House Study Bill 648 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF REVENUE BILL) A BILL FOR An Act relating to the administration of the tax and related 1 laws of the department of revenue, including powers and 2 duties of the director and administration of the individual 3 income tax, inheritance tax, motor fuel and special fuel 4 taxes, and including retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5290XD (4) 85 mm/sc

S.F. _____ H.F. _____ DIVISION I 1 POWER AND DUTIES OF THE DIRECTOR 2 Section 1. Section 421.17, Code 2014, is amended by adding 3 the following new subsection: 4 NEW SUBSECTION . 33. At the director’s discretion, to 5 receive and retain in an electronic format any record, 6 application, tax return, deposit, report, or any other 7 information or document required to be submitted to the 8 department. 9 DIVISION II 10 INDIVIDUAL INCOME TAX 11 Sec. 2. Section 422.5, subsection 3, paragraph a, Code 2014, 12 is amended to read as follows: 13 a. The tax shall not be imposed on a resident or nonresident 14 whose net income, as defined in section 422.7 , is thirteen 15 thousand five hundred dollars or less in the case of married 16 persons filing jointly or filing separately on a combined 17 return, heads of household, and surviving spouses or nine 18 thousand dollars or less in the case of all other persons; 19 but in the event that the payment of tax under this division 20 would reduce the net income to less than thirteen thousand five 21 hundred dollars or nine thousand dollars as applicable, then 22 the tax shall be reduced to that amount which would result 23 in allowing the taxpayer to retain a net income of thirteen 24 thousand five hundred dollars or nine thousand dollars as 25 applicable. The preceding sentence does not apply to estates 26 or trusts. For the purpose of this subsection , the entire net 27 income, including any part of the net income not allocated 28 to Iowa, shall be taken into account. For purposes of this 29 subsection , net income includes all amounts of pensions or 30 other retirement income , except social security benefits 31 excluded under section 422.7, subsection 13, paragraph “d” , 32 received from any source which is not taxable under this 33 division as a result of the government pension exclusions in 34 section 422.7 , or any other state law. If the combined net 35 -1- LSB 5290XD (4) 85 mm/sc 1/ 6

S.F. _____ H.F. _____ income of a husband and wife exceeds thirteen thousand five 1 hundred dollars, neither of them shall receive the benefit 2 of this subsection , and it is immaterial whether they file a 3 joint return or separate returns. However, if a husband and 4 wife file separate returns and have a combined net income of 5 thirteen thousand five hundred dollars or less, neither spouse 6 shall receive the benefit of this paragraph, if one spouse has 7 a net operating loss and elects to carry back or carry forward 8 the loss as provided in section 422.9, subsection 3 . A person 9 who is claimed as a dependent by another person as defined in 10 section 422.12 shall not receive the benefit of this subsection 11 if the person claiming the dependent has net income exceeding 12 thirteen thousand five hundred dollars or nine thousand dollars 13 as applicable or the person claiming the dependent and the 14 person’s spouse have combined net income exceeding thirteen 15 thousand five hundred dollars or nine thousand dollars as 16 applicable. 17 Sec. 3. Section 422.5, subsection 3B, paragraph a, Code 18 2014, is amended to read as follows: 19 a. The tax shall not be imposed on a resident or nonresident 20 who is at least sixty-five years old on December 31 of 21 the tax year and whose net income, as defined in section 22 422.7 , is thirty-two thousand dollars or less in the case 23 of married persons filing jointly or filing separately on a 24 combined return, heads of household, and surviving spouses or 25 twenty-four thousand dollars or less in the case of all other 26 persons; but in the event that the payment of tax under this 27 division would reduce the net income to less than thirty-two 28 thousand dollars or twenty-four thousand dollars as applicable, 29 then the tax shall be reduced to that amount which would result 30 in allowing the taxpayer to retain a net income of thirty-two 31 thousand dollars or twenty-four thousand dollars as applicable. 32 The preceding sentence does not apply to estates or trusts. 33 For the purpose of this subsection , the entire net income, 34 including any part of the net income not allocated to Iowa, 35 -2- LSB 5290XD (4) 85 mm/sc 2/ 6

S.F. _____ H.F. _____ shall be taken into account. For purposes of this subsection , 1 net income includes all amounts of pensions or other retirement 2 income , except social security benefits excluded under section 3 422.7, subsection 13, paragraph “d” , received from any source 4 which is not taxable under this division as a result of the 5 government pension exclusions in section 422.7 , or any other 6 state law. If the combined net income of a husband and wife 7 exceeds thirty-two thousand dollars, neither of them shall 8 receive the benefit of this subsection , and it is immaterial 9 whether they file a joint return or separate returns. However, 10 if a husband and wife file separate returns and have a combined 11 net income of thirty-two thousand dollars or less, neither 12 spouse shall receive the benefit of this paragraph, if one 13 spouse has a net operating loss and elects to carry back or 14 carry forward the loss as provided in section 422.9, subsection 15 3 . A person who is claimed as a dependent by another person as 16 defined in section 422.12 shall not receive the benefit of this 17 subsection if the person claiming the dependent has net income 18 exceeding thirty-two thousand dollars or twenty-four thousand 19 dollars as applicable or the person claiming the dependent 20 and the person’s spouse have combined net income exceeding 21 thirty-two thousand dollars or twenty-four thousand dollars as 22 applicable. 23 Sec. 4. RETROACTIVE APPLICABILITY. This division of this 24 Act applies retroactively to January 1, 2014, for tax years 25 beginning on or after that date. 26 DIVISION III 27 INHERITANCE TAX 28 Sec. 5. Section 450.94, subsection 2, Code 2014, is amended 29 to read as follows: 30 2. Unless a return is not required to be filed pursuant to 31 section 450.22, subsection 3 , or section 450.53, subsection 32 1 , paragraph “b” , the taxpayer shall file an inheritance tax 33 return on forms to be prescribed by the director of revenue on 34 or before the last day of the ninth month after the death of 35 -3- LSB 5290XD (4) 85 mm/sc 3/ 6

S.F. _____ H.F. _____ the decedent. When an inheritance tax return is filed, the 1 department shall examine it and determine the correct amount of 2 tax. If the amount paid is less than the correct amount due, 3 the department shall notify the taxpayer of the total amount 4 due together with any penalty and interest which shall be 5 computed as a sum certain if paid on or before , with interest 6 computed to the last day of the month in which the notice is 7 dated , or on or before the last day of the following month if 8 the notice is dated after the twentieth day of a month and 9 before the first day of the following month . 10 DIVISION IV 11 MOTOR FUEL AND SPECIAL FUEL TAXES 12 Sec. 6. Section 452A.64, Code 2014, is amended to read as 13 follows: 14 452A.64 Failure to file return —— incorrect return. 15 If a return required by this chapter is not filed, or if a 16 return when filed is incorrect or insufficient and the filer 17 fails to file a corrected or sufficient return within twenty 18 days after the same is required by notice from the appropriate 19 state agency , the appropriate state agency shall determine the 20 amount of tax due. The determination shall be made from all 21 information that the appropriate state agency may be able to 22 obtain and, if necessary, the agency may estimate the tax on 23 the basis of external indices. The appropriate state agency 24 shall give notice of the determination to the person liable 25 for the tax. The determination shall fix the tax unless the 26 person against whom it is assessed shall, within sixty days 27 after the giving of notice of the determination, apply to 28 the director of the appropriate state agency for a hearing 29 or unless the taxpayer contests the determination by paying 30 the tax, interest, and penalty and timely filing a claim for 31 refund. At the hearing, evidence may be offered to support 32 the determination or to prove that it is incorrect. After the 33 hearing, the director shall give notice of the decision to the 34 person liable for the tax. The findings of the appropriate 35 -4- LSB 5290XD (4) 85 mm/sc 4/ 6

S.F. _____ H.F. _____ state agency as to the amount of fuel taxes, penalties , and 1 interest due from any person shall be presumed to be the 2 correct amount and in any litigation which may follow, the 3 certificate of the agency shall be admitted in evidence, shall 4 constitute a prima facie case and shall impose upon the other 5 party the burden of showing any error in the findings and the 6 extent thereof or that the finding was contrary to law. 7 EXPLANATION 8 The inclusion of this explanation does not constitute agreement with 9 the explanation’s substance by the members of the general assembly. 10 This bill relates to the administration of the tax and 11 related laws by the department of revenue. 12 DIVISION I —— POWERS AND DUTIES OF THE DIRECTOR. Division 13 I amends the powers and duties of the director of revenue to 14 allow the director, at the director’s discretion, to receive 15 and retain in an electronic format any record, application, tax 16 return, deposit, report, or any other information or document 17 required to be submitted to the department. 18 DIVISION II —— INDIVIDUAL INCOME TAX. Division II relates 19 to the individual income tax. The division amends the 20 calculation of net income for purposes of determining whether 21 or not a taxpayer’s net income exceeds the amount at which 22 the individual income tax will not be imposed pursuant to 23 Code section 422.5(3) or Code section 422.5(3B) and for which 24 an individual income tax return is not required to be filed, 25 and for purposes of calculating the alternate tax in those 26 same Code sections. Under current law, all pension or other 27 retirement income from any source is required to be included in 28 the calculations, regardless of whether the income is otherwise 29 excluded from the individual income tax under Iowa law. The 30 division excludes from the calculations all social security 31 benefits excluded from the individual income tax under Iowa 32 law. 33 The division applies retroactively to January 1, 2014, for 34 tax years beginning on or after that date. 35 -5- LSB 5290XD (4) 85 mm/sc 5/ 6

S.F. _____ H.F. _____ DIVISION III —— INHERITANCE TAX. Division III relates to the 1 inheritance tax. The division eliminates the requirement that 2 notices of assessment issued after the twentieth day of a month 3 include interest calculated for the next month. 4 DIVISION IV —— MOTOR FUEL AND SPECIAL FUEL TAXES. Division 5 IV relates to motor fuel and special fuel taxes. Current 6 law requires that the department of revenue or the state 7 department of transportation, as applicable, send a notice to 8 filers of fuel tax returns if the return is either incorrect 9 or insufficient, giving the taxpayer 20 days to file a 10 corrected return. If a correct or sufficient return is not 11 filed, the department of revenue or the state department of 12 transportation, as applicable, is authorized to determine the 13 amount of tax due and send a notice of assessment to the person 14 liable for the tax. The division strikes the 20-day notice 15 requirement. 16 -6- LSB 5290XD (4) 85 mm/sc 6/ 6