Text: SF00468 Text: SF00470 Text: SF00400 - SF00499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. Section 422.32, subsection 2, Code 1995, is 1 2 amended to read as follows: 1 3 2. "Business income" means income arising from 1 4 transactions and activity in the regular course of the 1 5 taxpayer's trade or business;and includesor income from 1 6 tangible and intangible property if the acquisition, 1 7 management, and disposition of the property constitute 1 8 integral parts of the taxpayer's regular trade or business 1 9 operations; or gain or loss resulting from the sale, exchange, 1 10 or other disposition of real property or of tangible or 1 11 intangible personal property, if the property while owned by 1 12 the taxpayer was operationally related to the taxpayer's trade 1 13 or business carried on in Iowa; or gain or loss resulting from 1 14 the sale, exchange, or other disposition of stock in another 1 15 corporation if the activities of the other corporation were 1 16 operationally related to the taxpayer's trade or business 1 17 carried on in Iowa while the stock was owned by the taxpayer. 1 18 A taxpayer may have more than one regular trade or business in 1 19 determining whether income is business income. 1 20 It is the intent of the general assembly to treat as 1 21 apportionable business income all income that may be treated 1 22 as apportionable business income under the Constitution of the 1 23 United States. 1 24 The filing of an Iowa income tax return on a combined 1 25 report basis is neither allowed nor required by this 1 26 subsection. 1 27 Sec. 2. To the extent a taxpayer treated income as 1 28 business income according to the definition amended in section 1 29 1 of this Act or treated income as nonbusiness income 1 30 consistent with the decision in Phillips Petroleum Company v. 1 31 Iowa Department of Revenue and Finance, 511 N.W.2d 608(Iowa 1 32 1993) on a filed tax return for tax periods beginning prior to 1 33 January 1, 1995, the director of revenue and finance shall not 1 34 challenge such treatment. 1 35 Sec. 3. This Act, being deemed of immediate importance, 2 1 takes effect upon enactment and applies retroactively to 2 2 January 1, 1995, for tax years beginning on or after that 2 3 date. 2 4 EXPLANATION 2 5 The Iowa supreme court in Phillips Petroleum Company v. 2 6 Iowa Department of Revenue and Finance, 511 N.W.2d 608 (Iowa 2 7 1993) held that capital gains resulting from transactions not 2 8 in the regular course of a taxpayer's trade or business were 2 9 nonbusiness income, even if the capital assets generated 2 10 business income when they were used in the taxpayer's trade or 2 11 business. The bill amends the definition of business income 2 12 to overturn that decision. This amendment creates a separate 2 13 functional test for business income. This amendment treats as 2 14 business income any gain or loss resulting from property which 2 15 while owned by the taxpayer was operationally related to the 2 16 taxpayer's trade or business carried on in Iowa or resulting 2 17 from stock in a corporation which was operationally related to 2 18 the taxpayer's trade or business carried on in Iowa. The 2 19 amendment expresses the legislature's intent that 2 20 apportionable business income is all income that may be 2 21 treated as apportionable under the United States Constitution. 2 22 This bill also provides that if a taxpayer treated income 2 23 covered by the amendment as business income or as nonbusiness 2 24 income consistent with the Phillips Petroleum Company decision 2 25 on a filed Iowa tax return for tax periods beginning prior to 2 26 January 1, 1995, the director of revenue and finance must 2 27 accept such treatment. The amendment does not allow or 2 28 require the filing of an Iowa income tax return on a combined 2 29 reporting basis. 2 30 The bill takes effect upon enactment and applies retro- 2 31 actively to January 1, 1995, for tax years beginning on or 2 32 after that date. 2 33 LSB 2295SV 76 2 34 mg/jw/5
Text: SF00468 Text: SF00470 Text: SF00400 - SF00499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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