec. 17.  EFFECTIVE DATE.  This division of this Act takes effect January 1, 2015.
    Sec. 18.  APPLICABILITY.  This division of this Act applies to tax years beginning on or after January 1, 2015.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   DIVISION I —— SALES AND USE TAXES. Division I relates to state sales and use taxes and to an amendment to the Iowa Constitution ratified on November 2, 2010, which created a natural resources and outdoor recreation trust fund (fund) and dedicated a portion of state revenues to the fund for the purposes of protecting and enhancing water quality and natural areas in the state including parks, trails, and fish and wildlife habitat, and conserving agricultural soils in the state (Article VII, section 10). The fund is codified in Code section 461.31. Pursuant to the amendment, the amount credited to the fund will be equal to the amount generated by an increase in the state sales tax rate occurring after the effective date of the constitutional amendment, but shall not exceed the amount that a state sales tax rate of 0.375 percent would generate. The state sales tax rate has not been increased since the effective date of the constitutional amendment, so no amounts have been credited to the fund. The division increases from 6 percent to 6.375 percent the state sales tax rate and the state use tax rate, and provides for the transfer of sales tax revenues to the fund. The division also amends the transfer of use tax revenues to the secure an advanced vision for education fund (SAVE) in Code section 423F.2 from 1/6th (approximately 16.66 percent) of the revenues to 15.6863 percent of the revenues to ensure that SAVE receives approximately the same proportion of the total use tax revenue as it did prior to the use tax rate increase provided in the division.
   The division takes effect July 1, 2015.
   DIVISION II —— INDIVIDUAL INCOME TAXES. Division II relates to the individual income by increasing the personal exemption credit and by making the credit refundable. Under current law, the personal exemption credit, which is a composite of five separate credits, is nonrefundable and may not exceed the computed tax. The division increases from $40 to $95 the personal exemption credit for an estate or trust, a single individual, or a married person filing a separate return; increases from $80 to $190 the personal exemption credit for a head of household, or a husband and wife filing a joint return; and increases from $40 to $70 the additional exemption credit for each dependent of the taxpayer. The division makes these credits, as well as the existing additional exemption credits of $20 for an individual who is at least 65 years of age and $20 for a blind individual, refundable to the extent they exceed the tax remaining after subtracting all refundable and nonrefundable credits except the credits for withheld tax and estimated tax paid. However, for a nonresident or part-year resident, the amount of the credit in excess of the tax liability that shall be refunded is in the proportion that the taxpayer’s net income allocated to Iowa bears to the taxpayer’s total net income, under rules to be prescribed by the director of revenue.
   The division takes effect January 1, 2015, and applies to tax years beginning on or after that date.