Senate File 2209 - Introduced SENATE FILE 2209 BY McCOY A BILL FOR An Act relating to higher education by providing for the 1 establishment of the state of Iowa higher education bank and 2 revolving fund and eliminating the deduction for federal 3 taxes paid by certain individual income taxpayers and 4 including retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5433XS (3) 86 gh/sc
S.F. 2209 DIVISION I 1 CREATION OF STATE OF IOWA HIGHER EDUCATION BANK 2 Section 1. NEW SECTION . 525.1 Higher education loan 3 program. 4 1. The treasurer of state shall administer a program to 5 provide loans to students or parents of a student to finance 6 all or a portion of the cost of a student’s attendance at an 7 institution of higher education. A loan provided by the bank 8 under this section shall have a rate of interest fixed at one 9 percent per year. 10 2. The treasurer, in consultation with the college student 11 aid commission, shall adopt rules for the bank to provide loans 12 pursuant to this section. The rules shall include student 13 eligibility requirements, repayment terms, and any other rules 14 necessary to properly administer the bank’s higher education 15 loan program. 16 Sec. 2. NEW SECTION . 525.2 Establishment of state of Iowa 17 higher education bank. 18 Subject to article VIII, section 6, of the Constitution of 19 the State of Iowa, the state of Iowa higher education bank is 20 created with the purpose of encouraging and promoting higher 21 education in the state. 22 Sec. 3. NEW SECTION . 525.3 Definitions. 23 As used in this chapter, unless the context otherwise 24 requires: 25 1. “Bank” means the state of Iowa higher education bank 26 established under this chapter. 27 2. “Institution of higher education” means any educational 28 institution that offers a postsecondary educational degree, 29 certificate, or program of study and is eligible to receive 30 Tit. IV funds under the federal Higher Education Act of 1965, 31 as amended, or state funding or assistance. 32 3. “Taxable income” means as defined in section 422.4. 33 Sec. 4. NEW SECTION . 525.4 Management of bank —— duties of 34 treasurer. 35 -1- LSB 5433XS (3) 86 gh/sc 1/ 7
S.F. 2209 The treasurer of state shall operate, manage, and control 1 the bank, locate and maintain its places of business, and make 2 and enforce orders, rules, regulations, and bylaws for the 3 transaction of its business. The treasurer shall employ and 4 fix the qualifications, duties, and compensation of employees 5 of the bank and may enter into contracts for any services that 6 may be required to conduct the business of the bank. 7 Sec. 5. NEW SECTION . 525.5 Advisory board of directors. 8 1. An advisory board of directors to the bank shall 9 be appointed to provide recommendations to the treasurer 10 regarding the bank. The advisory board shall consist of five 11 members appointed by the governor and confirmed by the senate 12 pursuant to section 2.32. Two members of the general assembly 13 shall serve as ex officio, nonvoting members, one senator to 14 be appointed by the majority leader of the senate and one 15 representative to be appointed by the speaker of the house of 16 representatives. The advisory board shall not be compensated. 17 Each member shall serve a term of four years. 18 2. The advisory board of directors shall have the following 19 duties: 20 a. Meet regularly with the management of the bank to review 21 the bank’s operations to determine whether recommendations 22 should be provided to the treasurer relating to improved 23 management performance, customer service, internal methods, 24 procedures, and operating policies. 25 b. Provide recommendations to the treasurer relating to the 26 establishment of additional objectives for the operation of the 27 bank. 28 c. Provide recommendations to the treasurer relating to 29 employment practices and personnel policies. 30 d. Meet regularly with the treasurer to present any 31 recommendations relating to the bank. 32 e. Advise the treasurer with respect to the powers and 33 functions of the bank. 34 Sec. 6. NEW SECTION . 525.6 Commencement of business. 35 -2- LSB 5433XS (3) 86 gh/sc 2/ 7
S.F. 2209 The bank shall not transact any business except such 1 business as is incident to commencement of business until the 2 treasurer determines that the bank has acquired the minimum 3 capital necessary to operate and remain solvent. In doing so, 4 the treasurer shall consult with the superintendent of the 5 banking division to evaluate and determine the approximate 6 amount of capital required to commence operations. 7 Sec. 7. NEW SECTION . 525.7 Acquisition of capital. 8 The bank shall acquire capital to operate from any of the 9 following sources: 10 1. Repayment of loans and accrued interest. 11 2. Appropriations from the general assembly or federal 12 government. 13 3. Revenue from annual taxable income exceeding three 14 hundred seventy-five thousand dollars in the case of a single 15 person, or seven hundred fifty thousand dollars in the case of 16 a married couple, as provided in section 421.17, subsection 14. 17 4. Funds derived from the settlement of legal disputes 18 subject to approval from the general assembly. 19 Sec. 8. NEW SECTION . 525.8 State of Iowa higher education 20 bank revolving fund. 21 1. A state of Iowa higher education bank revolving fund 22 is created in the state treasury under the control of the 23 treasurer. The moneys in the fund shall be used by the 24 treasurer for the purpose of operating the state of Iowa higher 25 education bank. 26 2. The fund shall consist of moneys credited to the fund 27 pursuant to section 525.7 and any other moneys available to 28 and obtained or accepted by the treasurer for placement in the 29 fund. Notwithstanding section 12C.7, subsection 2, interest or 30 earnings on moneys in the fund shall be credited to the fund. 31 Notwithstanding section 8.33, moneys that remain unencumbered 32 or unobligated at the close of the fiscal year shall not 33 revert but shall remain available for the same purpose in the 34 succeeding fiscal year. 35 -3- LSB 5433XS (3) 86 gh/sc 3/ 7
S.F. 2209 DIVISION II 1 FEDERAL DEDUCTIBILITY —— APPROPRIATION TO STATE OF IOWA HIGHER 2 EDUCATION BANK REVOLVING FUND 3 Sec. 9. Section 421.17, Code 2016, is amended by adding the 4 following new subsection: 5 NEW SUBSECTION . 14. a. Beginning in calendar year 2017, 6 the department shall by October 15 of each year determine 7 the difference between the net amount of individual income 8 taxes due and paid for the fiscal year ending on the preceding 9 June 30 and the net amount of individual income taxes that 10 would have been due and payable during that fiscal year had 11 the provisions of section 422.9, subsection 2, paragraph “b” , 12 subparagraph (2), not been applicable, and shall certify such 13 amount to the treasurer of state. 14 b. There is appropriated from the general fund of the state 15 to the state of Iowa higher education bank revolving fund 16 created in section 525.8 for the fiscal year beginning July 1, 17 2017, and for each fiscal year thereafter, an amount equal to 18 the amount certified during the fiscal year by the department 19 of revenue to the treasurer of state pursuant to paragraph “a” . 20 Sec. 10. Section 422.9, subsection 2, paragraph b, Code 21 2016, is amended to read as follows: 22 b. (1) Add the amount of federal income taxes paid or 23 accrued, as the case may be, during the tax year and subtract 24 any federal income tax refunds received during the tax year. 25 Where married persons, who have filed a joint federal income 26 tax return, file separately, such total shall be divided 27 between them according to the portion of the total paid or 28 accrued, as the case may be, by each. Federal income taxes 29 paid for a tax year in which an Iowa return was not required 30 to be filed shall not be added and federal income tax refunds 31 received from a tax year in which an Iowa return was not 32 required to be filed shall not be subtracted. 33 (2) Notwithstanding subparagraph (1), federal income taxes 34 paid for a tax year beginning on or after January 1, 2016, 35 -4- LSB 5433XS (3) 86 gh/sc 4/ 7
S.F. 2209 in which the taxpayer’s net income exceeds three hundred 1 seventy-five thousand dollars in the case of a single person, 2 or seven hundred fifty thousand dollars in the case of a 3 married couple, shall not be added, and federal income tax 4 refunds received from a tax year beginning on or after January 5 1, 2016, in which the taxpayer’s net income exceeds three 6 hundred seventy-five thousand dollars in the case of a single 7 person, or seven hundred fifty thousand dollars in the case of 8 a married couple, shall not be subtracted. 9 Sec. 11. RETROACTIVE APPLICABILITY. This division of this 10 Act applies retroactively to January 1, 2016, for tax years 11 beginning on or after that date. 12 EXPLANATION 13 The inclusion of this explanation does not constitute agreement with 14 the explanation’s substance by the members of the general assembly. 15 This bill establishes the state of Iowa higher education 16 bank and revolving fund and provides money for the fund by 17 disallowing a deduction for federal taxes paid for certain 18 taxpayers. The purpose of the fund is to promote and encourage 19 higher education in the state. 20 Division I provides the state treasurer with the authority 21 to operate, manage, and control the public state bank, 22 including locating and maintaining its places of business, 23 adopting rules and regulations, and employing staff for any 24 services that may be required for the bank to conduct its 25 business. 26 The bill establishes an advisory board of directors to 27 provide recommendations to the treasurer regarding the bank. 28 The board consists of five members appointed by the governor 29 and confirmed by the senate. Two members from the general 30 assembly shall serve as ex officio and shall be appointed by 31 the majority leader of the senate and the speaker of the house 32 of representatives. The board shall not be compensated and 33 each member shall serve a term of four years. The board shall 34 provide recommendations to the treasurer regarding the bank’s 35 -5- LSB 5433XS (3) 86 gh/sc 5/ 7
S.F. 2209 operations, additional objectives, the hire of employees, and 1 any other recommendations relating to the bank. 2 The bill provides that the bank shall not commence its 3 operations until the treasurer, after consulting with the 4 superintendent of banking, determines that the bank has the 5 minimum capital necessary to operate and maintain solvency. 6 The bill provides that the bank shall acquire capital to 7 operate from the repayment of loans and accrued interest, 8 appropriations from the general assembly or federal government, 9 revenue from disallowing a deduction for federal taxes paid 10 for income taxpayers whose income exceeds $375,000 (single) 11 or $750,000 (married) annually, and funds derived from legal 12 settlements subject to approval from the general assembly. 13 The bill provides that the bank shall establish a higher 14 education loan program to provide loans to students or 15 parents of a student to finance the cost of attendance at an 16 institution of higher education, as defined in the bill. A 17 loan provided under this program shall have a fixed rate of 18 interest at 1 percent per year. The treasurer, in consultation 19 with the college student aid commission, is required to adopt 20 rules to administer the program. 21 The bill establishes a state of Iowa higher education bank 22 revolving fund in the state treasury and under the control of 23 the treasurer to consist of moneys acquired by means specified 24 in the bill. Moneys in the fund are to be used to operate the 25 bank and shall not revert to the general fund of the state. 26 Division II disallows the Iowa income tax deduction for 27 federal income taxes paid for tax years beginning on or after 28 January 1, 2016, if the taxpayer’s net income for the tax year 29 exceeds $750,000 ($375,000 for a single person). Beginning in 30 2017, the bill requires the department of revenue to calculate 31 the additional Iowa income tax revenues collected as a result 32 of the disallowance of federal deductibility for each fiscal 33 year and certify that amount to the treasurer of state by 34 October 15. For each fiscal year beginning on or after July 1, 35 -6- LSB 5433XS (3) 86 gh/sc 6/ 7
S.F. 2209 2017, an amount equal to the amount certified by the department 1 of revenue during the fiscal year is appropriated from the 2 general fund of the state to the state of Iowa higher education 3 bank revolving fund created in Code section 525.8. 4 Division II applies retroactively to January 1, 2016, for 5 tax years beginning on or after that date. 6 -7- LSB 5433XS (3) 86 gh/sc 7/ 7