HF 434 (LSB 2403YH (2) 87)

HOUSE FILE 434

BY  R. TAYLOR

A BILL FOR

An Act exempting from the individual income tax the amount of income resulting from the discharge of certain student loan debt on account of death and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2017, is amended by adding the following new subsection:
   NEW SUBSECTION.  18.  Subtract, to the extent included, the amount of income resulting from a discharge of qualified student loan debt on account of the death of the student or borrower. For purposes of this subsection, “qualified student loan” means a student loan as defined in section 108(f)(2) of the Internal Revenue Code or a private education loan as defined in 15 U.S.C. §1650(a)(7).
    Sec. 2.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2017, 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.
   Under current law for federal income tax purposes and Iowa income tax purposes, a discharge (cancellation) of student loan debt on account of death results in taxable income to the debtor for the amount of the debt discharged. This bill exempts, for Iowa individual income tax purposes, income resulting from a discharge of qualified student loan debt on account of the death of the student or borrower.
   “Qualified student loan” is defined in the bill, but generally includes postsecondary education student loans made by the United States or a federal agency or instrumentality, a state or political subdivision of a state, a tax-exempt public benefit corporation controlling a hospital, certain educational organizations, or private educational lenders.
   The bill applies retroactively to January 1, 2017, for tax years beginning on or after that date.