Text: SSB00266 Text: SSB00268 Text: SSB00200 - SSB00299 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
PAG LIN
1 1 Section 1. NEW SECTION. 422.11 FRANCHISE TAX CREDIT.
1 2 The taxes imposed under this division, less the credits
1 3 allowed under section 422.12, shall be reduced by a franchise
1 4 tax credit. A taxpayer who is a shareholder in a financial
1 5 institution, as defined in section 581 of the Internal Revenue
1 6 Code, which has in effect for the tax year an election under
1 7 subchapter S of the Internal Revenue Code shall compute the
1 8 amount of the tax credit by dividing the financial institution
1 9 income taxed to the taxpayer by Iowa by the taxpayer's total
1 10 Iowa income and multiplying the resulting percentage times the
1 11 amount of tax under this division after the deduction for the
1 12 credits allowed under section 422.12. The resulting amount,
1 13 which shall not exceed the taxpayer's pro rata share of the
1 14 franchise tax paid by the financial institution, is the amount
1 15 of the franchise tax credit allowed.
1 16 Sec. 2. Section 422.61, subsection 3, Code 1997, is
1 17 amended by adding the following new paragraph:
1 18 NEW PARAGRAPH. g. Where a financial institution as
1 19 defined in section 581 of the Internal Revenue Code is not
1 20 subject to income tax and the shareholders of the financial
1 21 institution are taxed on the financial institution's income
1 22 under the provisions of the Internal Revenue Code, such tax
1 23 treatment shall be disregarded and the financial institution
1 24 shall compute its net income for franchise tax purposes in the
1 25 same manner under this subsection as a financial institution
1 26 that is subject to or liable for federal income tax under the
1 27 Internal Revenue Code in effect for the applicable year.
1 28 Sec. 3. This Act applies retroactively to January 1, 1997,
1 29 for tax years beginning on or after January 1, 1997.
1 30 EXPLANATION
1 31 The bill amends Code section 422.61 to disallow the federal
1 32 treatment for Iowa individual income tax purposes where a
1 33 financial institution, as defined in section 581 of the
1 34 Internal Revenue Code, is not subject to income tax and where
1 35 the shareholders of the financial institution are taxed on the
2 1 financial institutions' income on the shareholder's federal
2 2 individual income tax return. This federal provision is known
2 3 as a subchapter S corporation election. This amendment to
2 4 Code section 422.61 is intended to prevent any discrimination
2 5 in the taxation of federal obligation income of all financial
2 6 institutions because income of financial institutions would
2 7 only be taxed under the state franchise tax.
2 8 The bill provides for a franchise tax credit for
2 9 individuals who are shareholders of those financial
2 10 institutions that chose subchapter S tax treatment. Since the
2 11 financial institution is subject to the state franchise tax on
2 12 its income and the shareholder has included its pro rata share
2 13 of such income in its adjusted gross income for federal tax
2 14 purposes which is the shareholders net income for state tax
2 15 purposes such income would be taxed twice. The credit for the
2 16 shareholder prevents this. The amount of credit is determined
2 17 by dividing the shareholder's pro rata financial institution's
2 18 income by the shareholder's total Iowa income. This
2 19 percentage is then applied to the shareholder's state tax of
2 20 deduction of the personal credits and the resulting amount is
2 21 subtracted from shareholder's state tax after deduction of the
2 22 personal credits.
2 23 The bill applies retroactively to January 1, 1997, for tax
2 24 years beginning on or after that date.
2 25 LSB 2764SC 77
2 26 mg/sc/14
Text: SSB00266 Text: SSB00268 Text: SSB00200 - SSB00299 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
Iowa General Assembly
Search: Senate Bills and Amendments (77th General Assembly)
© 1997 Cornell College and League of Women Voters of Iowa
Comments about this site or page? webmaster@legis.iowa.gov. Please remember that the person listed above does not vote on bills. Direct all comments concerning legislation to State Legislators.
Last update: Fri Apr 11 03:43:18 CDT 1997
URL: /DOCS/GA/77GA/Legislation/SSB/00200/SSB00267/970410.html
jhf