HSB 673 (LSB 5575YC (2) 85)

HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS)

A BILL FOR

An Act creating a student loan tax credit available against the state individual income tax, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 262.9, Code 2014, is amended by adding the following new subsection:
   NEW SUBSECTION.  38.  a.  Calculate for each calendar year the average resident undergraduate tuition to attend institutions listed in section 262.7, subsections 1, 2, and 3, and notify the director of the department of revenue of that amount by January 31 of the succeeding year.
   b.  This subsection is repealed January 1, 2024.
    Sec. 2.  NEW SECTION.  422.11C  Student loan tax credit.
   1.  For purposes of this section:
   a.  “Approved postsecondary educational institution” means any of the following:
   (1)  A community college established under chapter 260C.
   (2)  An institution of higher learning under the control of the state board of regents.
   (3)  A nonprofit accredited private institution in this state that meets the requirements in section 261.9, subsection 1, and the requirements of the provisions of the federal Higher Education Act of 1965, as amended, for student participation in the federal interest subsidy program.
   b.  “Average Iowa tuition” means the average resident undergraduate tuition determined under section 262.9, subsection 38, for the calendar year immediately preceding the tax year for which the credit under this section is claimed.
   c.  “Qualified student loan” means any loan that is made, insured, or guaranteed under Tit. IV of the federal Higher Education Act of 1965, as amended, directly to the taxpayer for attendance at an approved postsecondary educational institution.
   d.  “Qualified taxpayer” means a taxpayer who meets all of the following requirements:
   (1)  The taxpayer attended an approved postsecondary educational institution and received a bachelor’s degree from an approved postsecondary educational institution after December 31, 2013.
   (2)  The taxpayer is a resident of this state for the entire tax year.
   (3)  The taxpayer is employed in this state. If the taxpayer is employed in this state during any part of the month, the taxpayer shall be considered employed in this state for the entire month.
   2.  The taxes imposed under this division, less the credits allowed under section 422.12, shall be reduced by a student loan tax credit equal to fifty percent of the amount paid on a qualified student loan by a qualified taxpayer during the tax year, not to exceed an amount equal to twenty percent of the average Iowa tuition per tax year.
   3.  If the taxpayer is not a qualified taxpayer for the entire tax year, the maximum amount of the credit shall be prorated and the amount of credit for the taxpayer shall equal the maximum amount of credit for the tax year, divided by twelve, multiplied by the number of months in the tax year the taxpayer was a qualified taxpayer.
   4.  A qualified taxpayer may claim the credit allowed under this section for not more than five tax years from the date the qualified taxpayer received a bachelor’s degree from an approved postsecondary educational institution.
   5.  Any credit in excess of the taxpayer’s liability for the tax year is not refundable and shall not be credited to the tax liability for any following year.
   6.  In order to be eligible for the credit under this section, the qualified taxpayer shall provide the department with proof of residency and proof of employment in this state, in the manner and form prescribed by the department. The department may also require documentation from the qualified taxpayer supporting any payments claimed to be for a qualified student loan.
   7.  This section is repealed January 1, 2024.
    Sec. 3.  IMPLEMENTATION.  Notwithstanding section 262.9, subsection 38, paragraph “a”, the state board of regents shall notify the director of the department of revenue of the average resident undergraduate tuition, as calculated in section 262.9, subsection 38, paragraph “a”, for the 2013 calendar within thirty days of the effective date of this Act.
    Sec. 4.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2014, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill creates a student loan tax credit available against the state individual income tax.
   The tax credit equals 50 percent of the amount paid on a qualified student loan by a qualified taxpayer during a tax year, not to exceed 20 percent of the average Iowa tuition each year. “Average Iowa tuition” equals the average resident undergraduate tuition to attend the university of Iowa, Iowa state university, or the university of northern Iowa. The state board of regents is required to calculate the average Iowa tuition each year and certify the amount to the director of revenue by January 31 of the following year.
   “Qualified student loan” is defined in the bill as any loan made, insured, or guaranteed under Title IV of the federal Higher Education Act of 1965 directly to the taxpayer for attendance at an approved postsecondary educational institution.
   “Approved postsecondary educational institution” means an Iowa community college, an institution of higher learning under the control of the state board of regents, or a nonprofit accredited private institution in this state that meets certain requirements specified in the bill. 
   “Qualified taxpayer” is defined in the bill as a taxpayer that attended an approved postsecondary educational institution, received a bachelor’s degree from an approved postsecondary educational institution after December 31, 2013, is a resident of Iowa for the entire tax year, and is employed in Iowa. A taxpayer shall be considered employed for an entire month if the taxpayer was employed during any part of the month.
   If a taxpayer is not a qualified taxpayer for the entire tax year, the maximum amount of the credit is prorated based on the number of months the taxpayer was a qualified taxpayer. A qualified taxpayer is not allowed to claim the credit for more than five tax years after the taxpayer receives a bachelor’s degree. Any credit in excess of the taxpayer’s tax liability is not refundable and shall not be carried forward to any succeeding tax year.
   A qualified taxpayer is required to provide the department of revenue with proof of residence and employment in this state. The department of revenue may also require documentation to support payments claimed to be for a qualified student loan. The student loan tax credit is repealed January 1, 2024.
   The bill applies retroactively to January 1, 2014, for tax years beginning on or after that date.