SF 164 (LSB 1068XS (9) 88)

SENATE FILE 164

BY  BROWN

A BILL FOR

An Act exempting from the individual income tax the wages of individuals who are employed in high-demand jobs and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2019, is amended by adding the following new subsection:
   NEW SUBSECTION.  60.  a.  Subtract, to the extent included, the amount of wages received by an individual domiciled in this state from a high-demand job.
   b.  For purposes of this subsection:
   (1)  (a)  “High-demand job” means the same as defined in section 84A.1B, subsection 13A, as enacted by 2018 Iowa Acts, chapter 1067, section 7.
   (b)  “High-demand job” also includes additional job categories in a city or county identified by the city or county where work opportunities are available and qualified applicants are lacking. A city or county shall petition the community college in the region in which the city or county is located to designate such a job category a high-demand job. For purposes of this subsection only, a community college may designate up to ten job categories as high-demand jobs in the region of the community college based upon a petition from a city or county by July 31 of each year. If the community college does not designate a job category as a high-demand job, the community college shall inform the city or county of the reasons for not making such a designation by July 31. For each tax year, a community college shall annually verify to the department the job categories designated high-demand jobs pursuant to this subparagraph division by August 31.
   (2)  “Small city” means a city with a population of less than fifteen thousand based upon the most recent federal decennial census.
   (3)  “Small county” means one of the ten least populated counties in this state based upon the most recent federal decennial census.
   c.  (1)  An individual may elect to take the exemption during the first tax year the individual receives wages from a high-demand job or in the second tax year of receiving such wages.
   (2)  After the election in subparagraph (1), the individual shall take the exemption if residing in a small city or small county for a total of five consecutive tax years, or if the individual is not residing in a small city or small county, the individual shall take the exemption for a total of three consecutive tax years.
   (3)  After taking the exemption in consecutive years as provided in subparagraph (2), the individual is prohibited from taking the exemption in future tax years.
   d.  (1)  Add the amount to the extent previously exempted pursuant to this subsection under any of the following circumstances:
   (a)  The individual does not have wages from a high-demand job and is unable to take the exemption in consecutive tax years as required under paragraph “c”, subparagraph (2).
   (b)  The individual becomes a nonresident of this state within three or five years of first taking the exemption, as applicable.
   (2)  This paragraph does not apply to an individual who becomes disabled and is unable to work in a high-demand job.
   e.  (1)  This subsection shall not apply to an individual who has been a resident taxpayer during the tax year prior to the first tax year of taking the exemption in this subsection, unless all of the following apply:
   (a)  The individual graduated from a community college, private college, private university, or regents institution in this state after the effective date of this Act.
   (b)  The individual is receiving wages from a high-demand job in this state.
   (c)  The individual is a resident taxpayer.
   (2)  An individual who becomes a resident of this state in order to take a high-demand job and elects to take the exemption during the second tax year as provided in paragraph “c” shall be considered a resident taxpayer during the tax year prior to the first tax year of taking the exemption for purposes of this paragraph.
   f.  The employer during each tax year an individual takes an exemption for a high-demand job shall provide verification to the department that the individual is employed in such a job.
   g.  The department of revenue shall report to the general assembly the types of job categories available for the high-demand job program in this subsection, where the high-demand jobs are located, and the number of individuals who have elected to take the exemption under this subsection beginning October 1, 2021, and every October 1 thereafter.
   h.  The director shall adopt rules pursuant to chapter 17A to administer this subsection and develop forms for the proper administration of this subsection.
    Sec. 2.  FIRST YEAR DESIGNATION AND VERIFICATION BY COMMUNITY COLLEGES.  For the first year after the effective date of this Act, a community college shall be considered to be in compliance with section 422.7, subsection 60, paragraph “b”, subparagraph (1), subparagraph division (b), if the community college designates the high-demand job categories by September 1, 2019, and verifies such job categories to the department of revenue by October 1, 2019.
    Sec. 3.  EFFECTIVE DATE.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 4.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2019, 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 exempts from the individual income tax wages of individuals who are employed in high-demand jobs.
   Under the bill, “high-demand job” is defined in Code section 84A.1B(13A), which becomes effective July 1, 2019 (see 2018 Iowa Acts, chapter 1067, sections 7 and 15). The bill also defines “high-demand job” to include a job category in a city or county identified by the city or county where work opportunities are available and qualified applicants are lacking. The bill requires a city or county to petition the community college in the region in which the city or county is located to designate such a job category as a high-demand job. For each tax year a community college may designate up to 10 job categories as “high-demand jobs” in the region of the community college based upon a petition from a city or county.
   An individual may elect to take the exemption during the first tax year the individual receives wages from a high-demand job designated in the bill or in the second tax year of receiving such wages. After the election as to what tax year to begin the exemption, the bill requires the individual to take the exemption for a total of five consecutive tax years if the person resides in a small city or small county, or three consecutive tax years if the person does not reside in such a city or county.
   The bill defines “small city” to mean a city with a population of less than 15,000 based upon the most recent federal decennial census. The bill defines “small county” to mean 1 of the 10 least populated counties in this state based upon the most recent federal decennial census.
   Generally, the bill provides that high-demand job wages are to be included in income to the extent previously exempted under any of the following circumstances: the individual ceases to have wages from a high-demand job in any tax year during the consecutive years the individual is required to work in a high-demand job; or the individual becomes a nonresident of this state within three or five years of first taking the exemption, as applicable.
   However, if an individual becomes disabled after taking the exemption and does not work in a high-demand job for the consecutive years as required by the bill, the individual is not required to include high-demand job wages as income to the extent previously exempted.
   The bill does not apply to an individual who has been a resident taxpayer during the tax year prior to the first tax year of taking the exemption, unless all of the following apply: the individual graduated from a community college, private college, private university, or regents institution in this state after the effective date of the bill; the individual is receiving wages from a high-demand job in this state; and the individual is a resident taxpayer.
   The bill requires the employer during each tax year an individual takes an exemption for a high-demand job to provide verification to the department of revenue that the individual is employed in such a job.
   The bill requires the department of revenue to report to the general assembly the types of job categories available for the high-demand job program in the bill, where the high-demand jobs are located, and the number of individuals who have elected to take the exemption under the bill beginning October 1, 2021.
   The bill requires the department of revenue to adopt rules to administer the provisions of the bill.
   The bill takes effect upon enactment and applies retroactively to January 1, 2019, for tax years beginning on or after that date.