HF 2546 (LSB 5407YH (4) 88)

HOUSE FILE 2546

BY  PRICHARD, KONFRST, WESSEL-KROESCHELL, B. MEYER, OLDSON, STECKMAN, M. SMITH, BEARINGER, KRESSIG, BROWN-POWERS, WILLIAMS, MATSON, DONAHUE, STAED, KURTH, McKEAN, JAMES, KACENA, BRECKENRIDGE, JACOBY, OLSON, SUNDE, ISENHART, THEDE, GAINES, HUNTER, COHOON, DERRY, WILBURN, HALL, NIELSEN, BENNETT, JUDGE, EHLERT, WOLFE, FORBES, ANDERSON, MASCHER, WINCKLER, ABDUL-SAMAD, GASKILL, R. SMITH, LENSING, and McCONKEY

A BILL FOR

An Act relating to the child and dependent care credit available against the individual income tax, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.12C, subsection 1, Code 2020, is amended by striking the subsection and inserting in lieu thereof the following:
   1.  The taxes imposed under this division, less the amounts of nonrefundable credits allowed under this division, shall be reduced by a child and dependent care credit equal to the following percentages of the federal child and dependent care credit provided in section 21 of the Internal Revenue Code, without regard to whether or not the federal credit was limited by the taxpayer’s federal tax liability:
   a.  For a taxpayer with net income of less than forty-five thousand dollars, one hundred percent.
   b.  For a taxpayer with net income of forty-five thousand dollars or more but less than ninety thousand dollars, thirty percent.
   c.  For a taxpayer with net income of ninety thousand dollars or more but less than one hundred thousand dollars, twenty-five percent.
   d.  For a taxpayer with net income of one hundred thousand dollars or more but less than one hundred twenty-five thousand dollars, twenty percent.
   e.  For a taxpayer with net income of one hundred twenty-five thousand dollars or more but less than one hundred fifty thousand dollars, fifteen percent.
   f.  For a taxpayer with net income of one hundred fifty thousand dollars or more but less than one hundred seventy-five thousand dollars, ten percent.
   g.  For a taxpayer with net income of one hundred seventy-five thousand dollars or more but less than two hundred fifty thousand dollars, five percent.
   h.  For a taxpayer with net income of two hundred fifty thousand dollars or more, zero percent.
    Sec. 2.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2020 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 increases the Iowa net income threshold levels for purposes of calculating the Iowa child and dependent child care tax credit available against the individual income tax. The Iowa child and dependent care tax credit is a refundable credit calculated as a percentage of the nonrefundable federal child and dependent care tax credit, depending on the Iowa net income of the taxpayer. 
   Currently, there are seven graduated Iowa net income thresholds used to calculate the credit. The bill increases these graduated thresholds from seven threshold levels to eight threshold levels, and changes the percentage of the nonrefundable federal child and dependent care tax credit used to calculate the Iowa child and dependent child care tax credit.
   Currently, the credit percentages in these seven Iowa net income thresholds range from a high of 75 percent of the federal credit for taxpayers with net income of less than $10,000, to a low of 30 percent of the federal credit for taxpayers with net income of $40,000 or more but less than $45,000. Under the bill, the credit percentages in the thresholds range from a high of 100 percent of the federal credit for taxpayers with a net income of less than $45,000 to a low of 5 percent of the federal credit for taxpayers with net income of $175,000 or more but less than $250,000.
   The bill applies retroactively to January 1, 2020, for tax years beginning on or after that date.