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PAG LIN 1 1 Section 1. Section 422.4, subsection 1, Code 1995, is 1 2 amended by striking the subsection. 1 3 Sec. 2. Section 422.4, subsection 2, paragraphs b and c, 1 4 Code 1995, are amended to read as follows: 1 5 b. "Cumulative standard deduction factor" means the 1 6 product of the annual standard deduction factor for the19891 7 1997 calendar year and all annual standard deduction factors 1 8 for subsequent calendar years as determined pursuant to this 1 9 subsection. The cumulative standard deduction factor applies 1 10 to all tax years beginning on or after January 1 of the 1 11 calendar year for which the latest annual standard deduction 1 12 factor has been determined. 1 13 c. The annual standard deduction factor for the19891997 1 14 calendar year is one hundred percent. 1 15 Sec. 3. Section 422.4, subsection 16, Code 1995, is 1 16 amended to read as follows: 1 17 16. The words "taxable income" mean the net income as 1 18 defined in section 422.7 minus thedeductionsdeduction 1 19 allowed by section 422.9, in the case of individuals; in the 1 20 case of estates or trusts, the words "taxable income" mean the 1 21 taxable income (without a deduction for personal exemption) as 1 22 computed for federal income tax purposes under the Internal 1 23 Revenue Code, but with the adjustments specified in section 1 24 422.7plus the Iowa income tax deducted in computing the1 25federal taxable income and minus federal income taxes as1 26provided in section 422.9. 1 27 Sec. 4. Section 422.5, subsection 1, Code 1995, is amended 1 28 by striking the subsection and inserting in lieu thereof the 1 29 following: 1 30 1. a. A tax at the rate of fifteen percent is imposed 1 31 upon every resident and nonresident of the state which tax 1 32 shall be levied, collected, and paid annually upon and with 1 33 respect to the entire taxable income as defined in this 1 34 division. 1 35 b. The tax imposed upon the taxable income of a 2 1 nonresident shall be computed by multiplying the amount 2 2 specified in this subsection by a fraction of which the 2 3 nonresident's net income allocated to Iowa, as determined in 2 4 section 422.8, subsection 2, is the numerator and the 2 5 nonresident's total net income defined under section 422.7 is 2 6 the denominator. This provision also applies to individuals 2 7 who are residents of Iowa for less than the entire tax year. 2 8 Sec. 5. Section 422.5, subsection 2, Code 1995, is amended 2 9 by striking the subsection. 2 10 Sec. 6. Section 422.5, subsection 3, Code 1995, is amended 2 11 by striking the subsection. 2 12 Sec. 7. Section 422.5, subsection 6, Code 1995, is amended 2 13 by striking the subsection. 2 14 Sec. 8. Section 422.5, subsection 11, Code 1995, is 2 15 amended by striking the subsection. 2 16 Sec. 9. Section 422.6, unnumbered paragraph 1, Code 1995, 2 17 is amended to read as follows: 2 18 The tax imposed by section 422.5less the credits allowed2 19under sections 422.10, 422.11A, 422.11B, and 422.11C, and the2 20personal exemption credit allowed under section 422.12 apply2 21 applies to andareis a charge against estates and trusts with 2 22 respect to their taxable income, and therates arerate is the 2 23 same asthosethe rate applicable to individuals. The 2 24 fiduciary shall make the return of income for the estate or 2 25 trust for which the fiduciary acts, whether the income is 2 26 taxable to the estate or trust or to the beneficiaries. 2 27 Sec. 10. Section 422.7, Code Supplement 1995, is amended 2 28 by striking the section and inserting in lieu thereof the 2 29 following: 2 30 422.7 "NET INCOME" – HOW COMPUTED. 2 31 1. For individuals, "net income" means the adjusted gross 2 32 income as properly computed for federal income tax purposes 2 33 under the Internal Revenue Code with the adjustments made in 2 34 paragraphs "a" and "b". 2 35 a. The adjusted gross income is adjusted by adding the sum 3 1 of the following: 3 2 (1) The amounts paid or accrued to the taxpayer as 3 3 interest or dividends during the tax year to the extent 3 4 excluded. 3 5 (2) The amount of tax imposed under this division to the 3 6 extent deducted for the tax year. 3 7 b. The adjusted gross income is adjusted by subtracting 3 8 the sum of the following: 3 9 (1) The amounts included pursuant to sections 402(a), 3 10 402(c), 403(a), 403(b), 406(a), 407(a), 408, and 409 of the 3 11 Internal Revenue Code, or included as distributions under any 3 12 retirement or disability plan for employees of a governmental 3 13 agency or unit, or retirement payments to retired partners 3 14 which payments are excluded in computing net earnings from 3 15 self employment by section 1402 of the Internal Revenue Code 3 16 and regulations adopted pursuant thereto. 3 17 (2) The amount of tax imposed under this division which 3 18 was refunded to the extent included for the tax year. 3 19 (3) The amount included pursuant to section 111 of the 3 20 Internal Revenue Code as a recovery of items previously 3 21 deducted from adjusted gross income in computing taxable 3 22 income. 3 23 (4) The amount of social security benefits and railroad 3 24 retirement benefits, included pursuant to sections 72(r) and 3 25 86 of the Internal Revenue Code. 3 26 (5) The sum of the amounts disallowed as deductions by 3 27 sections 171(a)(2) and 265(a)(2) of the Internal Revenue Code 3 28 and the amounts of expenses allocable to interest and 3 29 disallowed as deductions by section 265(a)(1) of the Internal 3 30 Revenue Code. 3 31 2. For estates and trusts, "net income" means the taxable 3 32 income as properly computed for federal income tax purposes 3 33 under the Internal Revenue Code with the adjustments made in 3 34 paragraphs "a" and "b", subject to paragraph "c". 3 35 a. The taxable income is adjusted by adding the sum of the 4 1 following: 4 2 (1) The amounts paid or accrued to the taxpayer as 4 3 interest or dividends during the tax year to the extent 4 4 excluded. 4 5 (2) Six hundred dollars for an estate, three hundred 4 6 dollars for a trust which under its governing instrument is 4 7 required to distribute all of its income currently, or one 4 8 hundred dollars for all other trusts. However, the amount 4 9 added is only to the extent deducted. 4 10 (3) The amount of tax imposed under this division to the 4 11 extent deducted for the tax year. 4 12 b. The taxable income is adjusted by subtracting the sum 4 13 of the following: 4 14 (1) The amounts included pursuant to sections 402(a), 4 15 402(c), 403(a), 403(b), 406(a), 407(a), 408, and 409 of the 4 16 Internal Revenue Code or included as distributions under any 4 17 retirement or disability plan for employees of a governmental 4 18 agency or unit, or retirement payments to retired partners 4 19 which payments are excluded in computing net earnings from 4 20 self employment by section 1402 of the Internal Revenue Code 4 21 and regulations adopted pursuant thereto. 4 22 (2) The amount of tax imposed under this division which 4 23 was refunded to the taxpayer to the extent included for the 4 24 tax year. 4 25 (3) The amounts included in taxable income as adjusted by 4 26 paragraph "a" which are exempt from taxation by this state 4 27 either by reason of its constitution or by reason of the 4 28 constitution, treaties, or statutes of the United States. 4 29 (4) The amounts disallowed as deductions by sections 4 30 171(a)(2) and 265(a)(2) of the Internal Revenue Code and the 4 31 amounts of expenses allocable to interest and disallowed as 4 32 deductions by section 265(a)(1) of the Internal Revenue Code. 4 33 Sec. 11. Section 422.8, subsection 2, Code 1995, is 4 34 amended to read as follows: 4 35 2. Nonresident's net income allocated to Iowa is the net 5 1 income, or portionthereofof net income, which is derived 5 2 from a business, trade, profession, or occupation carried on 5 3 within this state or income from any property, trust, estate, 5 4 or other source within Iowa. However, income derived from a 5 5 business, trade, profession, or occupation carried on within 5 6 this state and income from any property, trust, estate, or 5 7 other source within Iowa shall not include distributions from 5 8 pensions, including defined benefit or defined contribution 5 9 plans, annuities, individual retirement accounts, and deferred 5 10 compensation plans or any earnings attributable thereto so 5 11 long as the distribution is directly related to an 5 12 individual's documented retirement and received while the 5 13 individual is a nonresident of this state. If a business, 5 14 trade, profession, or occupation is carried on partly within 5 15 and partly without the state, only the portion of the net 5 16 income which is fairly and equitably attributable to that part 5 17 of the business, trade, profession, or occupation carried on 5 18 within the state is allocated to Iowa for purposes of section 5 19 422.5, subsection 1,paragraph "j",and section 422.13 and 5 20 income from any property, trust, estate, or other source 5 21 partly within and partly without the state is allocated to 5 22 Iowa in the same manner, except that annuities, interest on 5 23 bank deposits and interest-bearing obligations, and dividends 5 24 are allocated to Iowa only to the extent to which they are 5 25 derived from a business, trade, profession, or occupation 5 26 carried on within the state. 5 27 Sec. 12. Section 422.8, subsection 4, Code 1995, is 5 28 amended by striking the subsection. 5 29 Sec. 13. Section 422.9, unnumbered paragraph 1 and 5 30 subsections 1 and 2, Code Supplement 1995, are amended by 5 31 striking the unnumbered paragraph and the subsections and 5 32 inserting in lieu thereof the following: 5 33 In computing taxable income of individuals, there shall be 5 34 deducted from net income the following amounts: 5 35 1. For a single person or for a married person who files 6 1 separately, nine thousand dollars. 6 2 2. For a husband and wife who file a joint return or a 6 3 surviving spouse, thirteen thousand five hundred dollars. 6 4 2A. For an unmarried head of household, thirteen thousand 6 5 five hundred dollars. 6 6 2B. For each dependent, four thousand five hundred 6 7 dollars, but not to exceed nine thousand dollars. 6 8 2C. For a single individual, husband, wife, or head of 6 9 household, an additional exemption of four thousand five 6 10 hundred dollars for each of the individuals who has attained 6 11 the age of sixty-five years before the close of the tax year 6 12 or on the first day following the end of the tax year. 6 13 2D. For a single individual, husband, wife, or head of 6 14 household, an additional exemption of four thousand five 6 15 hundred dollars for each of the individuals who is blind at 6 16 the close of the tax year. For the purposes of this 6 17 subsection, an individual is blind only if the individual's 6 18 central visual acuity does not exceed twenty-two-hundredths in 6 19 the better eye with correcting lenses, or if the individual's 6 20 visual acuity is greater than twenty-two-hundredths but is 6 21 accompanied by a limitation in the fields of vision such that 6 22 the widest diameter of the visual field subtends an angle no 6 23 greater than twenty degrees. 6 24 As used in this section, "dependent" has the same meaning 6 25 as provided by the Internal Revenue Code. 6 26 Sec. 14. Section 422.16, subsection 1, unnumbered 6 27 paragraph 1, Code 1995, is amended to read as follows: 6 28 Every withholding agent and every employer as defined in 6 29 this chapter and further defined in the Internal Revenue Code, 6 30 with respect to income tax collected at source, making payment 6 31 of wages to a nonresident employee working in Iowa, or to a 6 32 resident employee, shall deduct and withhold from the wages an 6 33 amount which will approximate the employee's annual tax 6 34 liability on a calendar year basis, calculated on the basis of 6 35 tables to be prepared by the department and schedules or 7 1 percentage rates, based on the wages, to be prescribed by the 7 2 department. Every employee or other person shall declare to 7 3 the employer or withholding agent the number of the employee's 7 4 or other person's personal exemptions and dependency 7 5 exemptions or credits to be used in applying the tables and 7 6 schedules or percentage rates. However, no greater number of 7 7 personal or dependency exemptions or credits may be declared 7 8 by the employee or other person than the number to which the 7 9 employee or other person is entitled except as allowed under 7 10 section 3402(m)(1) of the Internal Revenue Codeand as allowed7 11for the child and dependent care credit provided in section7 12422.12C. The claiming of exemptions or credits in excess of 7 13 entitlement is a serious misdemeanor. 7 14 Sec. 15. Section 422.21, unnumbered paragraph 5, Code 7 15 1995, is amended to read as follows: 7 16The director shall determine for the 1989 and each7 17subsequent calendar year the annual and cumulative inflation7 18factors for each calendar year to be applied to tax years7 19beginning on or after January 1 of that calendar year. The7 20director shall compute the new dollar amounts as specified to7 21be adjusted in section 422.5 by the latest cumulative7 22inflation factor and round off the result to the nearest one7 23dollar. The annual and cumulative inflation factors7 24determined by the director are not rules as defined in section7 2517A.2, subsection 10.The director shall determine for the 7 2619901997 calendar year and each subsequent calendar year the 7 27 annual and cumulative standard deduction factors to be applied 7 28 to tax years beginning on or after January 1 of that calendar 7 29 year. The director shall compute the new dollar amounts of 7 30 the standard deductions specified in section 422.9,subsection7 311subsections 1 through 2D, by the latest cumulative standard 7 32 deduction factor and round off the result to the nearest ten 7 33 dollars. The annual and cumulative standard deduction factors 7 34 determined by the director are not rules as defined in section 7 35 17A.2, subsection 10. 8 1 CONFORMING AMENDMENTS 8 2 Sec. 16. Section 56.2, subsection 19, Code Supplement 8 3 1995, is amended to read as follows: 8 4 19. "State income tax liability" means the state 8 5 individual income tax imposed under section 422.5reduced by8 6the sum of the deductions from the computed tax as provided8 7under section 422.12. 8 8 Sec. 17. Section 96.3, subsection 4, Code Supplement 1995, 8 9 is amended to read as follows: 8 10 4. DETERMINATION OF BENEFITS. With respect to benefit 8 11 years beginning on or after July 1, 1983, an eligible 8 12 individual's weekly benefit amount for a week of total 8 13 unemployment shall be an amount equal to the following 8 14 fractions of the individual's total wages in insured work paid 8 15 during that quarter of the individual's base period in which 8 16 such total wages were highest; the commissioner shall 8 17 determine annually a maximum weekly benefit amount equal to 8 18 the following percentages, to vary with the number of 8 19 dependents, of the statewide average weekly wage paid to 8 20 employees in insured work which shall be effective the first 8 21 day of the first full week in July: 8 22 If the The weekly Subject to the 8 23 number of benefit amount following maxi- 8 24 dependents shall equal the mum percentage 8 25 is: following frac- of the statewide 8 26 tion of high average weekly 8 27 quarter wages: wage: 8 28 0 1/23 53% 8 29 1 1/22 55% 8 30 2 1/21 57% 8 31 3 1/20 60% 8 32 4 or more 1/19 65% 8 33 The maximum weekly benefit amount, if not a multiple of one 8 34 dollar shall be rounded to the lower multiple of one dollar. 8 35 However, until such time as sixty-five percent of the 9 1 statewide average weekly wage exceeds one hundred ninety 9 2 dollars, the maximum weekly benefit amounts shall be 9 3 determined using the statewide average weekly wage computed on 9 4 the basis of wages reported for calendar year 1981. As used 9 5 in this section "dependent" means dependent as defined in 9 6 section422.12, subsection 1, paragraph "c"422.9, as if the 9 7 individual claimant was a taxpayer, except that an individual 9 8 claimant's nonworking spouse shall be deemed to be a dependent 9 9 under this section. "Nonworking spouse" means a spouse who 9 10 does not earn more than one hundred twenty dollars in gross 9 11 wages in one week. 9 12 Sec. 18. Section 216B.3, subsection 15, Code Supplement 9 13 1995, is amended to read as follows: 9 14 15. Develop a plan to provide telephone yellow pages 9 15 information without charge to persons declared to be blind 9 16 under the standards in section422.12, subsection 1, paragraph9 17"e"422.9. The department may apply for federal funds to 9 18 support the service. The program shall be limited in scope by 9 19 the availability of funds. 9 20 Sec. 19. Section 257.21, unnumbered paragraph 2, Code 9 21 1995, is amended to read as follows: 9 22 The instructional support income surtax shall be imposed on 9 23 the state individual income tax for the calendar year during 9 24 which the school's budget year begins, or for a taxpayer's 9 25 fiscal year ending during the second half of that calendar 9 26 year and after the date the board adopts a resolution to 9 27 participate in the program or the first half of the succeeding 9 28 calendar year, and shall be imposed on all individuals 9 29 residing in the school district on the last day of the 9 30 applicable tax year. As used in this section, "state 9 31 individual income tax" means the taxes computed under section 9 32 422.5, less the credits allowed in sections 422.11A, 422.11B,9 33422.11C, 422.12, and 422.12B. 9 34 Sec. 20. Section 422D.2, Code 1995, is amended to read as 9 35 follows: 10 1 422D.2 LOCAL INCOME SURTAX. 10 2 A county may impose by ordinance a local income surtax as 10 3 provided in section 422D.1 at the rate set by the board of 10 4 supervisors, of up to one percent, on the state individual 10 5 income tax of each individual residing in the county at the 10 6 end of the individual's applicable tax year. However, the 10 7 cumulative total of the percents of income surtax imposed on 10 8 any taxpayer in the county shall not exceed twenty percent. 10 9 The reason for imposing the surtax and the amount needed shall 10 10 be set out in the ordinance. The surtax rate shall be set to 10 11 raise only the amount needed. For purposes of this section, 10 12 "state individual income tax" means the tax computed under 10 13 section 422.5, less the credits allowed in sections 422.11A,10 14422.11B, 422.11C, 422.12, and 422.12B. 10 15 Sec. 21. Section 476.6, subsection 1, unnumbered paragraph 10 16 2, Code 1995, is amended to read as follows: 10 17 A subscriber of a telephone exchange or service, who is 10 18 declared to be legally blind under section422.12, subsection10 191, paragraph "e"422.9, is exempt from any charges for 10 20 telephone directory assistance that may be approved by the 10 21 board. 10 22 Sec. 22. REPEAL. 10 23 1. Sections 422.10 and 422.12, Code Supplement 1995, are 10 24 repealed. 10 25 2. Sections 422.11A, 422.11B, 422.11C, 422.12B, 422.12C, 10 26 and 502.207B, Code 1995, are repealed. 10 27 Sec. 23. EFFECTIVE AND APPLICABILITY DATES. This Act 10 28 takes effect January 1, 1997, for tax years beginning on or 10 29 after that date. 10 30 EXPLANATION 10 31 This bill rewrites the state individual income tax by 10 32 setting a single, or flat, rate of 15 percent of taxable 10 33 income. In arriving at the taxable income, all of the 10 34 itemized deductions allowed for federal tax purposes are 10 35 eliminated. A standard deduction from net income is provided 11 1 which is equal to the following amounts: 1) for a single 11 2 filer or a married person filing a separate return, $9,000; 2) 11 3 for a husband and wife filing a joint return, $13,500; 3) for 11 4 an unmarried head of household, $13,500; 4) for each 11 5 dependent, $4,500, but not to exceed $9,000. 11 6 The bill eliminates the alternative minimum tax. The bill 11 7 also repeals the current credits. 11 8 The bill takes effect January 1, 1997, for tax years 11 9 beginning on or after that date. 11 10 LSB 3237YH 76 11 11 sc/cf/24.1
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