HSB 38 (LSB 1257XD (4) 85)

SENATE/HOUSE FILE _____

BY  (PROPOSED DEPARTMENT OF REVENUE BILL)

A BILL FOR

An Act updating the Code references to the Internal Revenue Code and decoupling from certain federal bonus depreciation provisions, providing certain taxpayers additional time to file a claim for refund or credit of individual income tax, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

INTERNAL REVENUE CODE REFERENCES
    Section 1.  Section 15.335, subsection 7, paragraph b, Code 2013, is amended to read as follows:
   b.  For purposes of this section, “Internal Revenue Code” means the Internal Revenue Code in effect on January 1, 2012
 
2013, and as amended by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240.
    Sec. 2.  Section 422.3, subsection 5, Code 2013, is amended to read as follows:
   5.  “Internal Revenue Code” means the Internal Revenue Code of 1954, prior to the date of its redesignation as the Internal Revenue Code of 1986 by the Tax Reform Act of 1986, or means the Internal Revenue Code of 1986 as amended to and including January 1, 2012
 
2013, and as amended by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240.
    Sec. 3.  Section 422.9, subsection 2, paragraph i, Code 2013, is amended to read as follows:
   i.  The deduction for state sales and use taxes is allowable only if the taxpayer elected to deduct the state sales and use taxes in lieu of state income taxes under section 164 of the Internal Revenue Code. A deduction for state sales and use taxes is not allowed if the taxpayer has taken the deduction for state income taxes or claimed the standard deduction under section 63 of the Internal Revenue Code. This paragraph applies to taxable years beginning after December 31, 2003, and before January 1, 2008, and to taxable years beginning after December 31, 2009, and before January 1, 2012
 
2014.
    Sec. 4.  Section 422.10, subsection 3, paragraph b, Code 2013, is amended to read as follows:
   b.  For purposes of this section, “Internal Revenue Code” means the Internal Revenue Code in effect on January 1, 2012
 
2013, and as amended by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240.
    Sec. 5.  Section 422.32, subsection 1, paragraph g, Code 2013, is amended to read as follows:
   g.  “Internal Revenue Code” means the Internal Revenue Code of 1954, prior to the date of its redesignation as the Internal Revenue Code of 1986 by the Tax Reform Act of 1986, or means the Internal Revenue Code of 1986 as amended to and including January 1, 2012
 
2013, and as amended by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240.
    Sec. 6.  Section 422.33, subsection 5, paragraph d, subparagraph (2), Code 2013, is amended to read as follows:
   (2)  For purposes of this subsection, “Internal Revenue Code” means the Internal Revenue Code in effect on January 1, 2012
 
2013, and as amended by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240.
    Sec. 7.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 8.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2012, for tax years beginning on or after that date.

DIVISION II

BONUS DEPRECIATION
    Sec. 9.  Section 422.7, subsection 39A, unnumbered paragraph 1, Code 2013, is amended to read as follows:
   The additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code, as enacted by Pub. L. No. 110-185, § 103, Pub. L. No. 111-5, § 1201, Pub. L. No. 111-240, § 2022, and Pub. L. No. 111-312, § 401,
 
and Pub. L. No. 112-240, § 331, does not apply in computing net income for state tax purposes. If the taxpayer has taken the additional first-year depreciation allowance for purposes of computing federal adjusted gross income, then the taxpayer shall make the following adjustments to federal adjusted gross income when computing net income for state tax purposes:
    Sec. 10.  Section 422.35, subsection 19A, unnumbered paragraph 1, Code 2013, is amended to read as follows:
   The additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code, as enacted by Pub. L. No. 110-185, § 103, Pub. L. No. 111-5, § 1201, Pub. L. No. 111-240, § 2022, and Pub. L. No. 111-312, § 401,
 
and Pub. L. No. 112-240, § 331, does not apply in computing net income for state tax purposes. If the taxpayer has taken the additional first-year depreciation allowance for purposes of computing federal taxable income, then the taxpayer shall make the following adjustments to federal taxable income when computing net income for state tax purposes:
    Sec. 11.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 12.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2013, for tax years ending on or after that date.

DIVISION III

FILING OF CLAIMS
    Sec. 13.  Section 422.73, Code 2013, is amended by adding the following new subsection:
   NEW SUBSECTION.  1A.  Notwithstanding subsection 1, a claim for refund or credit of the individual income tax paid which resulted from a reduction in a person’s federal adjusted gross income due to section 1106 of the FAA Modernization and Reform Act of 2012, Pub. L. No. 112-95, shall be considered timely if the claim is filed with the department on or before June 30, 2013.
    Sec. 14.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 15.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2012, for refund or credit claims filed on or after that date.
EXPLANATION
   This bill updates the Iowa Code references to the Internal Revenue Code to make federal income tax revisions enacted by Congress in 2012, and by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240, applicable for Iowa income tax purposes, decouples with certain bonus depreciation provisions, and provides certain taxpayers additional time to file a claim for refund or credit of individual income tax paid.
   DIVISION I —— INTERNAL REVENUE CODE REFERENCES. The division amends Code sections 422.3 and 422.32, general definition sections in the chapter of the Code that governs corporate and individual income tax and the franchise tax on financial institutions, to update the references to the Internal Revenue Code.
   The division amends Code sections 15.335, 422.10, and 422.33 to update the references to the Internal Revenue Code for the state research activities credit for individuals, corporations, and corporations in economic development areas to include the federal changes to the research activities credit and the alternative simplified research activities credit. 
   Code section 422.9 provides individuals a deduction from net income for state sales and use taxes if the individual chose to deduct sales and use tax in lieu of state income taxes or the standard deduction for federal income tax purposes. This deduction was set to expire under both federal and Iowa law for tax years beginning on or after January 1, 2012. The American Taxpayer Relief Act of 2012 extended the federal deduction for the 2012 and 2013 tax years. This division extends the Iowa deduction for the 2012 and 2013 tax years. 
   Division I takes effect upon enactment and applies retroactively to January 1, 2012, for tax years beginning on or after that date.
   DIVISION II —— BONUS DEPRECIATION. The division decouples, for Iowa income tax purposes, from the federal additional first-year depreciation allowance in section 168(k) of the Internal Revenue Code which was extended by the American Taxpayer Relief Act of 2012.
   Division II takes effect upon enactment and applies retroactively to January 1, 2013, for tax years ending on or after that date.
   DIVISION III —— FILING OF CLAIMS. The division amends Code section 422.73, relating to the period of limitation to claim a tax refund or credit, to provide additional time for taxpayers affected by the FAA Modernization and Reform Act of 2012, Pub. L. No. 112-95, to request a refund or credit of Iowa individual income tax paid. The federal law allows a qualified airline employee who received a settlement payment from an airline company in bankruptcy to roll over that amount into a traditional individual retirement account (IRA) and exclude that amount from adjusted gross income in the year in which it was received. The federal law allowed additional time, until April 15, 2013, for a refund to be requested for federal income tax purposes provided the rollover occurred within 180 days of February 14, 2012. Iowa taxpayers whose federal adjusted gross income was reduced due to this federal law have until June 30, 2013, to request a refund or credit for Iowa individual income tax paid.
   Division III takes effect upon enactment and applies retroactively to January 1, 2012, for refund or credit claims filed on or after that date.