House File 91 - Introduced HOUSE FILE 91 BY ALONS , HIGHFILL , SCHULTZ , SHEETS , DOLECHECK , FRY , BRANDENBURG , GASSMAN , SALMON , and KOESTER A BILL FOR An Act relating to the exclusion from the computation of net 1 income of the net capital gain from the sale of a business 2 or of certain business property and including retroactive 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1067YH (6) 85 mm/sc

H.F. 91 Section 1. Section 422.7, subsection 21, paragraph a, Code 1 2013, is amended to read as follows: 2 a. (1) Net capital gain from the sale of real property or 3 equipment used in a business, in which the taxpayer materially 4 participated for ten three years, as defined in section 469(h) 5 of the Internal Revenue Code, and which has been held for a 6 minimum of ten three years, or from the sale of a business, 7 as defined in section 423.1 , in which the taxpayer materially 8 participated for ten three years, as defined in section 469(h) 9 of the Internal Revenue Code, and which has been held for a 10 minimum of ten three years. The sale of a business means the 11 sale of all or substantially all of the tangible personal 12 property or service of the business. 13 (a) However, where the business is sold to individuals who 14 are all lineal descendants of the taxpayer, the taxpayer does 15 not have to have materially participated in the business in 16 order for the net capital gain from the sale to be excluded 17 from taxation. 18 (b) However, in lieu of the net capital gain deduction 19 in this paragraph and paragraphs “b” , “c” , and “d” , where the 20 business is sold to individuals who are all lineal descendants 21 of the taxpayer, the amount of capital gain from each capital 22 asset may be subtracted in determining net income. 23 (2) For purposes of this paragraph “a” , “lineal descendant” 24 means children of the taxpayer, including legally adopted 25 children and biological children, stepchildren, grandchildren, 26 great-grandchildren, and any other lineal descendants of the 27 taxpayer. 28 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 29 retroactively to January 1, 2013, for assets acquired, and for 30 tax years beginning, on or after that date. 31 EXPLANATION 32 Current law provides an exclusion from the computation of 33 net income for the net capital gain from the sale of a business 34 or from the sale of real property used in a business if the 35 -1- LSB 1067YH (6) 85 mm/sc 1/ 2

H.F. 91 taxpayer materially participated in the business for 10 years 1 and if the property is held for 10 years or more. 2 This bill expands the exclusion to include the sale of 3 business equipment and reduces the required holding and 4 participation periods to three years. 5 The bill applies retroactively to January 1, 2013, for 6 assets acquired and for tax years beginning on or after that 7 date. 8 -2- LSB 1067YH (6) 85 mm/sc 2/ 2