Senate File 58 - Introduced SENATE FILE 58 BY CHELGREN A BILL FOR An Act relating to the individual income tax by excluding 1 social security income from the income tax return filing 2 requirement calculation and the alternate tax calculation, 3 and including retroactive applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1139XS (3) 87 mm/sc

S.F. 58 Section 1. Section 422.5, subsection 3, paragraph a, Code 1 2017, is amended to read as follows: 2 a. The tax shall not be imposed on a resident or nonresident 3 whose net income, as defined in section 422.7 , is thirteen 4 thousand five hundred dollars or less in the case of married 5 persons filing jointly or filing separately on a combined 6 return, heads of household, and surviving spouses or nine 7 thousand dollars or less in the case of all other persons; 8 but in the event that the payment of tax under this division 9 would reduce the net income to less than thirteen thousand five 10 hundred dollars or nine thousand dollars as applicable, then 11 the tax shall be reduced to that amount which would result 12 in allowing the taxpayer to retain a net income of thirteen 13 thousand five hundred dollars or nine thousand dollars as 14 applicable. The preceding sentence does not apply to estates 15 or trusts. For the purpose of this subsection , the entire net 16 income, including any part of the net income not allocated 17 to Iowa, shall be taken into account. For purposes of this 18 subsection , net income includes all amounts of pensions or 19 other retirement income, except for military retirement pay 20 excluded under section 422.7, subsection 31A , paragraph “a” , 21 or section 422.7, subsection 31B , paragraph “a” , and except 22 for social security benefits excluded under section 422.7, 23 subsection 13, received from any source which is not taxable 24 under this division as a result of the government pension 25 exclusions in section 422.7 , or any other state law. If the 26 combined net income of a husband and wife exceeds thirteen 27 thousand five hundred dollars, neither of them shall receive 28 the benefit of this subsection , and it is immaterial whether 29 they file a joint return or separate returns. However, if 30 a husband and wife file separate returns and have a combined 31 net income of thirteen thousand five hundred dollars or less, 32 neither spouse shall receive the benefit of this paragraph, if 33 one spouse has a net operating loss and elects to carry back or 34 carry forward the loss as provided in section 422.9, subsection 35 -1- LSB 1139XS (3) 87 mm/sc 1/ 4

S.F. 58 3 . A person who is claimed as a dependent by another person 1 as defined in section 422.12 shall not receive the benefit 2 of this subsection if the person claiming the dependent has 3 net income exceeding thirteen thousand five hundred dollars 4 or nine thousand dollars as applicable or the person claiming 5 the dependent and the person’s spouse have combined net income 6 exceeding thirteen thousand five hundred dollars or nine 7 thousand dollars as applicable. 8 Sec. 2. Section 422.5, subsection 3B, paragraph a, Code 9 2017, is amended to read as follows: 10 a. The tax shall not be imposed on a resident or nonresident 11 who is at least sixty-five years old on December 31 of 12 the tax year and whose net income, as defined in section 13 422.7 , is thirty-two thousand dollars or less in the case 14 of married persons filing jointly or filing separately on a 15 combined return, heads of household, and surviving spouses or 16 twenty-four thousand dollars or less in the case of all other 17 persons; but in the event that the payment of tax under this 18 division would reduce the net income to less than thirty-two 19 thousand dollars or twenty-four thousand dollars as applicable, 20 then the tax shall be reduced to that amount which would result 21 in allowing the taxpayer to retain a net income of thirty-two 22 thousand dollars or twenty-four thousand dollars as applicable. 23 The preceding sentence does not apply to estates or trusts. 24 For the purpose of this subsection , the entire net income, 25 including any part of the net income not allocated to Iowa, 26 shall be taken into account. For purposes of this subsection , 27 net income includes all amounts of pensions or other retirement 28 income, except for military retirement pay excluded under 29 section 422.7, subsection 31A , paragraph “a” , or section 422.7, 30 subsection 31B , paragraph “a” , and except for social security 31 benefits excluded under section 422.7, subsection 13, received 32 from any source which is not taxable under this division as 33 a result of the government pension exclusions in section 34 422.7 , or any other state law. If the combined net income of a 35 -2- LSB 1139XS (3) 87 mm/sc 2/ 4

S.F. 58 husband and wife exceeds thirty-two thousand dollars, neither 1 of them shall receive the benefit of this subsection , and it 2 is immaterial whether they file a joint return or separate 3 returns. However, if a husband and wife file separate returns 4 and have a combined net income of thirty-two thousand dollars 5 or less, neither spouse shall receive the benefit of this 6 paragraph, if one spouse has a net operating loss and elects 7 to carry back or carry forward the loss as provided in section 8 422.9, subsection 3 . A person who is claimed as a dependent by 9 another person as defined in section 422.12 shall not receive 10 the benefit of this subsection if the person claiming the 11 dependent has net income exceeding thirty-two thousand dollars 12 or twenty-four thousand dollars as applicable or the person 13 claiming the dependent and the person’s spouse have combined 14 net income exceeding thirty-two thousand dollars or twenty-four 15 thousand dollars as applicable. 16 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 17 retroactively to January 1, 2017, for tax years beginning on 18 or after that date. 19 EXPLANATION 20 The inclusion of this explanation does not constitute agreement with 21 the explanation’s substance by the members of the general assembly. 22 Under current law, social security benefits received by 23 a taxpayer are exempt from the calculation of the individual 24 income tax. However, these social security benefits are 25 required to be included in the calculation for determining 26 whether or not a taxpayer’s net income exceeds the amount at 27 which the individual income tax will not be imposed, and for 28 which an income tax return is not required to be filed, and in 29 the calculation of the alternate tax, which is an alternate 30 method of calculating income tax liability for certain 31 taxpayers in lieu of the regular income tax calculation. 32 This bill excludes social security benefits from these two 33 calculations. 34 The bill applies retroactively to January 1, 2017, for tax 35 -3- LSB 1139XS (3) 87 mm/sc 3/ 4

S.F. 58 years beginning on or after that date. 1 -4- LSB 1139XS (3) 87 mm/sc 4/ 4