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PAG LIN 1 1 Section 1. Section 422.4, subsection 18, Code 1997, is 1 2 amended by striking the subsection. 1 3 Sec. 2. Section 422.5, subsection 1, paragraph j, 1 4 subparagraph (2), Code 1997, is amended to read as follows: 1 5 (2) The tax imposed upon the taxable income of a resident 1 6 shareholder ina value-addedan S corporation which has in 1 7 effect for the tax year an election under subchapter S of the 1 8 Internal Revenue Code and carries on business within and 1 9 without the state may be computed by reducing the amount 1 10 determined pursuant to paragraphs "a" through "i" by the 1 11 amounts of nonrefundable credits under this division and by 1 12 multiplying this resulting amount by a fraction of which the 1 13 resident's net income allocated to Iowa, as determined in 1 14 section 422.8, subsection 2, paragraph "b", is the numerator 1 15 and the resident's total net income computed under section 1 16 422.7 is the denominator. Thisparagraphsubparagraph also 1 17 applies to individuals who are residents of Iowa for less than 1 18 the entire tax year. 1 19 (a) In order for a resident shareholder ina value-added1 20 an S corporation which has in effect for the tax year an 1 21 election under subchapter S of the Internal Revenue Code and 1 22 carries on business within and without the state, to claim the 1 23 benefits of apportionment of income of thevalue-addedS 1 24 corporation, the taxpayer must completely fill out the return, 1 25 determine the taxpayer's income tax liability without the 1 26 benefit of apportionment of thevalue-addedS corporation's 1 27 income, and pay the amount of tax owed. The taxpayer shall 1 28 recompute the taxpayer's income tax liability, by applying the 1 29 provisions of this subparagraph on a special return. This 1 30 special return shall be filed under rules of the director and 1 31 constitutes a claim for refund of the difference between the 1 32 amount of tax the taxpayer paid as determined without the 1 33 provisions of this subparagraph and the amount of tax 1 34 determined with the provisions of this subparagraph. 1 35 (b) This subparagraph shall not affect the amount of the 2 1 taxpayer's checkoff to the Iowa election campaign fund under 2 2 section 56.18, the checkoff for the fish and game fund in 2 3 section 456A.16, the credits from tax provided in sections 2 4 422.10, 422.11A, and 422.12 and the allocation of these 2 5 credits between spouses if the taxpayers filed separate 2 6 returns or separately on combined returns. 2 7(c) For any tax year, the aggregate amount of refund2 8claims that shall be paid pursuant to this subparagraph shall2 9not exceed five million dollars. If, for a tax year, the2 10aggregate amount of refund claims filed pursuant to this2 11subparagraph exceeds five million dollars, each claim for2 12refund shall be paid on a pro rata basis so that the aggregate2 13amount of refund claims does not exceed five million dollars.2 14In the case where refund claims are not paid in full, the2 15amount of the refund to which the taxpayer is entitled under2 16this subparagraph is the pro rata amount that was paid and the2 17taxpayer is not entitled to a refund of the unpaid portion and2 18is not entitled to carry that amount forward or backward to2 19another tax year. Taxpayers shall not use refunds as2 20estimated payments for the succeeding tax year. Taxpayers2 21whose tax years begin on January 1 must file their refund2 22claims by October 31 of the calendar year following the end of2 23their tax year to be eligible for refunds. Taxpayers whose2 24tax years begin on a date other than January 1 must file their2 25refund claims by the end of the tenth month following the end2 26of their tax years to be eligible. The department shall2 27determine on February 1 of the second succeeding calendar year2 28if the total amount of claims for refund exceeds five million2 29dollars for the tax year. Notwithstanding any other2 30provision, interest shall not be due on any refund claims that2 31are paid by the last day of February of the second succeeding2 32calendar year. If the claim is not payable on February 1 of2 33the second succeeding calendar year, because the taxpayer is a2 34fiscal year filer, then the amount of the claim allowed shall2 35be in the same ratio as the refund claims available on3 1February 1 of the second succeeding calendar year. These3 2claims shall be funded by moneys appropriated for payment of3 3individual income tax refunds.3 4 Sec. 3. Section 422.5, subsection 1, paragraph k, 3 5 unnumbered paragraph 4, Code 1997, is amended to read as 3 6 follows: 3 7 In the case of a resident, including a resident estate or 3 8 trust, the state's apportioned share of the state alternative 3 9 minimum tax is one hundred percent of the state alternative 3 10 minimum tax computed in this subsection. In the case of a 3 11 resident or part-year resident shareholder ina value-addedan 3 12 S corporation which has in effect for the tax year an election 3 13 under subchapter S of the Internal Revenue Code and carries on 3 14 business within and without the state, a nonresident, 3 15 including a nonresident estate or trust, or an individual, 3 16 estate, or trust that is domiciled in the state for less than 3 17 the entire tax year, the state's apportioned share of the 3 18 state alternative minimum tax is the amount of tax computed 3 19 under this subsection, reduced by the applicable credits in 3 20 sections 422.10 through 422.12 and this result multiplied by a 3 21 fraction with a numerator of the sum of state net income 3 22 allocated to Iowa as determined in section 422.8, subsection 3 23 2, paragraph "a" or "b" as applicable, plus tax preference 3 24 items, adjustments, and losses under subparagraph (1) 3 25 attributable to Iowa and with a denominator of the sum of 3 26 total net income computed under section 422.7 plus all tax 3 27 preference items, adjustments, and losses under subparagraph 3 28 (1). In computing this fraction, those items excludable under 3 29 subparagraph (1) shall not be used in computing the tax 3 30 preference items. Married taxpayers electing to file separate 3 31 returns or separately on a combined return must allocate the 3 32 minimum tax computed in this subsection in the proportion that 3 33 each spouse's respective preference items, adjustments, and 3 34 losses under subparagraph (1) bear to the combined preference 3 35 items, adjustments, and losses under subparagraph (1) of both 4 1 spouses. 4 2 Sec. 4. Section 422.8, subsection 2, paragraph b, 4 3 unnumbered paragraph 1, Code 1997, is amended to read as 4 4 follows: 4 5 A resident's income allocable to Iowa is the income 4 6 determined under section 422.7 reduced by items of income and 4 7 expenses froma subchapteran S corporationwhich is a value-4 8added corporationthat carries on business within and without 4 9 the state when those items of income and expenses pass 4 10 directly to the shareholders under provisions of the Internal 4 11 Revenue Code. These items of income and expenses are 4 12 increased by the greater of the following: 4 13 Sec. 5. Section 422.8, subsection 6, Code 1997, is amended 4 14 to read as follows: 4 15 6. If the resident or part-year resident is a shareholder 4 16 ofa value-addedan S corporation which has in effect an 4 17 election under subchapter S of the Internal Revenue Code, 4 18 subsections 1 and 3 do not apply to any income taxes paid to 4 19 another state or foreign country on the income from thevalue-4 20addedcorporation which has in effect an election under 4 21 subchapter S of the Internal Revenue Code. 4 22 Sec. 6. This Act applies retroactively to January 1, 1997, 4 23 for tax years beginning on or after that date. 4 24 EXPLANATION 4 25 Present law allows shareholders of an S corporation which 4 26 is a value-added corporation to reduce its individual income 4 27 tax by use of a different method of computing the tax. The 4 28 difference between the regular method and the alternative 4 29 method constitutes a claim for refund of tax owed. However, 4 30 the aggregate amount of refunds shall not exceed $5 million 4 31 per tax year. 4 32 This bill expands the opportunity for a reduction in tax to 4 33 shareholders of all S corporations regardless of whether they 4 34 are value-added corporations or not. The bill also eliminates 4 35 the limitation of $5 million on the aggregate amount of claims 5 1 for refunds. 5 2 The bill applies retroactively to January 1, 1997, for tax 5 3 years beginning on or after that date. 5 4 LSB 1172SS 77 5 5 mg/jw/5
Text: SF00025 Text: SF00027 Text: SF00000 - SF00099 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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