Text: HSB00508 Text: HSB00510 Text: HSB00500 - HSB00599 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 DIVISION I 1 2 INCOME TAX INDEXATION 1 3 Section 1. Section 422.4, subsection 1, paragraph a, Code 1 4 1995, is amended to read as follows: 1 5 a. "Annual inflation factor" means an index, expressed as 1 6 a percentage, determined by the department by October 15 of 1 7 the calendar year preceding the calendar year for which the 1 8 factor is determined, which reflects the purchasing power of 1 9 the dollar as a result of inflation during the fiscal year 1 10 ending in the calendar year preceding the calendar year for 1 11 which the factor is determined. In determining the annual 1 12 inflation factor, the department shall use the annual percent 1 13 change, but not less than zero percent, in the implicit price 1 14 deflator for the gross national product computed for the 1 15 second quarter of the calendar year by the bureau of economic 1 16 analysis of the United States department of commerce and shall 1 17 addone-halfall of that percent change to one hundred 1 18 percent. The annual inflation factor and the cumulative 1 19 inflation factor shall each be expressed as a percentage 1 20 rounded to the nearest one-tenth of one percent. The annual 1 21 inflation factor shall not be less than one hundred percent. 1 22 Sec. 2. This division of this Act, being deemed of 1 23 immediate importance, takes effect upon enactment and applies 1 24 to the computation of the annual inflation factor for calendar 1 25 years beginning on or after January 1, 1996. The department 1 26 of revenue and finance shall adjust the annual inflation 1 27 factor previously computed for the 1996 calendar year to 1 28 reflect the change made in the computation of the annual 1 29 inflation factor in this division. 1 30 DIVISION II 1 31 SUBCHAPTER S CORPORATIONS 1 32 Sec. 3. Section 422.5, subsection 1, paragraph j, Code 1 33 1995, is amended by adding the following new unnumbered 1 34 paragraph: 1 35 NEW UNNUMBERED PARAGRAPH. The tax imposed upon the taxable 2 1 income of a resident shareholder in a corporation which has in 2 2 effect for the tax year an election under subchapter S of the 2 3 Internal Revenue Code and carries on business within and 2 4 without the state shall be computed by reducing the amount 2 5 determined pursuant to paragraphs "a" through "i" by the 2 6 amounts of nonrefundable credits under this division and by 2 7 multiplying this resulting amount by a fraction of which the 2 8 resident's net income allocated to Iowa, as determined in 2 9 section 422.8, subsection 2, paragraph "b", is the numerator 2 10 and the resident's total net income computed under section 2 11 422.7 is the denominator. This paragraph also applies to 2 12 individuals who are residents of Iowa for less than the entire 2 13 tax year. 2 14 Sec. 4. Section 422.5, subsection 1, paragraph k, 2 15 unnumbered paragraph 4, Code 1995, is amended to read as 2 16 follows: 2 17 In the case of a resident, including a resident estate or 2 18 trust, the state's apportioned share of the state alternative 2 19 minimum tax is one hundred percent of the state alternative 2 20 minimum tax computed in this subsection. In the case of a 2 21 resident or part year resident shareholder in a corporation 2 22 which has in effect for the tax year an election under 2 23 subchapter S of the Internal Revenue Code and carries on 2 24 business within and without the state, a nonresident, 2 25 including a nonresident estate or trust, or an individual, 2 26 estate, or trust that is domiciled in the state for less than 2 27 the entire tax year, the state's apportioned share of the 2 28 state alternative minimum tax is the amount of tax computed 2 29 under this subsection, reduced by the applicable credits in 2 30 sections 422.10 through 422.12 and this result multiplied by a 2 31 fraction with a numerator of the sum of state net income 2 32 allocated to Iowa as determined in section 422.8, subsection 2 33 2, paragraph "a" or "b", as applicable, plus tax preference 2 34 items, adjustments, and losses under subparagraph (1) 2 35 attributable to Iowa and with a denominator of the sum of 3 1 total net income computed under section 422.7 plus all tax 3 2 preference items, adjustments, and losses under subparagraph 3 3 (1). In computing this fraction, those items excludable under 3 4 subparagraph (1) shall not be used in computing the tax 3 5 preference items. Married taxpayers electing to file separate 3 6 returns or separately on a combined return must allocate the 3 7 minimum tax computed in this subsection in the proportion that 3 8 each spouse's respective preference items, adjustments, and 3 9 losses under subparagraph (1) bear to the combined preference 3 10 items, adjustments, and losses under subparagraph (1) of both 3 11 spouses. 3 12 Sec. 5. Section 422.7, Code Supplement 1995, is amended by 3 13 adding the following new subsection: 3 14 NEW SUBSECTION. 35. Resident shareholders of a 3 15 corporation which has in effect an election under subchapter S 3 16 of the Internal Revenue Code shall add their proportionate 3 17 share of a deemed distribution of current year income, upon 3 18 which Iowa income tax has not been paid as determined under 3 19 rules of the director, to the extent that the salaries, wages, 3 20 or other compensation for services performed by all 3 21 shareholders does not equal ten percent of net income of the 3 22 corporation computed in accordance with section 422.35 and 3 23 considering items of income and expense which pass directly to 3 24 the shareholders under provisions of the Internal Revenue Code 3 25 before deduction of shareholders' salaries, wages, or other 3 26 compensation for services performed. In addition there shall 3 27 be added any cash or the value of any property distributions 3 28 made to the extent they are made from income upon which Iowa 3 29 income tax has not been paid as determined under rules of the 3 30 director. 3 31 Sec. 6. Section 422.8, subsection 2, Code 1995, is amended 3 32 to read as follows: 3 33 2. a. Nonresident's net income allocated to Iowa is the 3 34 net income, or portion thereof, which is derived from a 3 35 business, trade, profession, or occupation carried on within 4 1 this state or income from any property, trust, estate, or 4 2 other source within Iowa. However, income derived from a 4 3 business, trade, profession, or occupation carried on within 4 4 this state and income from any property, trust, estate, or 4 5 other source within Iowa shall not include distributions from 4 6 pensions, including defined benefit or defined contribution 4 7 plans, annuities, individual retirement accounts, and deferred 4 8 compensation plans or any earnings attributable thereto so 4 9 long as the distribution is directly related to an 4 10 individual's documented retirement and received while the 4 11 individual is a nonresident of this state. If a business, 4 12 trade, profession, or occupation is carried on partly within 4 13 and partly without the state, only the portion of the net 4 14 income which is fairly and equitably attributable to that part 4 15 of the business, trade, profession, or occupation carried on 4 16 within the state is allocated to Iowa for purposes of section 4 17 422.5, subsection 1, paragraph "j", and section 422.13 and 4 18 income from any property, trust, estate, or other source 4 19 partly within and partly without the state is allocated to 4 20 Iowa in the same manner, except that annuities, interest on 4 21 bank deposits and interest-bearing obligations, and dividends 4 22 are allocated to Iowa only to the extent to which they are 4 23 derived from a business, trade, profession, or occupation 4 24 carried on within the state. 4 25 b. A resident's income allocable to Iowa is the income 4 26 determined under section 422.7 reduced by the net income or 4 27 loss of a corporation which is fairly and equitably 4 28 attributable without the state under section 422.33, 4 29 subsections 2 and 3. For the purposes of this paragraph, 4 30 "corporation" means a corporation which has in effect for the 4 31 tax year an election under subchapter S of the Internal 4 32 Revenue Code and carries on business partly within and partly 4 33 without the state. This paragraph also applies to individuals 4 34 who are residents of Iowa for less than the entire tax year. 4 35 Sec. 7. Section 422.8, Code 1995, is amended by adding the 5 1 following new subsection: 5 2 NEW SUBSECTION. 6. If the resident or part year resident 5 3 is a shareholder of a corporation which has in effect an 5 4 election under subchapter S of the Internal Revenue Code, 5 5 subsections 1 and 3 do not apply to any income taxes paid to 5 6 another state or foreign country on the income from the 5 7 corporation which has in effect an election under subchapter S 5 8 of the Internal Revenue Code. 5 9 Sec. 8. This division of this Act, being deemed of 5 10 immediate importance, takes effect upon enactment and applies 5 11 retroactively to January 1, 1996, for tax years beginning on 5 12 or after that date. 5 13 DIVISION III 5 14 INHERITANCE TAXATION 5 15 Sec. 9. Section 450.9, subsections 2 and 3, Code 1995, are 5 16 amended to read as follows: 5 17 2. Each son and daughter, including legally adopted sons 5 18 and daughters, or biological sons and daughters entitled to 5 19 inherit under the law of this state,fifty thousand dollarsor 5 20 each grandchild or stepchild, the entire amount of property, 5 21 interest in property, and income. 5 22 3. Father or mother,fifteen thousand dollarsthe entire 5 23 amount of property, interest in property, and income. 5 24 Sec. 10. Section 450.10, subsection 1, unnumbered 5 25 paragraph 1, Code 1995, is amended to read as follows: 5 26 When the property, interest, or income passes tothe father5 27or mother, or to a child ora lineal descendant of the 5 28 decedent, grantor, donor, or vendor, including a legally5 29adopted child or biological child entitled to inherit under5 30the laws of this statenot included in subsection 7, the tax 5 31 imposed shall be on the individual share so passing in excess 5 32 of the exemptions allowed as follows: 5 33 Sec. 11. Section 450.10, subsection 2, unnumbered 5 34 paragraph 1, Code 1995, is amended to read as follows: 5 35 When the property or any interestthereinin property, or 6 1 incometherefromfrom property taxable under the provisions of 6 2 this chapter passes to the brother or sister, son-in-law, or 6 3 daughter-in-law,or step-children,the rate of tax imposed on 6 4 the individual share so passing shall be as follows: 6 5 Sec. 12. Section 450.10, subsection 7, Code 1995, is 6 6 amended to read as follows: 6 7 7. Property, interest in property, or income passing to 6 8 the surviving spouse, father or mother, son or daughter 6 9 including legally adopted sons and daughters or biological 6 10 sons and daughters entitled to inherit under the law of this 6 11 state, grandchild, or stepchild is not taxable under this 6 12 section. 6 13 Sec. 13. This division of this Act applies to estates of 6 14 decedents dying on or after July 1, 1996. 6 15 DIVISION IV 6 16 TAXPAYER RELIEF ACCOUNT 6 17 Sec. 14. NEW SECTION. 426C.1 TAXPAYER RELIEF ACCOUNT. 6 18 1. A taxpayer relief account is created in the state 6 19 treasury under the authority of the department of management. 6 20 The account shall be separate from the general fund of the 6 21 state and shall not be considered part of the general fund of 6 22 the state except in determining the cash position of the state 6 23 for payment of state obligations. The moneys in the account 6 24 are not subject to the provisions of section 8.33 and shall 6 25 not be transferred, used, obligated, appropriated, or 6 26 otherwise encumbered except as provided in this section. 6 27 Moneys in the account may be used for cash flow purposes 6 28 provided that any moneys so allocated are returned to the fund 6 29 by the end of each fiscal year. However, the fund shall be 6 30 considered a special account for the purposes of section 8.53, 6 31 relating to elimination of any GAAP deficit. Moneys in the 6 32 taxpayer relief account shall be used as appropriated by the 6 33 general assembly for tax relief, including but not limited to 6 34 reduction of school and other property taxes. 6 35 2. Notwithstanding section 12C.7, subsection 2, interest 7 1 or earnings on moneys deposited in the taxpayer relief account 7 2 shall be credited to the account. 7 3 3. There is appropriated to the tax relief account for 7 4 each fiscal year from the general fund of the state, one 7 5 hundred million dollars. 7 6 EXPLANATION 7 7 Division I - Under present law the tax brackets for the 7 8 state individual income tax are adjusted by an inflation 7 9 factor that uses 50 percent of the change in the implicit 7 10 price deflator for the gross national product. The division 7 11 increases this to 100 percent of such change. This division 7 12 applies retroactively to tax years beginning on or after 7 13 January 1, 1996. 7 14 Division II - Under current statutory provisions, a 7 15 nonresident shareholder of a subchapter S corporation computes 7 16 an amount of Iowa individual income tax on the nonresident's 7 17 total income earned everywhere and then that amount of tax is 7 18 prorated to Iowa in the ratio of gross income from Iowa 7 19 sources to total gross income. 7 20 The division taxes the income from a subchapter S 7 21 corporation for a resident shareholder the same way as the 7 22 income is taxed for a nonresident. An amount of Iowa 7 23 individual income tax is computed on the total resident 7 24 shareholder's total income everywhere and then the amount of 7 25 tax is prorated to Iowa in the ratio of gross income 7 26 everywhere reduced by the non-Iowa income of the subchapter S 7 27 corporation to total income everywhere. The resident 7 28 shareholder may still take an out-of-state tax credit on 7 29 income other than income from the subchapter S corporation for 7 30 taxes paid to another state. 7 31 The division applies retroactively to January 1, 1996, for 7 32 tax years beginning on or after that date. 7 33 Division III - This division exempts from the state 7 34 inheritance tax property, interest in property, and income 7 35 passing to parents, natural and adopted children, 8 1 stepchildren, and grandchildren. 8 2 This division applies to estates of decedents dying on or 8 3 after July 1, 1996. 8 4 Division IV - This division creates a special taxpayer 8 5 relief account in the state treasury to be used solely as 8 6 appropriated by the general assembly for providing tax relief. 8 7 The tax relief may take the form of a reduction in state or 8 8 local taxation. There is also appropriated $100 million to 8 9 the account for the fiscal year beginning July 1, 1996, and 8 10 for each subsequent fiscal year. 8 11 LSB 3629YC 76 8 12 mg/cf/24
Text: HSB00508 Text: HSB00510 Text: HSB00500 - HSB00599 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
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