HSB 648 (LSB 5290XD (4) 85)

SENATE/HOUSE FILE _____

BY  (PROPOSED DEPARTMENT OF REVENUE BILL)

A BILL FOR

An Act relating to the administration of the tax and related laws of the department of revenue, including powers and duties of the director and administration of the individual income tax, inheritance tax, motor fuel and special fuel taxes, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

POWER AND DUTIES OF THE DIRECTOR
    Section 1.  Section 421.17, Code 2014, is amended by adding the following new subsection:
   NEW SUBSECTION.  33.  At the director’s discretion, to receive and retain in an electronic format any record, application, tax return, deposit, report, or any other information or document required to be submitted to the department.

DIVISION II

INDIVIDUAL INCOME TAX
    Sec. 2.  Section 422.5, subsection 3, paragraph a, Code 2014, is amended to read as follows:
   a.  The tax shall not be imposed on a resident or nonresident whose net income, as defined in section 422.7, is thirteen thousand five hundred dollars or less in the case of married persons filing jointly or filing separately on a combined return, heads of household, and surviving spouses or nine thousand dollars or less in the case of all other persons; but in the event that the payment of tax under this division would reduce the net income to less than thirteen thousand five hundred dollars or nine thousand dollars as applicable, then the tax shall be reduced to that amount which would result in allowing the taxpayer to retain a net income of thirteen thousand five hundred dollars or nine thousand dollars as applicable. The preceding sentence does not apply to estates or trusts. For the purpose of this subsection, the entire net income, including any part of the net income not allocated to Iowa, shall be taken into account. For purposes of this subsection, net income includes all amounts of pensions or other retirement income, except social security benefits excluded under section 422.7, subsection 13, paragraph “d”, received from any source which is not taxable under this division as a result of the government pension exclusions in section 422.7, or any other state law. If the combined net income of a husband and wife exceeds thirteen thousand five hundred dollars, neither of them shall receive the benefit of this subsection, and it is immaterial whether they file a joint return or separate returns. However, if a husband and wife file separate returns and have a combined net income of thirteen thousand five hundred dollars or less, neither spouse shall receive the benefit of this paragraph, if one spouse has a net operating loss and elects to carry back or carry forward the loss as provided in section 422.9, subsection 3. A person who is claimed as a dependent by another person as defined in section 422.12 shall not receive the benefit of this subsection if the person claiming the dependent has net income exceeding thirteen thousand five hundred dollars or nine thousand dollars as applicable or the person claiming the dependent and the person’s spouse have combined net income exceeding thirteen thousand five hundred dollars or nine thousand dollars as applicable.
    Sec. 3.  Section 422.5, subsection 3B, paragraph a, Code 2014, is amended to read as follows:
   a.  The tax shall not be imposed on a resident or nonresident who is at least sixty-five years old on December 31 of the tax year and whose net income, as defined in section 422.7, is thirty-two thousand dollars or less in the case of married persons filing jointly or filing separately on a combined return, heads of household, and surviving spouses or twenty-four thousand dollars or less in the case of all other persons; but in the event that the payment of tax under this division would reduce the net income to less than thirty-two thousand dollars or twenty-four thousand dollars as applicable, then the tax shall be reduced to that amount which would result in allowing the taxpayer to retain a net income of thirty-two thousand dollars or twenty-four thousand dollars as applicable. The preceding sentence does not apply to estates or trusts. For the purpose of this subsection, the entire net income, including any part of the net income not allocated to Iowa, shall be taken into account. For purposes of this subsection, net income includes all amounts of pensions or other retirement income, except social security benefits excluded under section 422.7, subsection 13, paragraph “d”, received from any source which is not taxable under this division as a result of the government pension exclusions in section 422.7, or any other state law. If the combined net income of a husband and wife exceeds thirty-two thousand dollars, neither of them shall receive the benefit of this subsection, and it is immaterial whether they file a joint return or separate returns. However, if a husband and wife file separate returns and have a combined net income of thirty-two thousand dollars or less, neither spouse shall receive the benefit of this paragraph, if one spouse has a net operating loss and elects to carry back or carry forward the loss as provided in section 422.9, subsection 3. A person who is claimed as a dependent by another person as defined in section 422.12 shall not receive the benefit of this subsection if the person claiming the dependent has net income exceeding thirty-two thousand dollars or twenty-four thousand dollars as applicable or the person claiming the dependent and the person’s spouse have combined net income exceeding thirty-two thousand dollars or twenty-four thousand dollars as applicable.
    Sec. 4.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2014, for tax years beginning on or after that date.

DIVISION III

INHERITANCE TAX
    Sec. 5.  Section 450.94, subsection 2, Code 2014, is amended to read as follows:
   2.  Unless a return is not required to be filed pursuant to section 450.22, subsection 3, or section 450.53, subsection 1, paragraph “b”, the taxpayer shall file an inheritance tax return on forms to be prescribed by the director of revenue on or before the last day of the ninth month after the death of the decedent. When an inheritance tax return is filed, the department shall examine it and determine the correct amount of tax. If the amount paid is less than the correct amount due, the department shall notify the taxpayer of the total amount due together with any penalty and interest which shall be computed as a sum certain if paid on or before, with interest computed to the last day of the month in which the notice is dated, or on or before the last day of the following month if the notice is dated after the twentieth day of a month and before the first day of the following month.

DIVISION IV

MOTOR FUEL AND SPECIAL FUEL TAXES
    Sec. 6.  Section 452A.64, Code 2014, is amended to read as follows:
   452A.64  Failure to file return —— incorrect return.

   If a return required by this chapter is not filed, or if a return when filed is incorrect or insufficient and the filer fails to file a corrected or sufficient return within twenty days after the same is required by notice from the appropriate state agency, the appropriate state agency shall determine the amount of tax due. The determination shall be made from all information that the appropriate state agency may be able to obtain and, if necessary, the agency may estimate the tax on the basis of external indices. The appropriate state agency shall give notice of the determination to the person liable for the tax. The determination shall fix the tax unless the person against whom it is assessed shall, within sixty days after the giving of notice of the determination, apply to the director of the appropriate state agency for a hearing or unless the taxpayer contests the determination by paying the tax, interest, and penalty and timely filing a claim for refund. At the hearing, evidence may be offered to support the determination or to prove that it is incorrect. After the hearing, the director shall give notice of the decision to the person liable for the tax. The findings of the appropriate state agency as to the amount of fuel taxes, penalties, and interest due from any person shall be presumed to be the correct amount and in any litigation which may follow, the certificate of the agency shall be admitted in evidence, shall constitute a prima facie case and shall impose upon the other party the burden of showing any error in the findings and the extent thereof or that the finding was contrary to law.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the administration of the tax and related laws by the department of revenue.
   DIVISION I —— POWERS AND DUTIES OF THE DIRECTOR. Division I amends the powers and duties of the director of revenue to allow the director, at the director’s discretion, to receive and retain in an electronic format any record, application, tax return, deposit, report, or any other information or document required to be submitted to the department.
   DIVISION II —— INDIVIDUAL INCOME TAX. Division II relates to the individual income tax. The division amends the calculation of net income for purposes of determining whether or not a taxpayer’s net income exceeds the amount at which the individual income tax will not be imposed pursuant to Code section 422.5(3) or Code section 422.5(3B) and for which an individual income tax return is not required to be filed, and for purposes of calculating the alternate tax in those same Code sections. Under current law, all pension or other retirement income from any source is required to be included in the calculations, regardless of whether the income is otherwise excluded from the individual income tax under Iowa law. The division excludes from the calculations all social security benefits excluded from the individual income tax under Iowa law.
   The division applies retroactively to January 1, 2014, for tax years beginning on or after that date.
   DIVISION III —— INHERITANCE TAX. Division III relates to the inheritance tax. The division eliminates the requirement that notices of assessment issued after the twentieth day of a month include interest calculated for the next month.
   DIVISION IV —— MOTOR FUEL AND SPECIAL FUEL TAXES. Division IV relates to motor fuel and special fuel taxes. Current law requires that the department of revenue or the state department of transportation, as applicable, send a notice to filers of fuel tax returns if the return is either incorrect or insufficient, giving the taxpayer 20 days to file a corrected return. If a correct or sufficient return is not filed, the department of revenue or the state department of transportation, as applicable, is authorized to determine the amount of tax due and send a notice of assessment to the person liable for the tax. The division strikes the 20-day notice requirement.