Senate
File
2303
-
Introduced
SENATE
FILE
2303
BY
COMMITTEE
ON
WAYS
AND
MEANS
(SUCCESSOR
TO
SSB
3171)
(COMPANION
TO
LSB
6046HV
BY
COMMITTEE
ON
WAYS
AND
MEANS)
A
BILL
FOR
An
Act
relating
to
state
taxation
by
temporarily
updating
the
1
Code
references
to
the
Internal
Revenue
Code,
decoupling
2
from
certain
federal
bonus
depreciation
provisions,
3
rescinding
certain
administrative
rules
and
rule
amendments
4
and
modifying
the
sales
tax
exemptions
related
to
the
5
purchase
of
items
used
in
manufacturing
and
other
6
activities,
and
including
effective
date
and
retroactive
7
applicability
provisions.
8
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
9
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2303
DIVISION
I
1
INTERNAL
REVENUE
CODE
REFERENCES
2
Section
1.
INTERNAL
REVENUE
CODE
REFERENCES
FOR
3
2015.
Notwithstanding
the
definition
of
“Internal
Revenue
4
Code”
in
section
15.335,
subsection
7,
section
422.3,
5
subsection
5,
section
422.10,
subsection
3,
section
422.32,
6
subsection
1,
and
section
422.33,
subsection
5,
Code
2016,
7
the
following
shall
apply
for
the
period
beginning
January
1,
8
2015,
and
ending
December
31,
2015,
and
for
tax
years
beginning
9
during
the
2015
calendar
year:
10
1.
The
definition
of
“Internal
Revenue
Code”
for
purposes
11
of
section
15.335,
subsection
7,
section
422.10,
subsection
3,
12
and
section
422.33,
subsection
5,
Code
2016,
and
for
purposes
13
of
references
in
the
2016
Iowa
Code
and
2016
Iowa
Acts
to
the
14
definition
of
“Internal
Revenue
Code”
in
those
sections,
shall
15
mean
the
Internal
Revenue
Code
in
effect
on
January
1,
2016.
16
2.
The
definition
of
“Internal
Revenue
Code”
for
purposes
17
of
sections
422.3
and
422.32,
Code
2016,
and
for
purposes
of
18
references
in
the
2016
Iowa
Code
and
2016
Iowa
Acts
to
the
19
definition
of
“Internal
Revenue
Code”
in
those
sections,
shall
20
mean
the
Internal
Revenue
Code
of
1954,
prior
to
the
date
of
21
its
redesignation
as
the
Internal
Revenue
Code
of
1986
by
the
22
Tax
Reform
Act
of
1986,
or
means
the
Internal
Revenue
Code
of
23
1986
as
amended
to
and
including
January
1,
2016.
24
Sec.
2.
DEDUCTION
FOR
STATE
SALES
AND
USE
TAX
FOR
25
2015.
Notwithstanding
section
422.9,
subsection
2,
paragraph
26
“i”,
Code
2016,
the
deduction
for
state
sales
and
use
taxes
is
27
allowable
under
section
422.9
for
tax
years
beginning
during
28
the
2015
calendar
year,
but
only
if
the
taxpayer
elected
to
29
deduct
the
state
sales
and
use
taxes
in
lieu
of
state
income
30
taxes
under
section
164
of
the
Internal
Revenue
Code.
The
31
deduction
for
state
sales
and
use
taxes
is
not
allowed
if
the
32
taxpayer
has
taken
the
deduction
for
state
income
taxes
or
33
claimed
the
standard
deduction
under
section
63
of
the
Internal
34
Revenue
Code.
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2303
Sec.
3.
BONUS
DEPRECIATION
FOR
2015.
1
1.
Notwithstanding
section
1
of
this
Act,
or
any
other
2
provision
of
law
to
the
contrary,
the
additional
first-year
3
depreciation
allowance
authorized
in
section
168(k)
of
the
4
Internal
Revenue
Code,
as
enacted
by
Pub.
L.
No.
114-113,
§143,
5
does
not
apply
in
computing
net
income
for
state
tax
purposes
6
for
tax
years
ending
on
or
after
January
1,
2015,
but
before
7
January
1,
2016.
If
the
taxpayer
has
taken
the
additional
8
first-year
depreciation
allowance
for
purposes
of
computing
9
federal
adjusted
gross
income
or
federal
taxable
income,
as
10
the
case
may
be,
then
the
taxpayer,
when
computing
net
income
11
for
purposes
of
the
individual
income
tax
under
section
422.7
12
or
the
corporation
income
tax
or
franchise
tax
under
section
13
422.35,
shall
make
the
adjustments
described
in
section
422.7,
14
subsection
39A,
paragraphs
“a”
through
“c”,
Code
2016,
or
15
described
in
section
422.35,
subsection
19A,
paragraphs
“a”
16
through
“c”,
Code
2016,
as
applicable.
17
2.
In
addition
to
the
requirements
of
section
422.5,
18
subsection
2,
paragraph
“b”,
subparagraph
(1),
Code
2016,
19
for
purposes
of
the
state
alternative
minimum
taxable
income
20
calculation
in
section
422.5,
subsection
2,
paragraph
“b”,
21
subparagraph
(1),
to
the
extent
that
any
preference
or
22
adjustment
is
determined
by
an
individual’s
federal
adjusted
23
gross
income,
the
individual’s
federal
adjusted
gross
income
is
24
computed
in
accordance
with
subsection
1
of
this
section
for
25
tax
years
beginning
during
the
2015
calendar
year.
26
3.
In
addition
to
the
requirements
of
section
422.9,
27
subsection
2,
paragraph
“h”,
Code
2016,
for
purposes
of
28
calculating
the
deductions
in
section
422.9
that
are
authorized
29
under
the
Internal
Revenue
Code,
and
to
the
extent
that
30
any
such
deduction
is
determined
by
an
individual’s
federal
31
adjusted
gross
income,
the
individual’s
federal
adjusted
gross
32
income
is
computed
in
accordance
with
subsection
1
of
this
33
section
for
tax
years
beginning
during
the
2015
calendar
year.
34
Sec.
4.
EFFECTIVE
UPON
ENACTMENT.
This
division
of
this
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2303
Act,
being
deemed
of
immediate
importance,
takes
effect
upon
1
enactment.
2
Sec.
5.
RETROACTIVE
APPLICABILITY.
This
division
of
this
3
Act
applies
retroactively
to
January
1,
2015.
4
DIVISION
II
5
SALES
AND
USE
TAXES
6
Sec.
6.
RESCISSION
OF
AMENDMENTS
TO
ADMINISTRATIVE
RULES.
7
1.
The
amendments
to
701
Iowa
administrative
code,
rule
8
15.3,
subrule
3;
rule
18.29,
subrule
7;
rules
18.58,
219.11,
9
and
219.12;
rule
219.13,
subrule
3;
and
rule
230.5,
as
10
appearing
in
ARC
2349C,
as
published
in
the
Iowa
administrative
11
bulletin,
volume
XXXVIII,
number
14,
dated
January
6,
2016,
pp.
12
1359-1364,
are
rescinded.
13
2.
As
soon
as
practicable,
the
Iowa
administrative
code
14
editor
shall
restore
the
language
of
the
Iowa
administrative
15
code
rules
and
subrules
referenced
in
subsection
1
of
this
16
section
to
the
language
that
existed
on
January
5,
2016.
17
Sec.
7.
RESCISSION
OF
ADMINISTRATIVE
RULES.
18
1.
701
Iowa
administrative
code,
rules
230.14
through
19
230.22,
are
rescinded.
20
2.
As
soon
as
practicable,
the
Iowa
administrative
code
21
editor
shall
remove
the
language
of
the
Iowa
administrative
22
code
rules
referenced
in
subsection
1
of
this
section
from
the
23
Iowa
administrative
code.
24
Sec.
8.
Section
423.3,
subsection
47,
paragraph
a,
25
unnumbered
paragraph
1,
Code
2016,
is
amended
to
read
as
26
follows:
27
The
sales
price
from
the
sale
or
rental
of
computers,
28
machinery,
and
equipment,
including
replacement
parts
,
29
supplies
,
and
materials
used
to
construct
or
self-construct
30
computers,
machinery,
and
equipment
,
replacement
parts,
and
31
supplies,
if
such
items
are
any
of
the
following:
32
Sec.
9.
Section
423.3,
subsection
47,
paragraph
d,
Code
33
2016,
is
amended
by
adding
the
following
new
subparagraphs:
34
NEW
SUBPARAGRAPH
.
(7)
“Replacement
part”
means
tangible
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2303
personal
property
other
than
computers,
machinery,
equipment,
1
or
supplies,
regardless
of
the
cost
or
useful
life
of
the
2
tangible
personal
property,
that
meets
all
of
the
following
3
conditions:
4
(a)
The
tangible
personal
property
replaces
a
component
of
5
a
computer,
machinery,
or
equipment,
which
component
is
capable
6
of
being
separated
from
the
computer,
machinery,
or
equipment.
7
(b)
The
tangible
personal
property
performs
the
same
or
8
similar
function
as
the
component
it
replaced.
9
(c)
The
tangible
personal
property
restores
the
computer,
10
machinery,
or
equipment
to
an
operational
condition,
or
11
upgrades
or
improves
the
efficiency
of
the
computer,
machinery,
12
or
equipment.
13
NEW
SUBPARAGRAPH
.
(8)
“Supplies”
means
tangible
personal
14
property,
other
than
computers,
machinery,
equipment,
or
15
replacement
parts,
that
meets
one
of
the
following
conditions:
16
(a)
The
tangible
personal
property
is
to
be
connected
17
to
a
computer,
machinery,
or
equipment
and
requires
regular
18
replacement
because
the
property
is
consumed
or
deteriorates
19
during
use,
including
but
not
limited
to
saw
blades,
drill
20
bits,
filters,
and
other
similar
items
with
a
short
useful
21
life.
22
(b)
The
tangible
personal
property
is
used
in
conjunction
23
with
a
computer,
machinery,
or
equipment
and
is
specially
24
designed
for
use
in
manufacturing
specific
products
and
may
25
be
used
interchangeably
and
intermittently
on
a
particular
26
computer,
machine,
or
piece
of
equipment,
including
but
not
27
limited
to
jigs,
dies,
tools,
and
other
similar
items.
28
(c)
The
tangible
personal
property
comes
into
physical
29
contact
with
other
tangible
personal
property
used
in
30
processing
and
is
used
to
assist
with
or
maintain
conditions
31
necessary
for
processing,
including
but
not
limited
to
cutting
32
fluids,
oils,
coolants,
lubricants,
and
other
similar
items
33
with
a
short
useful
life.
34
(d)
The
tangible
personal
property
is
directly
and
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2303
primarily
used
in
an
activity
described
in
paragraph
“a”
,
1
subparagraphs
(1)
through
(6),
including
but
not
limited
to
2
prototype
materials
and
testing
materials.
3
Sec.
10.
EFFECTIVE
UPON
ENACTMENT.
The
sections
of
this
4
division
of
this
Act
rescinding
Iowa
administrative
code
rules
5
and
amendments
to
Iowa
administrative
code
rules,
being
deemed
6
of
immediate
importance,
take
effect
upon
enactment.
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
state
taxation.
11
DIVISION
I
——
INTERNAL
REVENUE
CODE
REFERENCES.
The
bill
12
provides
that
notwithstanding
several
Code
provisions
as
13
specified
in
the
bill,
the
definitions
of
“Internal
Revenue
14
Code”
in
those
Code
provisions
and,
by
internal
reference,
15
in
other
sections
of
the
Iowa
Code
and
Iowa
Acts
shall
mean
16
the
Internal
Revenue
Code
in
effect
on,
or
as
amended
to
and
17
including,
January
1,
2016.
This
definition
change
applies
18
only
to
the
period
beginning
January
1,
2015,
and
ending
19
December
31,
2015,
and
for
tax
years
beginning
during
the
2015
20
calendar
year.
21
The
affected
Code
provisions
include
Code
sections
422.3
22
and
422.32,
general
definition
sections
in
the
chapter
of
the
23
Code
that
governs
corporate
and
individual
income
tax
and
the
24
franchise
tax,
and
Code
sections
15.335,
422.10,
and
422.33,
25
which
contain
references
to
the
Internal
Revenue
Code
for
the
26
state
research
activities
credit
for
individuals,
corporations,
27
and
corporations
in
economic
development
areas.
28
Code
section
422.9
provides
individuals
a
deduction
from
29
net
income
for
state
sales
and
use
taxes
if
the
individual
30
chose
to
deduct
sales
and
use
tax
in
lieu
of
state
income
taxes
31
or
the
standard
deduction
for
federal
income
tax
purposes.
32
This
deduction
was
set
to
expire
under
both
federal
and
Iowa
33
law
for
tax
years
beginning
on
or
after
January
1,
2015.
The
34
federal
Protecting
Americans
from
Tax
Hikes
Act
of
2015
made
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the
federal
deduction
permanent.
The
bill
allows
the
Iowa
1
deduction
for
tax
years
beginning
during
the
2015
calendar
2
year.
3
The
bill
decouples,
for
Iowa
income
tax
purposes
for
tax
4
years
ending
on
or
after
January
1,
2015,
but
before
January
5
1,
2016,
from
the
federal
additional
first-year
depreciation
6
allowance
in
section
168(k)
of
the
Internal
Revenue
Code
7
(bonus
depreciation)
which
was
modified
and
extended
through
8
2019
by
the
federal
Protecting
Americans
from
Tax
Hikes
Act
9
of
2015.
Taxpayers
who
claim
bonus
depreciation
for
federal
10
tax
purposes
are,
for
the
applicable
tax
year,
required
to
add
11
such
depreciation
amounts
back
to
Iowa
net
income,
but
are
12
then
allowed
under
existing
state
law
to
deduct
the
amount
of
13
depreciation
that
would
otherwise
be
allowable
under
federal
14
law,
without
regard
to
the
bonus
depreciation
allowance.
15
Under
current
law,
taxpayers
are
in
some
instances
required,
16
when
calculating
alternative
minimum
tax
under
Code
section
17
422.5(2)
and
itemized
deductions
under
Code
section
422.9(2),
18
to
recompute
their
federal
adjusted
gross
income
to
take
19
into
account
the
fact
that
Iowa
has
decoupled
from
bonus
20
depreciation.
The
bill
provides
that
taxpayers
must
make
those
21
same
adjustments
to
federal
adjusted
gross
income
for
tax
year
22
2015
to
account
for
the
fact
that
Iowa
has
decoupled
from
bonus
23
depreciation
as
described
above.
24
The
division
takes
effect
upon
enactment
and
applies
25
retroactively
to
January
1,
2015.
26
DIVISION
II
——
SALES
AND
USE
TAXES.
The
bill
rescinds
27
several
administrative
rules
and
amendments
to
administrative
28
rules
of
the
department
of
revenue
relating
to
the
29
manufacturing
sales
and
use
tax
exemptions
under
Code
sections
30
423.3(47)
and
423.3(48)
for
the
purchase
of
certain
items
used
31
in
manufacturing,
research
and
development,
data
processing
32
or
storage,
or
recycling
activities,
and
for
the
purchase
of
33
certain
design
and
installation
services
related
to
machinery
34
and
equipment,
and
to
the
definitions
of
several
applicable
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2303
terms,
including
but
not
limited
to
definitions
for
tax-exempt
1
“computers”,
“machinery”,
“equipment”,
“replacement
parts”,
2
and
“materials
used
to
construct
or
self-construct
computers,
3
machinery,
and
equipment”.
These
administrative
rules
and
4
amendments
to
administrative
rules
also
concern
the
treatment
5
of
these
tax-exempt
items
as
they
relate
to
the
taxation
of
6
construction
activities
under
Code
sections
423.2(1)(b)
and
7
423.2(1)(c)
by
amending
the
method
for
determining
whether
8
the
items
are
considered
real
property
and
taxed
as
building
9
materials
when
purchased
in
furtherance
of
a
construction
10
contract,
or
considered
tangible
personal
property
eligible
for
11
the
manufacturing
sales
and
use
tax
exemptions.
12
The
effect
of
rescinding
the
amendments
to
these
13
administrative
rules
is
to
restore
the
language
of
the
14
affected
rules
to
that
as
it
existed
prior
to
the
date
15
the
adopted
amendments
to
the
rules
were
published
in
the
16
Iowa
administrative
bulletin.
The
bill
directs
the
Iowa
17
administrative
code
editor
to
restore
the
text
of
the
affected
18
rules
to
the
language
that
existed
on
January
5,
2016,
which
19
was
the
day
before
the
amendments
were
published
in
the
20
Iowa
administrative
bulletin.
The
bill
also
directs
the
21
Iowa
administrative
code
editor
to
remove
language
of
the
22
rescinded
rules
from
the
Iowa
administrative
code.
The
Iowa
23
administrative
code
editor
is
required
to
complete
these
24
actions
as
soon
as
practicable.
The
provisions
rescinding
25
these
administrative
rules
and
amendments
to
administrative
26
rules
and
requiring
certain
administrative
code
editor
actions
27
take
effect
upon
enactment.
28
The
bill
amends
the
sales
tax
exemption
in
Code
section
29
423.3(47)
for
the
purchase
or
rental
of
certain
items
used
in
30
manufacturing,
research
and
development,
data
processing
or
31
storage,
or
recycling
activities.
32
Under
current
law,
the
exemption
includes
replacement
33
parts.
The
bill
amends
the
exemption
to
include
materials
34
used
to
construct
or
self-construct
replacement
parts.
The
35
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6046SV
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86
mm/rj
7/
9
S.F.
2303
bill
defines
“replacement
part”
for
purposes
of
the
exemption
1
to
mean
tangible
personal
property
other
than
computers,
2
machinery,
equipment,
or
supplies,
regardless
of
the
cost
or
3
useful
life
of
the
property,
that
replaces
a
component
of
a
4
computer,
machinery,
or
equipment,
performs
the
same
or
similar
5
function
as
that
component,
and
restores
or
improves
the
6
computer,
machinery,
or
equipment.
7
The
bill
also
amends
the
exemption
to
include
supplies
8
and
materials
used
to
construct
or
self-construct
supplies.
9
“Supplies”
is
defined
in
the
bill
as
tangible
personal
property
10
that
is
not
a
computer,
machinery,
equipment,
or
replacement
11
part
and
that
meets
one
of
the
following
four
conditions:
12
1.
The
tangible
personal
property
is
to
be
connected
to
13
a
computer,
machinery,
or
equipment
and
requires
regular
14
replacement
because
it
is
consumed
or
deteriorates
during
use.
15
The
bill
lists
saw
blades,
drill
bits,
filters,
and
other
16
similar
items
with
a
short
useful
life
as
examples.
17
2.
The
tangible
personal
property
is
used
in
conjunction
18
with
a
computer,
machinery,
or
equipment
and
is
specially
19
designed
for
use
in
manufacturing
specific
products
and
may
20
be
used
interchangeably
and
intermittently
on
a
particular
21
computer,
machine,
or
piece
of
equipment.
The
bill
lists
jigs,
22
dies,
tools,
and
other
similar
items
as
examples.
23
3.
The
tangible
personal
property
comes
into
physical
24
contact
with
other
tangible
personal
property
used
in
25
processing
and
is
used
to
assist
with
or
maintain
conditions
26
necessary
for
processing.
The
bill
lists
cutting
fluids,
oils,
27
coolants,
lubricants,
and
other
similar
items
with
a
short
28
useful
life
as
examples.
29
4.
The
tangible
property
is
directly
and
primarily
used
30
in
an
activity
described
in
Code
section
423.3(47)(a)(1)-(6).
31
The
bill
lists
prototype
materials
and
testing
materials
as
32
examples.
33
By
operation
of
Code
section
423.6,
an
item
exempt
from
the
34
imposition
of
the
sales
tax
is
also
exempt
from
the
use
tax
35
-8-
LSB
6046SV
(2)
86
mm/rj
8/
9
S.F.
2303
imposed
in
Code
section
423.5.
1
-9-
LSB
6046SV
(2)
86
mm/rj
9/
9