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PAG LIN
1 1 Section 1. Section 422.7, Code 1997, is amended by adding
1 2 the following new subsection:
1 3 NEW SUBSECTION. 35. Subtract the income and expenses of
1 4 and add the cash dividend or value of a property distribution
1 5 from a financial institution as defined in section 581 of the
1 6 Internal Revenue Code where the financial institution is not
1 7 subject to income tax and the shareholders of the financial
1 8 institution are taxed on the financial institution's income
1 9 under the provisions of the Internal Revenue Code.
1 10 Sec. 2. Section 422.61, subsection 3, Code 1997, is
1 11 amended by adding the following new paragraph:
1 12 NEW PARAGRAPH. g. Where a financial institution as
1 13 defined in section 581 of the Internal Revenue Code is not
1 14 subject to income tax and the shareholders of the financial
1 15 institution are taxed on the financial institution's income
1 16 under the provisions of the Internal Revenue Code, such tax
1 17 treatment shall be disregarded and the financial institution
1 18 shall compute its net income for franchise tax purposes in the
1 19 same manner under this subsection as a financial institution
1 20 that is subject to or liable for federal income tax under the
1 21 Internal Revenue Code in effect for the applicable year.
1 22 Sec. 3. This Act applies retroactively to January 1, 1997,
1 23 for tax years beginning on or after that date.
1 24 EXPLANATION
1 25 Code section 422.7 is amended to remove from the
1 26 computation of individual income tax the items of income and
1 27 expenses from a financial institution that is treated as an S
1 28 corporation for federal income tax purposes and includes in
1 29 income the cash dividend or value of a property distribution
1 30 from the financial institution. For Iowa tax purposes, the S
1 31 corporation which operates a financial institution would file
1 32 an Iowa franchise tax return. The amendment is made
1 33 retroactively applicable to tax years beginning on or after
1 34 January 1, 1997.
1 35 Code section 422.61 is amended to disallow the federal
2 1 treatment for Iowa individual income tax purposes where a
2 2 financial institution, as defined in section 581 of the
2 3 Internal Revenue Code, is not subject to income tax and where
2 4 the shareholders of the financial institution are taxed on the
2 5 financial institution's income on the shareholder's federal
2 6 individual income tax return. This federal provision is known
2 7 as an S corporation election. This provision should prevent
2 8 any discrimination in the taxation of federal obligation
2 9 income of all financial institutions because income of
2 10 financial institutions would only be taxed under the state
2 11 franchise tax. The amendment is made retroactively applicable
2 12 to tax years beginning on or after January 1, 1997.
2 13 LSB 2074SC 77
2 14 mg/jj/8
Text: SSB00156 Text: SSB00158 Text: SSB00100 - SSB00199 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
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