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Bulletin
07-26-2023
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ARC 7049CAlcoholic Beverages Division[185]Notice of Intended ActionProposing rulemaking related to retail alcohol licenses and providing an opportunity for public comment
The Alcoholic Beverages Division hereby proposes to amend Chapter 1, “Organization and Operation,” Chapter 4, “Liquor Licenses—Beer Permits—Wine Permits,” Chapter 5, “License and Permit Division,” and Chapter 8, “Transportation and Warehouse”; rescind Chapter 17, “Class “E” Liquor Control Licenses”; and amend Chapter 18, “Public Records and Fair Information Practices,” Iowa Administrative Code.Legal Authority for Rulemaking This rulemaking is proposed under the authority provided in Iowa Code section 123.10.State or Federal Law Implemented This rulemaking implements, in whole or in part, 2022 Iowa Acts, Senate File 2374.Purpose and Summary The proposed amendments to these rules, which are now administered by the Department of Revenue (Department), are in response to 2022 Iowa Acts, Senate File 2374. The legislation revised alcoholic beverage license and permit classifications and fees, removed the additional privilege of Sunday sales, removed the $5,000 bond requirement for wine direct shipper permittees that are not native wineries, and removed the 100,000-proof gallon production cap on native distilleries. Additionally, this rulemaking aligns with current agency practices by updating the methods of payment accepted by class “E” retail alcohol licensees for alcoholic liquor, and also by promoting the Department’s electronic licensing system for license transfers, bond endorsement, and wine gallonage tax report filing requirements. The proposed amendments also eliminate outdated and redundant language instances, including where rule language is duplicative of statutory language. Other nonsubstantive clarifying amendments are also proposed. A Regulatory Analysis, including the proposed rule text, was published on May 31, 2023. A public hearing was held on June 20, 2023. No public comments on the Regulatory Analysis were received at the hearing or in writing. The Administrative Rules Coordinator provided preclearance for publication of this Notice of Intended Action on July 6, 2023. One change from the proposed amendments as published in the Regulatory Analysis has been made. After receiving an informal comment from an external stakeholder, one additional sentence was stricken in rule 185—4.25(123) regarding age requirements to adhere to changes enacted by legislation in 2023 Iowa Acts, Senate File 542.Fiscal Impact This rulemaking has no fiscal impact to the State of Iowa. Jobs Impact After analysis and review of this rulemaking, no impact on jobs has been found.Waivers Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition the Department for a waiver of the discretionary provisions, if any, pursuant to 185—Chapter 19. Public Comment Any interested person may submit written comments concerning this proposed rulemaking. Written comments in response to this rulemaking must be received by the Department no later than 4:30 p.m. on August 16, 2023. Comments should be directed to: Madelyn Cutler Iowa Department of Revenue Alcoholic Beverages Division 1918 SE Hulsizer Road Ankeny, Iowa 50021 Email: cutler@iowaabd.com Public Hearing Public hearings at which persons may present their views orally or in writing will be held as follows: August 15, 2023 2 to 3 p.m. Alcoholic Beverages Division Boardroom 1918 SE Hulsizer Road Ankeny, Iowa Video/conference call: meet.google.com/ukf-yhcd-gux August 16, 2023 9 to 10 a.m. Alcoholic Beverages Division Boardroom 1918 SE Hulsizer Road Ankeny, Iowa Video/conference call: meet.google.com/juv-hiog-okj Persons who wish to make oral comments at a public hearing may be asked to state their names for the record and to confine their remarks to the subject of this proposed rulemaking. Any persons who intend to attend the public hearing and have special requirements, such as those related to hearing or mobility impairments, should contact the Department and advise of specific needs. Review by Administrative Rules Review Committee The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6). The following rulemaking action is proposed:
ITEM 1. Amend rule 185—1.2(123,17A) as follows:185—1.2(123,17A) Scope and rules. Promulgated under Iowa Code chapters 17A and 123, these rules shall apply to all matters before the alcoholic beverages division. No rule shall in any way relieve a certificate of compliance holder, manufacturer, micro-distillernative distiller, vintner, brewer, wholesaler, alcohol carrier, wine direct shipper, liquor controlretail alcohol licensee or wine permittee or beer permittee, or an agent or employee thereof from any duty under the laws of this state. This rule is intended to implement Iowa Code section 123.4. ITEM 2. Amend 185—Chapter 1, implementation sentence, as follows: These rules are intended to implement Iowa Code sections 123.4, 123.5, 123.6, 123.9, 123.10, 123.21(10), and 17A.3. ITEM 3. Amend 185—Chapter 4, title, as follows:LIQUORRETAIL ALCOHOL LICENSES—BEER PERMITS—WINE PERMITS ITEM 4. Amend rule 185—4.1(123) as follows:185—4.1(123) Definitions. "Act" means the alcoholic beverage control Act. "Administrator" means the chief administrative officer of the alcoholic beverages division or a designee. "Beverages" as used in Iowa Code section 123.3(18)123.3(21) does not include alcoholic liquor, wine, or beer as defined in Iowa Code sections 123.3(4), 123.3(5), 123.3(7), 123.3(19), 123.3(28), 123.3(30), 123.3(43) and 123.3(47)any alcoholic beverage as defined in Iowa Code section 123.3(4). "Division" means the alcoholic beverages division of the department of commerce. This rule is intended to implement Iowa Code sections 123.3 and 123.4. ITEM 5. Amend subparagraph 4.2(4)"b" as follows: (8) A pattern or practice by the licensee, or permittee, or certificate of compliance holder of failing to report any change in the ownership or interest of the business pursuant to Iowa Code section 123.39(1)“b”(3). ITEM 6. Amend rule 185—4.4(123) as follows:185—4.4(123) Licensed premises. The following criteria must be met before a “place” (as used in Iowa Code section 123.3(25)123.3(29)) may be licensed as a “place susceptible of precise description satisfactory to the administrator.” 4.4(1) The “place” must be owned by or under the control of the prospective licensee, permittee, or certificate of compliance holder. 4.4(2) The “place” must be solely within the jurisdiction of one local approving authority. 4.4(3) The “place” must be described by a sketch of the “premises” as defined in Iowa Code section 123.3(25)123.3(29) and showing the boundaries of the proposed “place”; showing the locations of selling/serving areas within the confines of the “place”; showing all entrances and exits; and indicating the measurements of the “place” and distances between selling/serving areas. 4.4(4) The “place” must satisfy the health, safety, fire and seating requirements of the division, local authorities and the Iowa department of inspections and appeals. 4.4(5) Any other criteria as required by the administrator. This rule is intended to implement Iowa Code sections 123.3(25)123.3(29) and 123.4. ITEM 7. Amend rule 185—4.5(123) as follows:185—4.5(123) Mixed drinks or cocktails not for immediate consumption. An on-premises liquor controlA class “C,” class “D,” or class “F” retail alcohol licensee may mix, store, and allow the consumption of mixed drinks or cocktails which are not for immediate consumption for up to 72 hours, subject to the requirements and restrictions provided in 2012 Iowa Acts, House File 2465, section 22,Iowa Code section 123.49(2)“d” and this rule. 4.5(1) Definitions. "Immediate consumption.," For purposes of Iowa Code section 123.49(2)“d” as amended by 2012 Iowa Acts, House File 2465, section 22, and this rule, “immediate consumption” is defined asfor the purposes of this rule, means the compounding and fulfillment of a mixed drink or cocktail order upon receipt of the order for the mixed drink or cocktail. "Mixed drink or cocktail.," A mixed drink or cocktail is a beverage composed in whole or in part of alcoholic liquors, combined with other alcoholic beverages or nonalcoholic beverages or ingredients including but not limited to ice, water, soft drinks, or flavoringsfor the purposes of this rule, means an alcoholic beverage as defined in Iowa Code section 123.3(32). 4.5(2) Location. Mixed drinks or cocktails which are not for immediate consumption shall be mixed, stored, and consumed on the liquor controlretail alcohol licensed premises. Mixed drinks or cocktails shall not be removed from the licensed premises. 4.5(3) No change. 4.5(4) Container. A mixed drink or cocktail which is not for immediate consumption shall at all times be in a container compliant with applicable state and federal food safety statutes and regulations. a. The mixed drink or cocktail shall be mixed and remain stored in the same container. b. The mixed drink or cocktail shall be removed from the stored container for one of the following dispensing purposes: (1) To compound and fulfill a mixed drink or cocktail order upon receipt of the order for the mixed drink or cocktail. (2) For transfer into a pourable container. The pourable container shall have affixed a label compliant with subrule 4.5(5) displaying label information identical to that on the container from which the contents were poured. The expiration date and time shall not be extended by the transfer of product to a pourable container. c. The mixed drink or cocktail may be strained into another container when each of the following conditions is met: (1) The mixed drink or cocktail is returned without delay to the labeled container from which it was strained. (2) The container and process are compliant with applicable state and federal food safety statutes and regulations. d. An original package of alcoholic liquor as purchased from the division or an original package of wine shall not be used to mix, store, or dispense a mixed drink or cocktail, pursuant to Iowa Code section 123.49(2)“d” as amended by 2012 Iowa Acts, House File 2465, section 22, and section 123.49(2)“e.”and “e.” e. The mixed drink or cocktail shall not be mixed, stored, or dispensed from a container bearing an alcoholic beverage name brand. 4.5(5) Label. A label shall be placed on a container when the contents of the mixed drink or cocktail are placed into the empty container. a. Contents are defined in subrule 4.5(6). b. The label shall be subject to the following requirements and restrictions: (1) The label shall be affixed to the container in a conspicuous place. (2) The label shall legibly identify the month, day, and year the contents are placed into the empty container. (3) The label shall legibly identify the time the contents were placed into the empty container. The time shall be reported to the minute utilizing the 12-hour clock, and include either the ante meridian (AM) or post meridian (PM) part of time. (4) The label shall legibly identify the month, day, and year the contents expire. (5) The label shall legibly identify the time the contents expire. The time shall be reported in the same manner as reported in subparagraph 4.5(5)“b”(4). (6) The label shall legibly specify the title of the recipe used for the contents of the container. (7) The label shall legibly identify the person who prepared the contents of the container. (8) The label shall legibly identify the size of the batch within the container and be conspicuously marked with the words “CONTAINS ALCOHOL.” (9) The label shall be removed from the container once the entire contents have been consumed, transferred to a pourable container pursuant to subparagraph 4.5(4)“b”(2), or destroyed and disposed of in accordance with applicable law. (10) A label shall not be reused, nor shall a removed label be reapplied to a container. (11) A new label, subject to the requirements and restrictions of paragraph 4.5(5)“b,” shall be placed on the container for each prepared batch of mixed drinks or cocktails which is not for immediate consumption. c. A licensee may access a label template on the website of the division located at www.IowaABD.com. 4.5(6) Contents. Contents include alcoholic beverages, nonalcoholic ingredients, or combination thereof, which are not for immediate consumption. a. A licensee is limited to utilizing alcoholic beverages in the mixed drink or cocktail which are authorized by the license. b. A licensee shall utilize alcoholic beverages in the mixed drink or cocktail which are obtained as prescribed by Iowa Code chapter 123. c. The added flavors and other nonbeverage ingredients of the mixed drink or cocktail shall not include hallucinogenic substances, added caffeine or added stimulants including but not limited to guarana, ginseng, and taurine, or a controlled substance as defined in Iowa Code section 124.401. 4.5(7) Disposal. a. Any mixed drink or cocktail, or portion thereof, not consumed within 72 hours of the contents’ being placed into the empty container is expired and shall be destroyed and disposed of in accordance with applicable law. b. An expired mixed drink or cocktail which is not for immediate consumption shall not be: (1) Added to an empty container and relabeled; or (2) Added to another mixed drink or cocktail which is not for immediate consumption. 4.5(8) Records. A licensee shall maintain accurate and legible records for each prepared batch of mixed drinks or cocktails which is not for immediate consumption. a. Records shall contain: (1) The month, day, and year the contents are placed into the empty container. (2) The time the contents are placed into the empty container. The time shall be reported in the same manner as reported in subparagraph 4.5(5)“b”(4). (3) Each alcoholic beverage, including the brand and the amount, placed in the container. The amount of each alcoholic beverage shall be reported utilizing the metric system. (4) Each nonalcoholic ingredient placed in the container. (5) The recipe title and directions for preparing the contents of the container. (6) The size of the batch. (7) The identity of the person who prepared the contents of the container. (8) The month, day, and year the contents of the container are destroyed and disposed of or entirely consumed. (9) The time the contents of the container are destroyed and disposed of or entirely consumed. The time shall be reported in the same manner as reported in subparagraph 4.5(5)“b”(4). (10) The method of destruction and disposal or shall specify that the entire contents were consumed. (11) The identity of the person who destroyed and disposed of the contents, if the contents were not consumed. b. A licensee may access record-keeping forms on the website of the division located at www.IowaABD.com, by sending a request by fax to (515)281-7375, or by sending a request by mail to Alcoholic Beverages Division, 1918 SE Hulsizer Road, Ankeny, Iowa 50021. c. Records shall be maintained on the licensed premises for a period of three years and shall be open to inspection pursuant to Iowa Code section 123.30(1)123.33. 4.5(9) Dispensing machines. A dispensing machine which contains a mixed drink or cocktail with alcoholic beverages is subject to the requirements and restrictions of this rule. 4.5(10) Food safety compliance. A licensee who mixes, stores, and allows the consumption of mixed drinks or cocktails which are not for immediate consumption shall comply with all applicable state and federal food safety statutes and regulations. 4.5(11) Federal alcohol compliance. A licensee who mixes, stores, and allows the consumption of mixed drinks or cocktails which are not for immediate consumption shall comply with all applicable federal statutes and regulations. Prohibitions include but are not limited to processing with non-tax-paid alcoholic liquor, aging alcoholic liquor in barrels, heating alcoholic liquor, bottling alcoholic liquor, and refilling alcoholic liquor or wine bottles. 4.5(12) Violations. Failure to comply with the requirements and restrictions of this rule shall subject the licensee to the penalty provisions of Iowa Code section 123.39. This rule is intended to implement Iowa Code subsectionsection 123.49(2) as amended by 2012 Iowa Acts, House File 2465, section 22. ITEM 8. Amend rule 185—4.6(123) as follows:185—4.6(123) Filling and selling of beer in a container other than the original container. Class “B,” class “C,” and special class “C,” liquor controland class “E” retail alcohol licensees, class “B” and class “C” beer permittees, and the licensee’s or permittee’s employees may fill, refill, and sell beer in a container other than the original container, otherwise known as a growler, subject to the requirements and restrictions provided in Iowa Code section 123.131 as amended by 2020 Iowa Acts, House File 2540, section 14; Iowa Code section 123.132;123.31A and this rule. 4.6(1) Definitions. "Beer," for the purposes of this rule, means “beer” as defined in Iowa Code section 123.3(7) and “high alcoholic content beer” as defined in Iowa Code section 123.3(22). "Growler," for the purposes of this rule, means any fillable and sealable glass, ceramic, plastic, aluminum, or stainless steel container designed to hold beer or high alcoholic content beer. "Original container," for the purposes of this rule, means a vessel containing beer that has been lawfully obtained and has been securely capped, sealed, or corked at the location of manufacture. For special class “A” beer permit holders, an “original container” includes a tank used for storing and serving beer. 4.6(2) Filling and refilling requirements. a. A growler shall have the capacity to hold no more than 72 ounces. b. A growler shall be filled or refilled only by the licensee or permittee or the licensee’s or permittee’s employees who are 18 years of age or older. c. A growler shall be filled or refilled only on demand by a consumer at the time of the sale. d. A growler shall be filled or refilled only with beer from the original container procured from a class “A” beer permittee unless the beer being used to fill or refill a growler on the premises of a special class “A” beer permit holder was manufactured by that special class “A” beer permit holder on the permitted premises. e. A retailer may exchange a growler to be filled or refilled. f. The filling or refilling of a growler shall at all times be conducted in compliance with applicable state and federal food safety statutes and regulations. 4.6(3) Sealing requirements. A filled or refilled growler shall be securely sealed at the time of the sale by the licensee or permittee or the licensee’s or permittee’s employees in the following manner: a. A growler shall bear a cap, lid, stopper, or plug. b. A plastic heat shrink wrap band, strip, or sleeve shall extend around the cap or lid or over the stopper or plug to form a seal that must be broken upon the opening of the growler. A lid permanently affixed with a can seamer shall not require a plastic heat shrink wrap band, strip, or sleeve. c. The heat shrink wrap seal shall be so secure that it is visibly apparent when the seal on a growler has been tampered with or a sealed growler has otherwise been reopened. d. A growler shall not be deemed an open container, subject to the requirements of Iowa Code sections 321.284 and 321.284A, provided the sealed growler is unopened and the seal has not been tampered with and the contents of the growler have not been partially removed. 4.6(4) Restrictions. a. A growler shall not be filled in advance of a sale. b. A growler filled pursuant to this rule shall not be delivered or direct-shipped to a consumer. c. A growler filled pursuant to this rule shall not be sold or otherwise distributed to a retailer. d. A licensee or permittee or a licensee’s or permittee’s employees shall not allow a consumer to fill or refill a growler. e. The filling, refilling and selling of a growler shall be limited to the hours in which alcoholic beverages may be legally sold. f. A filled or refilled growler shall not be sold to any consumer who is under legal age, intoxicated, or simulating intoxication. g. An original container shall only be opened on the premises of a class “C” beer permittee“B” or class “E” retail alcohol licensee for the limited purposes of filling or refilling a growler as provided in this rule, or for a tasting in accordance with rule 185—16.7(123). h. A class “C” beer permittee shall only fill a growler at the time of an in-person sale. 4.6(5) No change. This rule is intended to implement Iowa Code sections 123.123, 123.131, and 123.132section 123.31A. ITEM 9. Amend rule 185—4.7(123) as follows:185—4.7(123) Improper conduct. 4.7(1) Illegality on premises. Illegality on premises. Noretail alcohol licensee, permittee, theiror the licensee’s agent or employee, shall engage in any illegal occupation or illegal act on the licensed premisepremises. 4.7(2) Cooperation with law enforcement officers. Cooperation with law enforcement officers. Noretail alcohol licensee, permittee, theiror the licensee’s agent or employee, shall refuse, fail or neglect to cooperate with any law enforcement officer in the performance of such officer’s duties to enforce the provisions of the Act. 4.7(3) Illegal activities. Illegal activities. Noretail alcohol licensee, permittee, theiror the licensee’s agent or employee, shall knowingly allow in or upon the licensed premises any conduct as defined in Iowa Code sections 725.1, 725.2, 725.3, 728.2, 728.3 and 728.5. 4.7(4) Frequenting premises. Frequenting premises. Noretail alcohol licensee, permittee, theiror the licensee’s agent or employee, shall knowingly permit the licensed premises to be frequented by, or become the meeting place, hangout or rendezvous for known pimps, panhandlers or prostitutes, or those who are known to engage in the use, sale or distribution of narcotics, or in any other illegal occupation or business. 4.7(5) Prohibited interest in business of licensee. Rescinded IAB 5/15/91, effective 6/19/91. 4.(6) 4.7(5) Open containers of alcoholic beverages. Noretail alcohol licensee, permittee, its agents or employeesor the licensee’s agent or employee, shall allow any filled, partially filled, or empty liquor glasses or liquor bottles, including miniature liquor bottles during the holiday season, to be taken off the licensed premises. However, unopened and opened containers and glasses of beer may be allowed to be taken off the licensed premises. A class “E” liquor controlretail alcohol licensee, its agents or employeesor the licensee’s agent or employee, shall not permit other liquor control licensees or consumers to remove partially filled, empty, open or unsealed containers of alcoholic liquor from the class “E”retail alcohol licensed premises. 4.(7) 4.7(6) Identifying markers. Identifying markers. A licensee shall not keep on the licensed premises nor use for resale alcoholic liquor which does not bear identifying markers as prescribed by the administrator of thisthe division. Identifying markers shall demonstrate that the alcoholic liquor was lawfully purchased from thisthe division. 4.7(8) A licensee or permittee, or an agent or employee of a licensee or permittee, who sells, gives or otherwise supplies alcoholic liquor, wine or beer to a person 19 or 20 years old does not subject the license or permit to suspension or revocation. The division or the local authority shall not impose any administrative sanction, including license suspension or revocation, upon a licensee or permittee who is convicted of a violation of Iowa Code section 123.47A, nor shall administrative proceedings pursuant to Iowa Code chapter 17A and Iowa Code section 123.39 be commenced against a licensee or permittee for a violation of Iowa Code section 123.47A. 4.7(9) The holder of a class “E” liquor control license shall sell alcoholic liquor in original, sealed and unopened containers only for off-premises consumption. This rule is intended to implement Iowa Code subsectionsection 123.49(2). ITEM 10. Amend rule 185—4.8(123) as follows:185—4.8(123) Violation by agent, servant or employee. Any violation of the Act or the rules of the division by any employee, agent or servant of a licensee or permittee shall be deemed to be the act of the licensee or permittee and shall subject the license or permit of said licensee or permittee to suspension or revocation. This rule is intended to implement Iowa Code sections 123.4 and 123.49(2). ITEM 11. Amend rule 185—4.9(123) as follows:185—4.9(123) Gambling evidence. The intentional possession or willful keeping of any gambling device, machine or apparatus as defined in Iowa Code section 99A.1725.9 upon the premises of any establishment licensed by the division shall be prima facie evidence of a violation of Iowa Code section 123.49(2)“a” and subject the license of said licensee or permittee to suspension or revocation. This rule is intended to implement Iowa Code sections 123.4 and 123.49. ITEM 12. Amend rule 185—4.11(123) as follows:185—4.11(123) Filling and selling of wine and native wine in a container other than the original container. Class “C” liquor control licensees; class “B,” class “B” native, and class “C” native wine permitteesClass “B,” class “C,” special class “C,” and class “E” retail alcohol licensees; special class “B” retail native wine licensees; and the licensee’s or permittee’s employees may fill, refill, and sell wine or native wine in a container other than the original container, otherwise known as a growler, subject to the requirements and restrictions provided in Iowa Code sections 123.178, 123.178A, and 123.178B as amended by 2020 Iowa Acts, House File 2540, sections 4, 5, 6, 7, 8, and 9,123.30, 123.31A, and 123.31B and in this rule. 4.11(1) Definitions. "Growler," for the purposes of this rule, means any fillable and sealable glass, ceramic, plastic, aluminum, or stainless steel container designed to hold wine or native wine. "Native wine," for the purposes of this rule, means wine manufactured in Iowa by fermentation of fruit, vegetables, dandelions, clover, honey, or any combination of these ingredients by a class “A” wine permitteethe same as defined in Iowa Code section 123.3(36). "Original container," for the purposes of this rule, means a vessel containing wine or native wine that has been lawfully obtained and has been securely capped, sealed, or corked at the location of manufacture. "Wine," for the purposes of this rule, means “wine”the same as defined in Iowa Code section 123.3(54)123.3(53). 4.11(2) Filling and refilling requirements. a. A growler shall have the capacity to hold no more than 72 ounces. b. A growler shall be filled or refilled only by the licensee or permittee or the licensee’s or permittee’s employees who are 18 years of age or older. c. A growler shall be filled or refilled only on demand by a consumer at the time of the sale. d. A growler shall be filled or refilled only with wine or native wine from the original container procured from a class “A” wine permittee. e. Class “B” native and class “C” native wine permitteesSpecial class “B” retail native wine licensees shall fill a growler with only native wine. f. A retailer may exchange a growler to be filled or refilled. g. The filling or refilling of a growler shall at all times be conducted in compliance with applicable state and federal food safety statutes and regulations. 4.11(3) Sealing requirements. A filled or refilled growler shall be securely sealed at the time of the sale by the licensee or permittee or the licensee’s or permittee’s employees in the following manner: a. A growler shall bear a cap, lid, stopper, or plug. b. A plastic heat shrink wrap band, strip, or sleeve shall extend around the cap or lid or over the stopper or plug to form a seal that must be broken upon the opening of the growler. A lid permanently affixed with a can seamer shall not require a plastic heat shrink wrap band, strip, or sleeve. c. The heat shrink wrap seal shall be so secure that it is visibly apparent when the seal on a growler has been tampered with or a sealed growler has otherwise been reopened. d. A growler shall not be deemed an open container, subject to the requirements of Iowa Code sections 321.284 and 321.284A, provided the sealed growler is unopened and the seal has not been tampered with and the contents of the growler have not been partially removed. 4.11(4) Restrictions. a. A growler shall not be filled in advance of a sale. b. A growler filled pursuant to this rule shall not be delivered or direct-shipped to a consumer. c. A growler filled pursuant to this rule shall not be sold or otherwise distributed to a retailer. d. A licensee or permittee or a licensee’s or permittee’s employees shall not allow a consumer to fill or refill a growler. e. The filling, refilling, and selling of a growler shall be limited to the hours in which alcoholic beverages may be legally sold. f. A filled or refilled growler shall not be sold to any consumer who is under legal age, intoxicated, or simulating intoxication. g. An original container shall only be opened on the premises of a class “B” or class “B” native wine permitteeand class “E” retail alcohol licensee for the limited purposes of filling or refilling a growler as provided in this rule, or for a tasting in accordance with rule 185—16.7(123). 4.11(5) Violations. Failure to comply with the requirements and restrictions of this rule shall subject the licensee or permittee to the penalty provisions provided in Iowa Code chapter 123. This rule is intended to implement Iowa Code sections 123.172, 123.178, 123.178A, and 123.178B123.30, 123.31A, and 123.31B. ITEM 13. Amend rule 185—4.13(123) as follows:185—4.13(123) Outdoor service. Any licensee or permittee having an outdoor, contiguous, discernible area on the same property on which their licensed establishment is located may serve the type of alcoholic liquor or beerbeverage permitted by the license or permit in the outdoor area. After a licensee or permittee satisfies the requirements of this rule, theythe licensee may serve and sell beer or liquoralcoholic beverages in both theirthe licensee’s indoor licensed establishment and in theirthe licensee’s outdoor area at the same time because an outdoor area is merely an extension of theirthe licensee’s licensed premisepremises and is not a transfer of their license. A licensee or permittee, prior to serving in the outdoor area, must file with thisthe division:- A new diagram showing the discernible outdoor area.
- A letter from licensee or permittee telling what dates the outdoor area will be used.
- 3A letter from localLocal authority approvingapproval of the outdoor area.
- 4A letter from the insurance and bonding companies acknowledgingInsurance company acknowledgment that the outdoor area is covered by the dramshop insurance policy and the bond.
- The check must be either the personal check of the licensee or the business check of the licensee. The business check must be the named establishment on the license and cannot be a check on another business owned or operated by the licensee.
- The check must be signed by the licensee. (For all holders of liquor control licenses this is interpreted as those persons whose authorized signatures are on file with the bank for the licensee’s account). However, this does not preclude an agent of the licensee from presenting a check signed by the licensee in the normal transaction of buying liquor.
- Traveler’s checks and bank drafts, signed by the licensee, will be accepted.
- Personal checks or traveler’s checks may be accepted as payment for purchases in state liquor stores. Second party checks shall not be accepted as payment for purchases in state liquor stores. Vendors shall follow the policy established by the administrator of the division for accepting personal checks and traveler’s checks for the purchase of alcoholic beverages.
Proposing rulemaking related to controlled substances and providing an opportunity for public comment
The Board of Pharmacy hereby proposes to amend Chapter 10, “Controlled Substances,” and Chapter 12, “Precursor Substances,” Iowa Administrative Code.Legal Authority for Rulemaking This rulemaking is proposed under the authority provided in Iowa Code sections 124.201 and 124B.2(2).State or Federal Law Implemented This rulemaking implements, in whole or in part, Iowa Code sections 124.201 and 124B.2(2).Purpose and Summary This proposed rulemaking temporarily adds one List 1 chemical (a substance used to manufacture illicit fentanyl) to the list of precursor substances in Iowa Code chapter 124B and one hallucinogen to Schedule I of the Controlled Substances Act in response to similar action taken by the federal Drug Enforcement Administration.Fiscal Impact This rulemaking has no fiscal impact to the State of Iowa. Jobs Impact After analysis and review of this rulemaking, no impact on jobs has been found.Waivers Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition the Board for a waiver of the discretionary provisions, if any, pursuant to 657—Chapter 34. Public Comment Any interested person may submit written comments concerning this proposed rulemaking. Written comments in response to this rulemaking must be received by the Board no later than 4:30 p.m. on August 15, 2023. Comments should be directed to: Sue Mears Board of Pharmacy 400 S.W. 8th Street, Suite E Des Moines, Iowa 50309 Email: sue.mears@iowa.gov Public Hearing No public hearing is scheduled at this time. As provided in Iowa Code section 17A.4(1)“b,” an oral presentation regarding this rulemaking may be demanded by 25 interested persons, a governmental subdivision, the Administrative Rules Review Committee, an agency, or an association having 25 or more members. Review by Administrative Rules Review Committee The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6). The following rulemaking action is proposed:
ITEM 1. Amend subrule 10.39(6) as follows: 10.39(6) Amend Iowa Code section 124.204(4) by adding the following new paragraphparagraphs: cl. 2-(ethylamino)-2-(3-methoxyphenyl)cyclohexan-1-one. Other names: methoxetamine, MXE. cm. 1-(1,3-benzodioxol-5-yl)-2-(ethylamino)butan-1-one. Other names: eutylone, bk-EBDB. ITEM 2. Amend subrule 12.1(1) as follows: 12.1(1) Amend Iowa Code section 124B.2(1) by adding the following new paragraphs: ah. Methyl alpha-phenylacetoacetate (other names: MAPA; methyl 3-oxo-2-phenylbutanoate) and its optical isomers. ai. 1-boc-4-AP (tert-butyl 4-(phenylamino)piperidine-1-carboxylate) and its salts. aj. 4-piperidone (piperidin-4-one), its acetals, its amides, its carbamates, its salts, and salts of its acetals, its amides, and its carbamates, and any combination thereof, whenever the existence of such is possible.ARC 7050CRevenue Department[701]Notice of Intended ActionProposing rulemaking related to capital gain deduction, farm tenancy income, and exclusion and providing an opportunity for public comment
The Revenue Department hereby proposes to amend Chapter 302, “Determination of Net Income,” Iowa Administrative Code.Legal Authority for Rulemaking This rulemaking is proposed under the authority provided in Iowa Code sections 421.14, 422.7(13), 422.7(14) and 422.68.State or Federal Law Implemented This rulemaking implements, in whole or in part, 2022 Iowa Acts, House File 2317.Purpose and Summary The purpose of this proposed rulemaking is to implement the deductions for farm tenancy agreement income and farm capital gains enacted by 2022 Iowa Acts, House File 2317, divisions II and III. The legislation repealed the previous Iowa capital gain deduction for gains resulting from the sale of a business, the sale of real property used in a business, the sale of timber, and the sale of employer securities to an Iowa employee stock ownership plan. The legislation provided a capital gain deduction for taxpayers who have held real property used in a farming business for ten years and who have materially participated in a farming business for ten years. The legislation also provided an election for retired farmers and eligible individuals to elect to deduct capital gains from the sale of cattle or horses, breeding livestock, and real property used in a farming business or to deduct income from a farm tenancy agreement covering real property. These deductions are effective for tax years beginning on or after January 1, 2023. This rulemaking also rescinds and replaces the rule for capital gains according to the law prior to the legislation.Fiscal Impact This rulemaking has no known fiscal impact to the State of Iowa beyond that of the legislation it is intended to implement. The final Fiscal Note for 2022 Iowa Acts, House File 2317, found that division II is projected to reduce the General Fund revenue by $2.1 million for fiscal year 2024, $2.0 million for fiscal year 2025, $1.8 million for fiscal year 2026, $1.5 million for fiscal year 2027, $1.6 million for fiscal year 2028, and increasing each year at the rate of inflation for fiscal years beyond. The final Fiscal Note for 2022 Iowa Acts, House File 2317, found that division III is projected to reduce the General Fund revenue by $7.2 million for fiscal year 2024, $6.9 million for fiscal year 2025, $6.1 million for fiscal year 2026, $5.4 million for fiscal year 2027, $5.7 million for fiscal year 2028, and increasing each year at the rate of inflation for fiscal years beyond. Jobs Impact After analysis and review of this rulemaking, no impact on jobs has been found.Waivers Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition the Department for a waiver of the discretionary provisions, if any, pursuant to rule 701—7.28(17A). Public Comment Any interested person may submit written or oral comments concerning this proposed rulemaking. Written or oral comments in response to this rulemaking must be received by the Department no later than 4:30 p.m. on August 25, 2023. Comments should be directed to: Kurt Konek Department of Revenue Hoover State Office Building P.O. Box 10457 Des Moines, Iowa 50306 Phone: 515.587.0440 Email: kurt.konek@iowa.gov Public Hearing If requested, a public hearing at which persons may present their views orally or in writing will be held as follows: August 17, 2023 2 to 3 p.m. Via video/conference call Persons who wish to participate in the video/conference call should contact Kurt Konek before 4:30 p.m. on August 16, 2023, to facilitate an orderly hearing. A video link and conference call number will be provided to participants prior to the hearing. Persons who wish to make oral comments at the public hearing may be asked to state their names for the record and to confine their remarks to the subject of this proposed rulemaking. Any persons who intend to attend the public hearing and have special requirements, such as those related to hearing or mobility impairments, should contact the Department and advise of specific needs. Review by Administrative Rules Review Committee The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6). The following rulemaking action is proposed:
ITEM 1. Rescind and reserve rule 701—302.38(422). ITEM 2. Adopt the following new rule 701—302.87(422):701—302.87(422) Capital gain deduction for certain types of net capital gains. Information relating to the Iowa capital gain deduction available for tax years prior to January 1, 2023, can be found in prior versions of rule 701—302.38(422). Prior versions of the Iowa Administrative Code are located here: www.legis.iowa.gov/law/administrativeRules/agencies. For tax years beginning on or after January 1, 2023, net capital gains from the sale of real property used in a farming business and the sale of certain livestock described in subrules 302.87(5) and 302.87(6) may be excluded in the computation of net income for qualified individual taxpayers. To exclude qualifying capital gains, a taxpayer has to meet certain holding period and material participation requirements, unless otherwise indicated in this rule. 302.87(1) Definitions. Unless otherwise indicated in this rule or required by the context, all words and phrases used in this rule that are defined under Iowa Code section 422.7(13) shall have the same meaning as provided to them under that Iowa Code section. 302.87(2) Material participation. If the taxpayer has regular, continuous, and substantial involvement in the operations of a farming business that meets the criteria for material participation in an activity under Section 469(h) of the Internal Revenue Code and the federal tax regulations for material participation in 26 CFR Sections 1.469-5 and 1.469-5T for the applicable number of years required under Iowa law for the deduction, the taxpayer has met the material participation requirement. Section 469(h)(3) of the Internal Revenue Code does not apply when determining material participation for the purposes of this rule. a. Work done in connection with an activity is not participation in the activity if the work is not of a type that is customarily done by an owner and one of the principal purposes for the performance of the work is to avoid the disallowance of any loss or credit from the activity. b. Work done in an activity by an individual in the individual’s capacity as an investor is not material participation in the business or activity unless the investor is directly involved in the day-to-day management or operations of the activity or business. Investor-type activities include the study and review of financial statements or reports on operations of the activity, preparing or compiling summaries or analyses of finances or operations of the activity for the individual’s own use, and monitoring the finances or operations of the activity in a nonmanagerial capacity. c. A highly relevant factor in material participation in a business is how regularly the taxpayer is present at the place where the principal operations of a business are conducted. In addition, a taxpayer is likely to have material participation in a business if the taxpayer performs all functions of the business. The fact that the taxpayer utilizes employees or contracts for services to perform daily functions in a business will not prevent the taxpayer from qualifying as materially participating in the business, but the services will not be attributed to the taxpayer. d. In determining whether a particular taxpayer has material participation in a business, participation of the taxpayer’s spouse in a business must also be taken into account. Activity done by a taxpayer’s spouse is considered activity done by the taxpayer. The spouse’s participation in the business must be taken into account even if the spouse does not file a joint state return with the taxpayer or if the spouse has no ownership interest in the business. The activities of other family members, employees, or consultants are not attributed to the taxpayer to determine material participation. e. Generally, an individual will be considered as materially participating in a tax year if the taxpayer satisfies or meets any of the following tests: (1) The individual participates in the farming business for more than 500 hours in the taxable year. (2) The individual’s participation in the farming business constitutes substantially all of the participation of all individuals in the business (including individuals who are not owners of interests in the business) for the tax year. (3) The individual participates in the farming business for more than 100 hours in the tax year, and no other individual (including individuals who are not owners of interests in the business) participates more in the business than the taxpayer during the tax year. (4) The individual participates in two or more businesses, excluding rental businesses, in the tax year and participates for more than 500 hours in all of the businesses and more than 100 hours in each of the businesses, and the participation is not material participation within the meaning of one of the tests in subparagraphs 302.87(2)“e”(1) through (3), (5) and (6). (5) The individual materially participated (determined without regard to this subparagraph) in a farming business for five of the ten years preceding the applicable tax year. (6) The individual participates in the business activity for more than 100 hours and, based on all the facts and circumstances, the individual participates on a regular, continuous, and substantial basis. Management activities of a taxpayer are not considered for purposes of determining if there was material participation if either of the following applies: any person other than the taxpayer is compensated for management services or any person provides more hours of management services than the taxpayer. f. The following paragraphs provide additional information regarding material participation: (1) Limited partners of a limited partnership. The limited partners will not be treated as materially participating in any activity of a limited partnership except in a situation where the limited partner would be treated as materially participating under the material participation tests in subparagraphs 302.87(2)“e”(1) or 302.87(2)“e”(5) above if the taxpayer were not a limited partner for the tax year. (2) Cash farm lease. A farmer who rents out farmland on a cash basis as the only activity in the farming business will generally not be considered to be materially participating in the farming activity. The burden is on the farmer landlord to show that the farmer landlord materially participated in the cash-rent farm activity. (3) Farmer landlord involved in crop-share arrangement. A farmer landlord is subject to self-employment tax on net income from a crop-share arrangement with a tenant. The landlord is considered to be materially participating with the tenant in the crop-share activity if the landlord meets one of the four following tests: Test 1: The landlord does any three of the following: (1) pays or is obligated to pay for at least half the direct costs of producing the crop; (2) furnishes at least half the tools, equipment, and livestock used in producing the crop; (3) consults with the tenant; and (4) inspects the production activities periodically. Test 2: The landlord regularly and frequently makes, or takes part in making, management decisions substantially contributing to or affecting the success of the enterprise. Test 3: The landlord worked 100 hours or more spread over a period of five weeks or more in activities connected with crop production. Test 4: The landlord has done tasks or performed duties which, considered in their total effect, show that the landlord was materially and significantly involved in the production of the farm commodities. (4) Conservation reserve program (CRP) payments. Farmers entering into long-term contracts providing for less intensive use of highly erodible or other specified cropland can receive compensation for conversion of such land in the form of an annualized rental payment. Although the CRP payments are referred to as rental payments, the payments are considered to be receipts from farm operations and not rental payments from real estate. If an individual is receiving CRP payments and is not considered to be retired from farming, the CRP payments are subject to self-employment tax. If individuals actively manage farmland placed in the CRP program by directly participating in seeding, mowing, and planting the farmland or by overseeing these activities and the individual is paying self-employment tax, the owner will be considered to be materially participating in the farming activity. However, if an individual’s only activity in the farming business is participation in a conservation reserve program, then that activity will not be considered when determining if the individual is a retired farmer. (5) Recordkeeping requirements. Taxpayers are required to provide proof of services performed and the hours attributable to those services. Detailed records should be maintained by the taxpayer, on as close to a daily basis as possible at or near the time of the performance of the activity, to verify that the material participation test has been met. However, material participation can be established by any other reasonable means, such as approximating the number of hours based on appointment books, calendars, or narrative summaries. Records prepared long after the activity, in preparation of an audit or proceeding, are insufficient to establish participation in an activity. 302.87(3) Lifetime election. A retired farmer may make a single lifetime election on a form prescribed by the department to exclude all qualifying capital gains from the sale of real property used in a farming business and the sale of certain livestock described in subrules 302.87(5) and 302.87(6). If a retired farmer makes the election described in this subrule, the retired farmer is not eligible to make the election to exclude the net income received pursuant to a farm tenancy agreement covering real property under Iowa Code section 422.7(14) and rule 701—302.88(422) or claim the beginning farmer tax credit under Iowa Code section 422.11E in the same tax year or any subsequent tax year. The election is irrevocable once made. a. Beginning farmer tax credit.A retired farmer may not utilize an unclaimed amount of a beginning farmer tax credit in the same tax year they are making an election described in this subrule or in subrule 302.88(3) or in any subsequent tax year. b. Surviving spouses.A surviving spouse of a deceased retired farmer may be eligible to make the election described in this subrule or the election described in subrule 302.88(3) or exclude the qualifying income pursuant to the election made by the retired farmer prior to death. (1) A surviving spouse of a deceased retired farmer may make the election described in this subrule or the election described in subrule 302.88(3) on behalf of the deceased retired farmer that the retired farmer would have been eligible to make prior to death. (2) If a retired farmer made the election described in this subrule or the election described in subrule 302.88(3) prior to death, the surviving spouse of the deceased retired farmer may exclude the qualifying income pursuant to the election made by the retired farmer prior to death. A surviving spouse cannot change the election the deceased retired farmer made. Any election made by the retired farmer prior to death is binding on all real property used in a farming business owned by the retired farmer at the time of death. This election is only binding on the retired farmer and the surviving spouse. (3) A surviving spouse of a deceased retired farmer may disclaim the election made by the retired farmer. If a surviving spouse of a deceased retired farmer makes this disclaimer, the surviving spouse is not eligible to deduct qualifying income pursuant to an election made by the retired farmer prior to death. A surviving spouse of a deceased retired farmer shall make this disclaimer on a form prescribed by the department and file the form with the surviving spouse’s income tax return. The surviving spouse may make the disclaimer in the tax year of the retired farmer’s death or in the tax year immediately following. If the surviving spouse excluded income on the surviving spouse’s return for the tax year of the retired farmer’s death pursuant to the election the retired farmer made and wishes to disclaim the election, then the surviving spouse must amend the surviving spouse’s return to include that income in Iowa net income and adjust tax liability accordingly. If no disclaimer is made by the due date, including extensions, of the surviving spouse’s income tax return for the tax year immediately following the tax year of the retired farmer’s death, then the surviving spouse is no longer eligible to make a disclaimer and is bound by the election the retired farmer made. The disclaimer is irrevocable once made. (4) A surviving spouse of a retired farmer may make a single lifetime election if the surviving spouse independently qualifies as a retired farmer. c. Joint owners.A retired farmer may exclude income pursuant to the election described in this subrule or the election described in subrule 302.88(3) to the extent of the retired farmer’s ownership interest in the real property. (1) A retired farmer who owns real property used in a farming business jointly with a spouse and makes the election described in this subrule or the election described in subrule 302.88(3) may only exclude qualifying income from that real property to the extent of the retired farmer’s ownership interest held in that real property. The retired farmer’s ownership interest does not include the ownership interest of the retired farmer’s spouse. If each spouse qualifies as a retired farmer, each spouse may make different elections on the property they jointly own to the extent of their respective ownership interests. (2) A retired farmer who owns real property used in a farming business jointly with someone who is not the retired farmer’s spouse may only exclude qualifying income from that real property to the extent of the retired farmer’s ownership interest held in the real property. 302.87(4) Net capital gains from the sale of real property used in a farming business. Net capital gains from the sale of real property used in a farming business may be excluded from the owner’s Iowa net income if the owner held the real property used in a farming business for ten or more years and materially participated in a farming business for at least ten years. If the taxpayer is a retired farmer, the taxpayer must make the election described in subrule 302.87(3) to exclude qualifying capital gains. It is not required that the property be located in Iowa for the owner to qualify for the deduction. a. Material participation means the same as “materially participated” as defined in Iowa Code section 422.7(13) and described in detail in subrule 302.87(2). If the taxpayer is a retired farmer and materially participated in a farming business for ten or more years in the aggregate, then the taxpayer will meet the material participation requirements. When determining whether a taxpayer is no longer materially participating to meet the definition of a retired farmer, the material participation test in subparagraph 302.87(2)“e”(5) shall not apply and the participation of the spouse of the taxpayer does not count as participation by the taxpayer. b. If the taxpayer has held the real property used in a farming business and sells the property to a relative of the taxpayer, the net capital gain from the sale may be excluded from net income regardless of whether the taxpayer met the material participation or holding period requirements. c. In situations in which real property was sold by a partnership, S corporation, limited liability company, estate, or trust and the capital gain from the sale of the real property flows through to the owners of the business entity for federal income tax purposes, the owners may exclude the capital gain from their net incomes if the real property was held for ten or more years and the owners had materially participated in the farming business for ten years prior to the date of sale of the real property, or ten years in the aggregate if the owner is a retired farmer. If the farming business changed entity type during the ten-year period before the sale, the owner is allowed to exclude the net capital gain from the sale of the real property used in the farming business provided the owner meets the material participation and holding period requirements. d. Installments received in the tax year from installment sales of real property used in a farming business are eligible for the exclusion of capital gains from net income if all relevant criteria were met at the time of the installment sale. e. Capital gains from the sale of real property by a C corporation do not qualify for the capital gain deduction. f. The following noninclusive examples illustrate how this subrule applies: 302.87(5) Net capital gains from sales of cattle or horses used for certain purposes and held for 24 months by taxpayers who are retired farmers. Net capital gains from the sales of cattle or horses held for 24 months or more for draft, breeding, dairy, or sporting purposes may be excluded from the taxpayer’s Iowa net income if the taxpayer is a retired farmer. The retired farmer must have materially participated in a farming business for five of the eight years preceding the retired farmer’s retirement or disability and must have sold all or substantially all of the retired farmer’s interest in the farming business by the time the election is made. For purposes of this subrule and subrule 302.87(6), “substantially all” means 90 percent of the interest in the farming business. a. Material participation means the same as “materially participated” as defined in Iowa Code section 422.7(13) and described in detail in subrule 302.87(2). When determining whether a taxpayer is no longer materially participating to meet the definition of a retired farmer, the material participation test in subparagraph 302.87(2)“e”(5) shall not apply and the participation of the spouse of the taxpayer does not count as participation by the taxpayer. b. Whether cattle or horses sold by the taxpayer after the taxpayer has held them 24 months or more were held for draft, breeding, dairy, or sporting purposes may be determined from federal court cases on such sales and the standards and examples included in 26 CFR Section 1.1231-2. Proper records should be kept showing purchase and birth dates of cattle and horses. The absence of records may make it impossible for the owner to show that the owner held a particular animal for the necessary holding period. Whether cattle or horses are held for draft, breeding, dairy, or sporting purposes depends on all the facts and circumstances of each case. c. Capital gains from sales of qualifying cattle or horses by an S corporation, partnership, or limited liability company, where the capital gains flow through to the owners of the respective business entity for federal income tax purposes, qualify for the capital gain deduction to the extent the owners receiving the capital gains are retired farmers who meet all the relevant criteria. d. Capital gains from sales of qualifying cattle or horses by a C corporation are not eligible for the capital gain deduction. 302.87(6) Net capital gains from sale of breeding livestock, other than cattle or horses, held for 12 or more months by taxpayers who are retired farmers. Net capital gains from the sale of breeding livestock, other than cattle or horses, held for 12 or more months may be excluded from the taxpayer’s Iowa net income if the taxpayer is a retired farmer. The retired farmer must have materially participated in a farming business for five of the eight years preceding the retired farmer’s retirement or disability and must have sold all or substantially all of the retired farmer’s interest in the farming business by the time the election is made. a. Material participation means the same as “materially participated” as defined in Iowa Code section 422.7(13) and described in detail in subrule 302.87(2). When determining whether a taxpayer is no longer materially participating to meet the definition of a retired farmer, the material participation test in subparagraph 302.87(2)“e”(5) shall not apply and the participation of the spouse of the taxpayer does not count as participation by the taxpayer. b. If livestock other than cattle or horses is considered to have been held for breeding purposes under the criteria established in 26 CFR Section 1.1231-2, the livestock will also be deemed to have been breeding livestock for purposes of this rule. Proper records should be kept showing purchase and birth dates of breeding livestock. The absence of records may make it impossible for the owner to show that the owner held a particular animal for the necessary holding period. Whether livestock are held for breeding purposes depends on all the facts and circumstances of each case. c. Capital gains from sales of qualifying livestock other than cattle or horses by an S corporation, partnership, or limited liability company, where the capital gains flow through to the owners of the respective business entity for federal income tax purposes, qualify for the capital gain deduction to the extent the owners receiving the capital gains are retired farmers who meet all the relevant criteria. d. Capital gains from the sale of breeding livestock other than cattle or horses by a C corporation are not eligible for the capital gain deduction. 302.87(7) Installments from sales consummated before January 1, 2023. Installments from sales that were consummated before January 1, 2023, that result in net capital gains qualify for the capital gain deduction if the requirements of Iowa Code section 422.7(21) and rule 701—302.38(422) were met at the time the sale was consummated. This rule is intended to implement Iowa Code section 422.7(13). ITEM 3. Adopt the following new rule 701—302.88(422):701—302.88(422) Net income from a farm tenancy agreement covering real property. An eligible individual may elect to exclude net income from a farm tenancy agreement covering real property held by the individual for ten or more years from the computation of net income, if the eligible individual materially participated in a farming business for ten or more years. 302.88(1) Definitions. Unless otherwise indicated in this rule or required by the context, all words and phrases used in this rule that are defined under Iowa Code section 422.7(14) shall have the same meaning as provided to them under that Iowa Code section. "Held" shall be determined with reference to the holding period provisions of Section 1223 of the Internal Revenue Code and the federal regulations pursuant thereto. 302.88(2) Material participation. Material participation for the purposes of this rule is determined pursuant to subrule 302.87(2) and the definition of “materially participated” in Iowa Code section 422.7(14). An eligible individual meets the material participation requirements if the individual materially participated in a farming business for ten years or more in the aggregate. When determining whether an eligible individual has stopped materially participating, the material participation test in subparagraph 302.87(2)“e”(5) shall not apply. 302.88(3) Lifetime election. An eligible individual may make a single lifetime election on a form prescribed by the department to exclude net income pursuant to a farm tenancy agreement covering real property. If an eligible individual makes the election described in this subrule, the eligible individual is not eligible to make an election to exclude the capital gain from the sale of real property used in a farming business or certain livestock under Iowa Code section 422.7(13) and rule 701—302.87(422) or claim the beginning farmer tax credit under Iowa Code section 422.11E in the same tax year or any subsequent tax year. The election is irrevocable once made. a. Beginning farmer tax credit.A retired farmer may not utilize an unclaimed amount of a beginning farmer tax credit in the same tax year the retired farmer is making an election described in this subrule or in subrule 302.87(3) or in any subsequent tax year. b. Surviving spouses.A surviving spouse of a deceased eligible individual may make the election described in this subrule or the election described in subrule 302.87(3) subject to the provisions of subrule 302.87(3). For purposes of this subrule, “retired farmer” as used in subrule 302.87(3) has the same meaning as “eligible individual.” c. Joint owners.An eligible individual may exclude income pursuant to the election described in this subrule or the election described in subrule 302.87(3) to the extent of the eligible individual’s ownership interest in the real property subject to the provisions of subrule 302.87(3). For purposes of this subrule, “retired farmer” as used in subrule 302.87(3) has the same meaning as “eligible individual.” 302.88(4) Amount of exclusion. An eligible individual that has made the election described in subrule 302.88(3) may exclude the amount of net income received from a farm tenancy agreement covering real property. An eligible individual may exclude net income from any qualifying farm tenancy agreement covering real property if the holding period requirements are met with respect to the real property in question, including agreements that are entered into after the single lifetime election is made. The amount of the exclusion cannot exceed the fair profits which would normally arise from a farm tenancy agreement between two parties operating at arm’s length. This rule is intended to implement Iowa Code section 422.7(14). ARC 7051CRevenue Department[701]Notice of Intended ActionProposing rulemaking related to capital gain exclusion and providing an opportunity for public comment
The Revenue Department hereby proposes to amend Chapter 302, “Determination of Net Income,” Iowa Administrative Code.Legal Authority for Rulemaking This rulemaking is proposed under the authority provided in Iowa Code sections 421.14 and 422.68.State or Federal Law Implemented This rulemaking implements, in whole or in part, Iowa Code section 422.7.Purpose and Summary Pursuant to Part IV of Executive Order 10, the Department was directed to propose this Notice of Intended Action to implement, in part, 2022 Iowa Acts, House File 2317. The Department proposes this rulemaking to provide guidance as to how and when an employee-owner may make an election to exclude capital gain from the sale of qualifying capital stock in a qualifying corporation. The legislation allowed employee-owners of a qualified corporation to exclude the capital gain from the sale of qualifying capital stock.Fiscal Impact This rulemaking has no known fiscal impact to the State of Iowa beyond that of the legislation it is intended to implement. The Department projects that the stock capital gain income tax exclusion will reduce tax liability and General Fund revenue by the following amounts: FY 2024 = $4.0 million; FY 2025 = $7.6 million; FY 2026 = $10.3 million; FY 2027 = $9.0 million; FY 2028 = $9.5 million. Fiscal impacts beyond FY 2028 are projected to continue, increasing each year at the rate of inflation. Jobs Impact After analysis and review of this rulemaking, no impact on jobs has been found.Waivers Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition the Department for a waiver of the discretionary provisions, if any, pursuant to rule 701—7.28(17A). Public Comment Any interested person may submit written or oral comments concerning this proposed rulemaking. Written or oral comments in response to this rulemaking must be received by the Department no later than 4:30 p.m. on August 15, 2023. Comments should be directed to: Kurt Konek Department of Revenue Hoover State Office Building P.O. Box 10457 Des Moines, Iowa 50306 Phone: 515.587.0440 Email: kurt.konek@iowa.gov Public Hearing No public hearing is scheduled at this time. As provided in Iowa Code section 17A.4(1)“b,” an oral presentation regarding this rulemaking may be demanded by 25 interested persons, a governmental subdivision, the Administrative Rules Review Committee, an agency, or an association having 25 or more members. Review by Administrative Rules Review Committee The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6). The following rulemaking action is proposed:
ITEM 1. Adopt the following new rule 701—302.41(422):701—302.41(422) Capital gain exclusion for elected employee-owned stock in a qualified corporation. 302.41(1) In general. Employee-owners may make a single, irrevocable lifetime election to exclude from net income the net capital gain from the sale or exchange of capital stock from a qualified corporation at the following rates: a. For tax years beginning in the 2023 calendar year, 33 percent. b. For tax years beginning in the 2024 calendar year, 66 percent. c. For tax years beginning on or after January 1, 2025, 100 percent. 302.41(2) Definitions. Unless otherwise indicated in this rule or required by the context, all words and phrases used in this rule that are defined under Iowa Code section 422.7(43) shall have the same meaning as provided to them under that Iowa Code section. 302.41(3) Qualifying for the exclusion. For the employee-owner’s sale or exchange to qualify for the exclusion in this rule, the capital stock must be acquired by the employee-owner while employed and on account of employment with a qualified corporation. a. While employed.The capital stock must have been acquired while the employee-owner was employed by the qualifying corporation. Capital stock received as compensation is acquired by the employee-owner while employed. Capital stock acquired from a stock right, stock warrant, or stock option is only acquired by the employee-owner while employed if such right, warrant, or option is exercised while the employee-owner is employed by the qualifying corporation. b. On account of employment.For capital stock to have been acquired on account of employment, the employee-owner must have acquired the capital stock in a manner only available to employees of the qualified corporation. Capital stock acquired at formation in exchange for capital contribution is not acquired on account of employment. c. Holding period.To qualify for the exclusion, the employee-owner must own the capital stock for at least ten cumulative years. If the employee-owner owns any capital stock in the qualified corporation for at least ten cumulative years, then every share of the employee-owner’s capital stock in that qualified corporation is considered to meet the holding period requirement. For stock rights, stock warrants, or stock options, the holding period does not begin until the right, warrant, or option is exercised. 302.41(4) Electing capital stock for exclusion. a. General rule.The employee-owner shall make the election to exclude capital gain from the sale of capital stock of a qualified corporation on a form prescribed by the department with the employee-owner’s original Iowa income tax return for the tax year in which the election is made. The form shall be available on the department’s website. To qualify for the exclusion, the employee-owner must include all information required by the form. b. Election when sale or exchange takes place over multiple transactions.The election applies to all subsequent sales or exchanges of capital stock of the same qualified corporation of which the initial election was made, within 15 years of the date the election was made. The employee-owner shall include the form prescribed by the department with the employee-owner’s Iowa income tax return when claiming the exclusion for a subsequent sale or exchange. c. The election can only be made once.An employee-owner may only make one lifetime election to exclude the qualifying capital stock of a single qualifying corporation under this rule. The election is irrevocable once made. 302.41(5) Election by a party other than the employee-owner. a. Election upon death of the employee-owner.If the employee-owner dies after having sold or exchanged qualifying capital stock without having made an election, the surviving spouse or, if there is no surviving spouse, the personal representative of the employee-owner’s estate may make a qualifying election in the manner described in subrule 302.41(4) for the tax year in which the employee-owner died. b. Inter vivos transfer of qualifying capital stock.After the election described in this rule has been made, the election applies to capital stock transferred from the employee-owner to the employee-owner’s spouse as an inter vivos gift or to an inter vivos trust primarily for the benefit of the employee-owner’s spouse. Capital stock transferred through a will or testamentary trust does not qualify for this exclusion. The election only applies if the spouse was married to the employee-owner on the date of the sale or exchange or the date of death of the employee-owner. This rule is intended to implement Iowa Code section 422.7.ARC 7052CWorkforce Development Board and Workforce Development Center Administration Division[877]Notice of Intended ActionProposing rulemaking related to Iowa office of apprenticeship and providing an opportunity for public comment
The Workforce Development Board and Workforce Development Center Administration Division hereby proposes to adopt new Chapter 29, “Iowa Office of Apprenticeship,” Iowa Administrative Code.Legal Authority for Rulemaking This rulemaking is proposed under the authority provided in 2023 Iowa Acts, Senate File 318.State or Federal Law Implemented This rulemaking implements, in whole or in part, Iowa Code chapter 84D as enacted by 2023 Iowa Acts, Senate File 318.Purpose and Summary This new chapter establishes rules and procedures for implementation and administration of the new Iowa Office of Apprenticeship pursuant to 2023 Iowa Acts, Senate File 318.Fiscal Impact 2023 Iowa Acts, Senate File 318, was signed into law on May 10, 2023, establishing new Iowa Code chapter 84D. There is no immediate fiscal impact of creation and implementation of these rules; however, the Iowa Office of Apprenticeship will have costs associated with it over the next five years in terms of personnel and implementation costs. No estimate is available at this time because IWD continues to coordinate with the existing Office of Apprenticeship and U.S. Department of Labor to determine scope of responsibility and timing of transition of the program. IWD does not anticipate any additional fiscal impact in the current fiscal year and anticipates that there will be a request for a general appropriation in future legislative sessions as IWD is better able to determine the amount of staff and resources necessary to fully implement this program.Jobs Impact The proposed chapter is authorized by 2023 Iowa Acts, Senate File 318, which establishes the Iowa Office of Apprenticeship in Iowa Code chapter 84D. The proposed chapter is required to supplement Senate File 318 and bring the state law establishing a state apprenticeship agency (SAA) into conformity with U.S. Department of Labor requirements pursuant to 29 CFR 29.13. The proposed chapter, in conjunction with Senate File 318, creates career pathways for all Iowans including adults and minorities. The proposed chapter, in conjunction with Senate File 318, will have a positive impact on private sector jobs and employment opportunities in Iowa by increasing training pathways into a wide variety of industries and occupations. Iowa led the country in creating registered apprenticeship programs in 2022, and the SAA program, implemented through these rules, will make it easier for employers and high schools to provide this valuable training pathway to more Iowans. Iowa wants to foster and grow registered apprenticeship and work-based learning programs throughout the state. As a system, Iowa Workforce Development (IWD) wants to continue to foster the quality programs that have already been created in construction trades and other occupations to help grow registered apprenticeship programs in all industries. IWD has had federal grants that have assisted in growing registered apprenticeship programs in the following high-demand areas: health care, agriculture, advanced manufacturing, construction trades and education. With these rules, IWD and the Iowa Office of Apprenticeship will work with all industries to support the creation of high-quality registered apprenticeship and work-based learning opportunities for Iowans. In a registered apprenticeship, employers create a program that contains related training instruction and on-the-job learning. Cost can vary from in-house education programs to community college courses for related training, on-the-job wages and mentor wages. There is no other relevant analysis.Waivers Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition IWD for a waiver of the discretionary provisions, if any. Public Comment Any interested person may submit written or oral comments concerning this proposed rulemaking. Written or oral comments in response to this rulemaking must be received by IWD no later than 4:30 p.m. on August 15, 2023. Comments should be directed to: Brooke Axiotis Iowa Workforce Development 1000 East Grand Avenue Des Moines, Iowa 50319 Phone: 515.802.9425 Email: brooke.axiotis@iwd.iowa.gov Public Hearing No public hearing is scheduled at this time. As provided in Iowa Code section 17A.4(1)“b,” an oral presentation regarding this rulemaking may be demanded by 25 interested persons, a governmental subdivision, the Administrative Rules Review Committee, an agency, or an association having 25 or more members. Review by Administrative Rules Review Committee The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6). The following rulemaking action is proposed:
ITEM 1. Adopt the following new 877—Chapter 29: CHAPTER 29IOWA OFFICE OF APPRENTICESHIP877—29.1(90GA,SF318) Purpose. The purpose of this chapter is to bring identified definitions, terms, and language in 2023 Iowa Acts, Senate File 318, into conformity with federal requirements, necessary for the approval of the Iowa office of apprenticeship law by the United States Department of Labor Office of Apprenticeship in accordance with 29 CFR 29.13(a)(1).877—29.2(90GA,SF318) Definitions. As used in this chapter: "Apprenticeship sponsor" means an entity operating an apprenticeship program or an entity in whose name an apprenticeship program is being operated, which entity is registered with or approved by the Iowa office of apprenticeship. "Certification" "certificate" means the written approval by the Iowa office of apprenticeship of a set of apprenticeship standards, of an individual for employment as an apprentice or probationary apprentice in a registered apprenticeship program, or of an individual who has successfully met the requirements to receive an interim credential. The Iowa office of apprenticeship will determine whether an individual has successfully completed an apprenticeship program to conform with 29 CFR Part 29. "Intermediary" means an entity that provides required technical instruction to an apprentice, aggregates employer demand, provides technical assistance to employers, assists with organizing training, develops occupational standards, and assists with the registration of programs under the authority of the Iowa office of apprenticeship. "On-the-job training" means an individual apprentice that is measured either through the completion of the industry standards for on-the-job learning (at least 2,000 hours) time-based approach, the attainment of a competency-based approach, or a blend of the time-based and competency-based approaches (hybrid). "Pre-apprenticeship," for purposes of the Iowa office of apprenticeship, means a program or set of strategies, registered by the Iowa office of apprenticeship, including basic skills training, academic skills remediation, or introduction to the industry, that is designed to prepare individuals for entry into an apprenticeship program. "Registered apprenticeship program" means a program to which all of the following apply:- The program has been accepted and recorded by the Iowa office of apprenticeship. The program includes all of the following:
- Employer involvement.
- On-the-job training.
- Related training instruction as defined in 2023 Iowa Acts, Senate File 318, section 2.
- Paid work experience with progressive wage increases.
- Receipt of a portable state or nationally recognized credential.
- The program is for the recruitment, selection, employment, and training of apprentices and is developed pursuant to 29 CFR Parts 29 and 30 and the rules of the Iowa office of apprenticeship.
- Ensuring the program conforms to 29 CFR Part 29 standards of apprenticeship.
- Ensuring the program complies with 29 CFR Part 30 equal employment opportunity in apprenticeship.
- Ensuring the program complies with the Iowa Office of Apprenticeship Standards and Regulations document approved by the United States Department of Labor.
- Ensuring the program complies with 2023 Iowa Acts, Senate File 318.
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