S.F. 2242 Section 1. Section 8.55, subsection 2, paragraph a, Code 1 2020, is amended to read as follows: 2 a. The first sixty million dollars of the difference 3 between the actual net revenue for the general fund of the 4 state for the fiscal year and the adjusted revenue estimate for 5 the fiscal year shall be transferred to the taxpayer relief 6 taxpayers trust fund created in section 8.57E 8.57G . 7 Sec. 2. NEW SECTION . 8.57G Taxpayers trust fund. 8 1. A taxpayers trust fund is created. The fund shall be 9 separate from the general fund of the state and the balance in 10 the fund shall not be considered part of the balance of the 11 general fund of the state. The moneys credited to the fund 12 are not subject to section 8.33 and shall not be transferred, 13 used, obligated, appropriated, or otherwise encumbered except 14 as provided in this section. 15 2. Moneys in the taxpayers trust fund shall only be used 16 pursuant to appropriations or transfers made by the general 17 assembly for tax relief. During each fiscal year beginning on 18 or after July 1, 2022, in which the balance of the taxpayers 19 trust fund equals or exceeds thirty million dollars, there is 20 transferred from the taxpayers trust fund to the Iowa taxpayers 21 trust fund tax credit fund created in section 422.10C, the 22 entire balance of the taxpayers trust fund to be used for the 23 Iowa taxpayers trust fund tax credit in accordance with section 24 422.10C, subsection 5. 25 3. a. Moneys in the taxpayers trust fund may be used for 26 cash flow purposes during a fiscal year provided that any 27 moneys so allocated are returned to the fund by the end of that 28 fiscal year. 29 b. Except as provided in section 8.58, the taxpayers trust 30 fund shall be considered a special account for the purposes of 31 section 8.53 in determining the cash position of the general 32 fund of the state for the payment of state obligations. 33 4. Notwithstanding section 12C.7, subsection 2, interest or 34 earnings on moneys deposited in the taxpayers trust fund shall 35 -1- LSB 5969XS (3) 88 jm/jh 1/ 7

S.F. 2242 be credited to the fund. 1 Sec. 3. Section 8.58, Code 2020, is amended to read as 2 follows: 3 8.58 Exemption from automatic application. 4 1. To the extent that moneys appropriated under section 5 8.57 do not result in moneys being credited to the general fund 6 under section 8.55, subsection 2 , moneys appropriated under 7 section 8.57 and moneys contained in the cash reserve fund, 8 rebuild Iowa infrastructure fund, environment first fund, Iowa 9 economic emergency fund, taxpayer relief fund taxpayers trust 10 fund , and state bond repayment fund shall not be considered 11 in the application of any formula, index, or other statutory 12 triggering mechanism which would affect appropriations, 13 payments, or taxation rates, contrary provisions of the Code 14 notwithstanding. 15 2. To the extent that moneys appropriated under section 16 8.57 do not result in moneys being credited to the general fund 17 under section 8.55, subsection 2 , moneys appropriated under 18 section 8.57 and moneys contained in the cash reserve fund, 19 rebuild Iowa infrastructure fund, environment first fund, Iowa 20 economic emergency fund, taxpayer relief fund taxpayers trust 21 fund , and state bond repayment fund shall not be considered by 22 an arbitrator or in negotiations under chapter 20 . 23 Sec. 4. Section 257.21, subsection 2, Code 2020, is amended 24 to read as follows: 25 2. The instructional support income surtax shall be imposed 26 on the state individual income tax for the calendar year during 27 which the school’s budget year begins, or for a taxpayer’s 28 fiscal year ending during the second half of that calendar year 29 and after the date the board adopts a resolution to participate 30 in the program or the first half of the succeeding calendar 31 year, and shall be imposed on all individuals residing in the 32 school district on the last day of the applicable tax year. 33 As used in this section , “state individual income tax” means 34 the taxes computed under section 422.5 , less the amounts of 35 -2- LSB 5969XS (3) 88 jm/jh 2/ 7

S.F. 2242 nonrefundable credits allowed under chapter 422, division II , 1 except for the Iowa taxpayers trust fund tax credit allowed 2 under section 422.10C . 3 Sec. 5. NEW SECTION . 422.10C Iowa taxpayers trust fund tax 4 credit. 5 1. For purposes of this section, unless the context 6 otherwise requires: 7 a. “Eligible individual” means, with respect to a tax year, 8 an individual who makes and files an individual income tax 9 return pursuant to section 422.13. “Eligible individual” does 10 not include an estate or trust, or an individual for whom an 11 individual income tax return was not timely filed, including 12 extensions. 13 b. “Unclaimed tax credit” means, with respect to a tax 14 year, the aggregate amount by which the Iowa taxpayers trust 15 fund tax credits that were eligible to be claimed by eligible 16 individuals, if any, exceeds the Iowa taxpayers trust fund tax 17 credits actually claimed by eligible individuals, if any. 18 2. The taxes imposed under this division, less the credits 19 allowed under this division except the credits for withheld 20 tax and estimated tax paid in section 422.16, shall be reduced 21 by an Iowa taxpayers trust fund tax credit to an eligible 22 individual for the tax year beginning January 1 immediately 23 preceding July 1 of any fiscal year during which a transfer, if 24 any, is made from the taxpayers trust fund in section 8.57G to 25 the Iowa taxpayers trust fund tax credit fund created in this 26 section. 27 3. The credit shall be equal to the quotient of the amount 28 transferred to the Iowa taxpayers trust fund tax credit fund in 29 the applicable fiscal year, divided by the number of eligible 30 individuals for the tax year immediately preceding the tax year 31 for which the credit in this section is allowed, as determined 32 by the director of revenue in accordance with this section, 33 rounded down to the nearest whole dollar. The department of 34 revenue shall draft the income tax form for any tax year in 35 -3- LSB 5969XS (3) 88 jm/jh 3/ 7

S.F. 2242 which a credit will be allowed under this section to provide 1 the information and space necessary for eligible individuals to 2 claim the credit. 3 4. Any credit in excess of the taxpayer’s liability for the 4 tax year is not refundable and shall not be credited to the tax 5 liability for any following year or carried back to a tax year 6 prior to the tax year in which the taxpayer claims the credit. 7 5. a. There is established within the state treasury under 8 the control of the department an Iowa taxpayers trust fund 9 tax credit fund consisting of any moneys transferred by the 10 general assembly by law from the taxpayers trust fund created 11 in section 8.57G for purposes of the credit provided in this 12 section. For the fiscal year beginning July 1, 2022, and for 13 each fiscal year thereafter, the department shall transfer 14 from the Iowa taxpayers trust fund tax credit fund to the 15 general fund of the state, the lesser of the balance of the 16 Iowa taxpayers trust fund tax credit fund or an amount of money 17 equal to the Iowa taxpayers trust fund tax credits claimed in 18 that fiscal year, if any. Any moneys in the Iowa taxpayers 19 trust fund tax credit fund which represent unclaimed tax 20 credits shall immediately revert to the taxpayers trust fund 21 created in section 8.57G. Interest or earnings on moneys in 22 the Iowa taxpayers trust fund tax credit fund shall be credited 23 to the taxpayers trust fund created in section 8.57G. 24 b. The moneys transferred to the general fund of the state 25 in accordance with this subsection shall not be considered new 26 revenues for purposes of the state general fund expenditure 27 limitation under section 8.54 but instead as replacement of 28 a like amount included in the expenditure limitation for the 29 fiscal year in which the transfer is made. 30 Sec. 6. Section 422D.2, Code 2020, is amended to read as 31 follows: 32 422D.2 Local income surtax. 33 A county may impose by ordinance a local income surtax as 34 provided in section 422D.1 at the rate set by the board of 35 -4- LSB 5969XS (3) 88 jm/jh 4/ 7

S.F. 2242 supervisors, of up to one percent, on the state individual 1 income tax of each individual residing in the county at the 2 end of the individual’s applicable tax year. However, the 3 cumulative total of the percents of income surtax imposed on 4 any taxpayer in the county shall not exceed twenty percent. 5 The reason for imposing the surtax and the amount needed 6 shall be set out in the ordinance. The surtax rate shall be 7 set to raise only the amount needed. For purposes of this 8 section , “state individual income tax” means the tax computed 9 under section 422.5 , less the amounts of nonrefundable credits 10 allowed under chapter 422, division II , except for the Iowa 11 taxpayers trust fund tax credit allowed under section 422.10C . 12 Sec. 7. TAXPAYERS TRUST FUND —— TAXPAYER RELIEF FUND 13 TRANSFER. During the fiscal year beginning July 1, 2020, 14 there is transferred from the taxpayer relief fund created in 15 section 8.57E to the taxpayers trust fund created in section 16 8.57G, an amount equal to the sum of the remaining balance of 17 the taxpayer relief fund as determined after the close of the 18 fiscal year beginning July 1, 2019, and ending June 30, 2020. 19 Sec. 8. REPEAL. Section 8.57E, Code 2020, is repealed. 20 EXPLANATION 21 The inclusion of this explanation does not constitute agreement with 22 the explanation’s substance by the members of the general assembly. 23 This bill creates the taxpayers trust fund and Iowa 24 taxpayers trust fund tax credit, and makes contingent transfers 25 from the Iowa economic emergency fund. 26 The taxpayers trust fund is established in the bill as 27 separate from the general fund of the state to be used for 28 appropriations for tax relief. If the Iowa economic emergency 29 fund reaches the maximum balance of 2.5 percent of the adjusted 30 revenue estimate for the fiscal year, a portion of the excess 31 may be transferred to the trust fund. The transfer amount is 32 limited to the first $60 million of the difference between 33 the actual net general fund revenue and the adjusted revenue 34 estimate for the fiscal year that was used to establish the 35 -5- LSB 5969XS (3) 88 jm/jh 5/ 7

S.F. 2242 state general fund expenditure limitation. 1 The bill creates a taxpayers trust fund tax credit and 2 provides for the transfer of moneys from the taxpayers trust 3 fund for purposes of the credit. The taxpayers trust fund 4 tax credit is available to an “eligible individual”, which is 5 defined as an individual who timely files an Iowa individual 6 income tax return, including extensions, but not including 7 an estate or trust. The credit is allowed for any tax year 8 beginning January 1 immediately preceding July 1 of any fiscal 9 year in which a transfer is made from the taxpayers trust 10 fund for purposes of the credit. The credit will be equal 11 to the amount transferred divided by the number of eligible 12 individuals for the previous tax year, rounded down to the 13 nearest whole dollar. The credit may be claimed against any 14 individual income tax liability remaining after subtracting 15 all refundable and nonrefundable credits except the credits 16 for withheld tax and estimated tax paid. The tax credit is 17 nonrefundable and may not be carried forward or back to a 18 different tax year. In order to administer the credit, the 19 bill creates an Iowa taxpayers trust fund tax credit fund 20 within the state treasury under the control of the department 21 of revenue. Transfers from the taxpayers trust fund for 22 purposes of the credit are placed into this fund and used 23 to reimburse the general fund of the state for the amount 24 of credits claimed. Any moneys in the fund which represent 25 unclaimed tax credits immediately revert back to the taxpayers 26 trust fund. An “unclaimed tax credit” means the amount by 27 which the credits that were eligible to be claimed by eligible 28 individuals exceeds the credits actually claimed by eligible 29 individuals. The bill provides for a transfer from the 30 taxpayers trust fund during fiscal year 2022-2023 for purposes 31 of the tax credit. The amount transferred shall be the ending 32 balance of the taxpayers trust fund at the close of the fiscal 33 year ending June 30, 2022, plus the amount transferred for that 34 fiscal year into the taxpayers trust fund during fiscal year 35 -6- LSB 5969XS (3) 88 jm/jh 6/ 7

S.F. 2242 2022-2023. This transfer will result in a taxpayers trust 1 fund tax credit being allowed for the 2022 tax year. The bill 2 requires that for fiscal year 2022-2023, and for each fiscal 3 year thereafter, if the balance of the taxpayers trust fund 4 equals or exceeds $30 million, the entire balance of the fund 5 is transferred to the taxpayers trust fund tax credit fund 6 created in the bill to be used to provide the taxpayers trust 7 fund tax credit to eligible individuals. The bill excludes the 8 taxpayers trust fund tax credit from the definition of “state 9 individual income tax” for purposes of computing the emergency 10 medical services income surtax, the instructional support 11 income surtax, the educational improvement income surtax, and 12 the physical plant and equipment income surtax. 13 The bill transfers the balance of the taxpayer relief fund 14 in Code section 8.57E to the taxpayer trust fund at the end of 15 the fiscal year ending June 30, 2020, and repeals the taxpayer 16 relief fund. 17 -7- LSB 5969XS (3) 88 jm/jh 7/ 7