House Study Bill 650 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON VETERANS AFFAIRS BILL BY CHAIRPERSON ALONS) A BILL FOR An Act creating individual income tax credits for military 1 service during certain military conflicts in Lebanon, 2 Grenada, and Panama, and for service during certain military 3 conflicts in the Persian Gulf, providing for penalties, and 4 including retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 6093YC (3) 85 mm/sc

H.F. _____ Section 1. Section 422.7, Code 2014, is amended by adding 1 the following new subsections: 2 NEW SUBSECTION . 57. a. Subtract the Lebanon, Grenada, and 3 Panama veteran tax credit provided under section 422.10A to the 4 extent that the credit increased federal adjusted gross income. 5 b. This subsection is repealed January 1, 2018. 6 NEW SUBSECTION . 58. a. Subtract the Persian Gulf veteran 7 tax credit provided under section 422.10B to the extent that 8 the credit increased federal adjusted gross income. 9 b. This subsection is repealed January 1, 2018. 10 Sec. 2. NEW SECTION . 422.10A Lebanon, Grenada, and Panama 11 veteran tax credit. 12 1. The taxes imposed under this division, less the credits 13 allowed under section 422.12, shall be reduced by a Lebanon, 14 Grenada, and Panama veteran tax credit equal to the following 15 amount: 16 a. For a taxpayer who served on active duty for not less 17 than one hundred twenty days in the armed forces of the United 18 States at any time between August 24, 1982, and July 31, 1984, 19 both dates inclusive, or between December 20, 1989, and January 20 31, 1990, both dates inclusive, and who was inducted into 21 federal active duty from the state of Iowa and was honorably 22 discharged or separated from federal active duty, or is still 23 on active duty in an honorable status, or has been retired, 24 or has been furloughed to a reserve, or has been placed on 25 inactive status, an amount equal to eighteen dollars for 26 each month that the taxpayer was on federal active duty in 27 a conflict service area within the dates specified in this 28 paragraph, not to exceed five hundred dollars. 29 b. For a taxpayer who otherwise qualifies for the credit 30 under paragraph “a” , except that the person was not present 31 in a conflict service area during the period between August 32 24, 1982, and July 31, 1984, both dates inclusive, or between 33 December 20, 1989, and January 31, 1990, both dates inclusive, 34 an amount equal to thirteen dollars for each month that the 35 -1- LSB 6093YC (3) 85 mm/sc 1/ 8

H.F. _____ taxpayer was on federal active duty within the dates specified 1 in paragraph “a” , not to exceed three hundred dollars. 2 c. The Iowa department of veterans affairs shall adopt 3 rules pursuant to chapter 17A providing for the definition of a 4 conflict service area. 5 2. In order to qualify for the credit in subsection 1, all 6 of the following requirements must be satisfied: 7 a. The taxpayer has not received a tax credit, bonus, or 8 compensation similar to that provided in this section from this 9 state or another state. 10 b. The taxpayer was on active duty service after August 11 24, 1982, and the person did not refuse on conscientious, 12 political, religious, or other grounds, to be subject to 13 military discipline. 14 c. The taxpayer files an application for tax credit under 15 this section with the department of veterans affairs in a 16 manner determined by the department by July 1, 2015. The 17 department of veterans affairs shall certify to the department 18 of revenue the identity of each taxpayer eligible for the 19 credit under this section and the amount of tax credit for 20 which the taxpayer is eligible. 21 3. If a taxpayer dies before claiming the credit in 22 subsection 1, the surviving unremarried widow or widower, 23 child or children, mother, father, or person standing in loco 24 parentis, in the order named and none other, of any deceased 25 taxpayer shall be eligible for the tax credit in subsection 1 26 that the deceased taxpayer would be entitled to pursuant to 27 this section, if living. If any taxpayer has died or shall 28 die, or is disabled, from service-connected causes incurred 29 during the period and in the area from which the taxpayer is 30 entitled to the credit pursuant to this section, the taxpayer 31 or the first survivor as designated by this subsection, and 32 in the order named, shall be eligible for a tax credit equal 33 to five hundred dollars or three hundred dollars, whichever 34 maximum amount would have applied pursuant to subsection 1, 35 -2- LSB 6093YC (3) 85 mm/sc 2/ 8

H.F. _____ paragraph “a” or “b” , regardless of the length of service. 1 4. A taxpayer who served for at least sixteen days in a 2 month shall be considered to have served for the entire month. 3 5. The credit provided in this section shall be allowed only 4 once per taxpayer. The credit shall be claimed by the taxpayer 5 for the tax year in which the application is successfully made 6 to the department of veterans affairs under subsection 2, 7 paragraph “c” . Any credit in excess of the tax liability is 8 refundable. Taxpayers affected by the allocation provisions 9 of section 422.8 shall be permitted a deduction for the credit 10 only in the amount fairly and equitably allocable to Iowa under 11 rules prescribed by the director of revenue. 12 6. A taxpayer who knowingly makes a false statement relating 13 to a material fact in supporting an application under this 14 section is guilty of a serious misdemeanor. A person convicted 15 pursuant to this section shall forfeit all tax credit to which 16 the taxpayer may have been entitled under this section. 17 7. The executive director of the department of veterans 18 affairs, in cooperation with the director of the department 19 of revenue, shall provide for the administration of the 20 credit authorized in this section. The department of veterans 21 affairs and the department of revenue shall each adopt rules, 22 pursuant to chapter 17A, as necessary to administer this 23 section, including but not limited to application procedures, 24 investigation, approval or disapproval of claims, and claiming 25 of credits. 26 8. This section is repealed January 1, 2016. 27 Sec. 3. NEW SECTION . 422.10B Persian Gulf veteran tax 28 credit. 29 1. The taxes imposed under this division, less the credits 30 allowed under section 422.12, shall be reduced by a Persian 31 Gulf veteran tax credit equal to the following amount: 32 a. For a taxpayer who served on active duty for not less 33 than one hundred twenty days in the armed forces of the United 34 States at any time between January 31, 1990, and February 28, 35 -3- LSB 6093YC (3) 85 mm/sc 3/ 8

H.F. _____ 1991, both dates inclusive, and who was inducted into federal 1 active duty from the state of Iowa and was honorably discharged 2 or separated from federal active duty, or is still on active 3 duty in an honorable status, or has been retired, or has been 4 furloughed to a reserve, or has been placed on inactive status, 5 an amount equal to eighteen dollars for each month that the 6 taxpayer was on federal active duty in the conflict service 7 area within the dates specified in this paragraph, not to 8 exceed five hundred dollars. 9 b. For a taxpayer who otherwise qualifies for the credit 10 under paragraph “a” , except that the taxpayer was not present in 11 a conflict service area during the period between January 31, 12 1990, and February 28, 1991, both dates inclusive, an amount 13 equal to thirteen dollars for each month that the taxpayer was 14 on federal active duty within the dates specified in paragraph 15 “a” , not to exceed three hundred dollars. 16 c. The Iowa department of veterans affairs shall adopt 17 rules pursuant to chapter 17A providing for the definition of a 18 conflict service area. 19 2. In order to qualify for the credit in subsection 1, all 20 of the following requirements must be satisfied: 21 a. The taxpayer has not received a tax credit, bonus, or 22 compensation similar to that provided in this section from this 23 state or another state. 24 b. The taxpayer was on federal active duty after January 25 31, 1990, and the taxpayer did not refuse on conscientious, 26 political, religious, or other grounds, to be subject to 27 military discipline. 28 c. The taxpayer files an application for tax credit under 29 this section with the department of veterans affairs in a 30 manner determined by the department by July 1, 2015. The 31 department of veterans affairs shall certify to the department 32 of revenue the identity of each taxpayer eligible for the 33 credit under this section and the amount of tax credit for 34 which the taxpayer is eligible. 35 -4- LSB 6093YC (3) 85 mm/sc 4/ 8

H.F. _____ 3. If a taxpayer dies before claiming the credit in 1 subsection 1, the surviving unremarried widow or widower, 2 child or children, mother, father, or person standing in loco 3 parentis, in the order named and none other, of any deceased 4 taxpayer shall be eligible for the tax credit in subsection 1 5 that the deceased taxpayer would be entitled to pursuant to 6 this section, if living. If any taxpayer has died or shall 7 die, or is disabled, from service-connected causes incurred 8 during the period and in the area from which the taxpayer is 9 entitled to the credit pursuant to this section, the taxpayer 10 or the first survivor as designated by this subsection, and 11 in the order named, shall be eligible for a tax credit equal 12 to five hundred dollars or three hundred dollars, whichever 13 maximum amount would have applied pursuant to subsection 1, 14 paragraph “a” or “b” , regardless of the length of service. 15 4. A taxpayer who served for at least sixteen days in a 16 month shall be considered to have served for the entire month. 17 5. The credit provided in this section shall be allowed only 18 once per taxpayer. The credit shall be claimed by the taxpayer 19 for the tax year in which the application is successfully made 20 to the department of veterans affairs under subsection 2, 21 paragraph “c” . Any credit in excess of the tax liability is 22 refundable. Taxpayers affected by the allocation provisions 23 of section 422.8 shall be permitted a deduction for the credit 24 only in the amount fairly and equitably allocable to Iowa under 25 rules prescribed by the director of revenue. 26 6. A taxpayer who knowingly makes a false statement relating 27 to a material fact in supporting an application under this 28 section is guilty of a serious misdemeanor. A person convicted 29 pursuant to this section shall forfeit all tax credit to which 30 the taxpayer may have been entitled under this section. 31 7. The executive director of the department of veterans 32 affairs, in cooperation with the director of the department 33 of revenue, shall provide for the administration of the 34 credit authorized in this section. The department of veterans 35 -5- LSB 6093YC (3) 85 mm/sc 5/ 8

H.F. _____ affairs and the department of revenue shall each adopt rules, 1 pursuant to chapter 17A, as necessary to administer this 2 section, including but not limited to application procedures, 3 investigation, approval or disapproval of claims, and claiming 4 of credits. 5 8. This section is repealed January 1, 2016. 6 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 7 retroactively to January 1, 2014, for tax years beginning on 8 or after that date. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 This bill provides for the creation of two one-time 13 individual income tax credits for veterans of the United States 14 military who served during identified periods of conflict. 15 The first credit is available to members of the United States 16 armed forces who served in active duty during the military 17 conflicts in Lebanon, Grenada, and Panama who meet certain 18 qualifications of service. The second credit is available to 19 members of the United States armed forces who served in active 20 duty during the military conflicts in the Persian Gulf who meet 21 certain qualifications of service. 22 The bill provides dates for the periods of these conflicts. 23 The bill provides that veterans who served in conflict service 24 areas during these periods will receive a larger tax credit for 25 their service than veterans who did not serve in a conflict 26 service area during these periods. The bill provides for the 27 computation of such payments based upon months of service 28 either in or outside of a conflict service area. A person who 29 served in a conflict service area is eligible for a maximum 30 credit of $500 and a person who did not serve in a conflict 31 service area is eligible for a maximum credit of $300. 32 The bill requires that a veteran must meet additional 33 requirements to qualify for the credit. The person must not 34 have received a similar tax credit or bonus from this state 35 -6- LSB 6093YC (3) 85 mm/sc 6/ 8

H.F. _____ or any other state. The person must not have refused to be 1 subject to military discipline on certain grounds. The bill 2 also requires that the person file an application with the 3 department of veterans affairs (department) by July 1, 2015, in 4 order to qualify for the credit. The department is required 5 to certify to the department of revenue the identify of each 6 person who qualifies for the credits and the amount of tax 7 credit for which the taxpayer is eligible. 8 Certain other persons who survive the veteran are 9 eligible for the tax credit for which the deceased person 10 would have been eligible. The bill also provides that upon 11 service-related death or disability relating to service during 12 the applicable time periods and in the applicable area, the 13 veteran or first survivor, as identified in the bill, will be 14 eligible for the highest maximum tax credit allowable to the 15 deceased. 16 The bill provides that knowingly making a false statement of 17 material fact supporting an application to receive one of the 18 tax credits is a serious misdemeanor. A serious misdemeanor 19 is punishable by confinement for no more than one year and a 20 fine of at least $315 but not more than $1,875. The bill also 21 provides that a conviction on such a charge would result in 22 forfeiture of any right to claim one of the credits. 23 Each credit provided in the bill shall be allowed only once 24 per taxpayer. The taxpayer is required to claim the credit 25 for the tax year in which the tax credit application was made. 26 Any credit in excess of the tax liability is refundable. 27 Nonresident and part-year residents are allowed a tax credit 28 only in the amount fairly and equitably allocable to Iowa under 29 rules prescribed by the director of revenue. 30 The tax credits are exempt from the individual income tax to 31 the extent that they increase federal adjusted gross income. 32 The director of the department of veterans affairs, in 33 cooperation with the director of the department of revenue, is 34 to administer the tax credits. 35 -7- LSB 6093YC (3) 85 mm/sc 7/ 8