Text: HF00020 Text: HF00022 Text: HF00000 - HF00099 Text: HF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. Section 422.5, subsection 1, paragraph j, 1 2 subparagraph (2), unnumbered paragraph 2, Code 1999, is 1 3 amended to read as follows: 1 4 This subparagraph shall not affect the amount of the 1 5 taxpayer's checkoff to the Iowa election campaign fund under 1 6 section 56.18, the checkoff for the fish and game fund in 1 7 section 456A.16, the credits from tax provided in sections 1 8 422.10, 422.11A, and 422.12 and the allocation of these 1 9 credits between spouses if the taxpayers filed separate 1 10 returnsor separately on combined returns. 1 11 Sec. 2. Section 422.5, subsection 1, paragraph k, 1 12 unnumbered paragraph 4, Code 1999, is amended to read as 1 13 follows: 1 14 In the case of a resident, including a resident estate or 1 15 trust, the state's apportioned share of the state alternative 1 16 minimum tax is one hundred percent of the state alternative 1 17 minimum tax computed in this subsection. In the case of a 1 18 resident or part-year resident shareholder in an S corporation 1 19 which has in effect for the tax year an election under 1 20 subchapter S of the Internal Revenue Code and carries on 1 21 business within and without the state, a nonresident, 1 22 including a nonresident estate or trust, or an individual, 1 23 estate, or trust that is domiciled in the state for less than 1 24 the entire tax year, the state's apportioned share of the 1 25 state alternative minimum tax is the amount of tax computed 1 26 under this subsection, reduced by the applicable credits in 1 27 sections 422.10 through 422.12 and this result multiplied by a 1 28 fraction with a numerator of the sum of state net income 1 29 allocated to Iowa as determined in section 422.8, subsection 1 30 2, paragraph "a" or "b" as applicable, plus tax preference 1 31 items, adjustments, and losses under subparagraph (1) 1 32 attributable to Iowa and with a denominator of the sum of 1 33 total net income computed under section 422.7 plus all tax 1 34 preference items, adjustments, and losses under subparagraph 1 35 (1). In computing this fraction, those items excludable under 2 1 subparagraph (1) shall not be used in computing the tax 2 2 preference items. Married taxpayers electing to file separate 2 3 returnsor separately on a combined returnmust allocate the 2 4 minimum tax computed in this subsection in the proportion that 2 5 each spouse's respective preference items, adjustments, and 2 6 losses under subparagraph (1) bear to the combined preference 2 7 items, adjustments, and losses under subparagraph (1) of both 2 8 spouses. 2 9 Sec. 3. Section 422.5, subsection 2, Code 1999, is amended 2 10 to read as follows: 2 11 2. However, the tax shall not be imposed on a resident or 2 12 nonresident whose net income, as defined in section 422.7, is 2 13 thirteen thousand five hundred dollars or less in the case of 2 14 married persons filing jointlyor filing separately on a2 15combined return, unmarried heads of household, and surviving 2 16 spouses or nine thousand dollars or less in the case of all 2 17 other persons; but in the event that the payment of tax under 2 18 this division would reduce the net income to less than 2 19 thirteen thousand five hundred dollars or nine thousand 2 20 dollars as applicable, then the tax shall be reduced to that 2 21 amount which would result in allowing the taxpayer to retain a 2 22 net income of thirteen thousand five hundred dollars or nine 2 23 thousand dollars as applicable. The preceding sentence does 2 24 not apply to estates or trusts. For the purpose of this 2 25 subsection, the entire net income, including any part of the 2 26 net income not allocated to Iowa, shall be taken into account. 2 27 For purposes of this subsection, net income includes all 2 28 amounts of pensions or other retirement income received from 2 29 any source which is not taxable under this division as a 2 30 result of the government pension exclusions in section 422.7, 2 31 or any other state law. If the combined net income of a 2 32 husband and wife exceeds thirteen thousand five hundred 2 33 dollars, neither of them shall receive the benefit of this 2 34 subsection, and it is immaterial whether they file a joint 2 35 return or separate returns. However, if a husband and wife 3 1 file separate returns and have a combined net income of 3 2 thirteen thousand five hundred dollars or less, neither spouse 3 3 shall receive the benefit of this paragraph, if one spouse has 3 4 a net operating loss and elects to carry back or carry forward 3 5 the loss as provided in section 422.9, subsection 3. A person 3 6 who is claimed as a dependent by another person as defined in 3 7 section 422.12 shall not receive the benefit of this 3 8 subsection if the person claiming the dependent has net income 3 9 exceeding thirteen thousand five hundred dollars or nine 3 10 thousand dollars as applicable or the person claiming the 3 11 dependent and the person's spouse have combined net income 3 12 exceeding thirteen thousand five hundred dollars or nine 3 13 thousand dollars as applicable. 3 14 In addition, if the married persons', filing jointlyor3 15filing separately on a combined return, unmarried head of 3 16 household's, or surviving spouse's net income exceeds thirteen 3 17 thousand five hundred dollars, the regular tax imposed under 3 18 this division shall be the lesser of the maximum state 3 19 individual income tax rate times the portion of the net income 3 20 in excess of thirteen thousand five hundred dollars or the 3 21 regular tax liability computed without regard to this 3 22 sentence. Taxpayers electing to file separately shall compute 3 23 the alternate tax described in this paragraph using the total 3 24 net income of the husband and wife. The alternate tax 3 25 described in this paragraph does not apply if one spouse 3 26 elects to carry back or carry forward the loss as provided in 3 27 section 422.9, subsection 3. 3 28 Sec. 4. Section 422.7, subsections 1 through 34, Code 3 29 1999, are amended by striking the subsections and inserting in 3 30 lieu thereof the following: 3 31 1. Subtract interest and dividends from federal 3 32 securities. 3 33 2. Add interest and dividends from foreign securities and 3 34 from securities of state and other political subdivisions 3 35 exempt from federal income tax under the Internal Revenue 4 1 Code. 4 2 3. Subtract, to the extent included, the amount of 4 3 additional social security benefits taxable under the Internal 4 4 Revenue Code for tax years beginning on or after January 1, 4 5 1994. The amount of social security benefits taxable as 4 6 provided in section 86 of the Internal Revenue Code, as 4 7 amended up to and including January 1, 1993, continues to 4 8 apply for state income tax purposes for tax years beginning on 4 9 or after January 1, 1994. Married taxpayers, who file a joint 4 10 federal income tax return and who elect to file separate 4 11 returns for state income tax purposes, shall allocate between 4 12 the spouses the amount of benefits subtracted from net income 4 13 in the ratio of the social security benefits received by each 4 14 spouse to the total of these benefits received by both 4 15 spouses. 4 16 4. Add interest and dividends from regulated investment 4 17 companies exempt from federal income tax under the Internal 4 18 Revenue Code and subtract the loss on the sale or exchange of 4 19 a share of a regulated investment company held for six months 4 20 or less to the extent the loss was disallowed under section 4 21 852(b)(4)(B) of the Internal Revenue Code. 4 22 5. Subtract the net capital gain from the following: 4 23 a. (1) Net capital gain from the sale of real property 4 24 used in a business, in which the taxpayer materially 4 25 participated for ten years, as defined in section 469(h) of 4 26 the Internal Revenue Code, and which has been held for a 4 27 minimum of ten years, or from the sale of a business, as 4 28 defined in section 422.42, in which the taxpayer was employed 4 29 or in which the taxpayer materially participated for ten 4 30 years, as defined in section 469(h) of the Internal Revenue 4 31 Code, and which has been held for a minimum of ten years. The 4 32 sale of a business means the sale of all or substantially all 4 33 of the tangible personal property or service of the business. 4 34 However, where the business is sold to individuals who are 4 35 all lineal descendants of the taxpayer, the taxpayer does not 5 1 have to have materially participated in the business in order 5 2 for the net capital gain from the sale to be excluded from 5 3 taxation. 5 4 However, in lieu of the net capital gain deduction in this 5 5 paragraph and paragraphs "b", "c", and "d", where the business 5 6 is sold to individuals who are all lineal descendants of the 5 7 taxpayer, the amount of capital gain from each capital asset 5 8 may be subtracted in determining net income. 5 9 (2) For purposes of this paragraph, "lineal descendant" 5 10 means children of the taxpayer, including legally adopted 5 11 children and biological children, stepchildren, grandchildren, 5 12 great-grandchildren, and any other lineal descendants of the 5 13 taxpayer. 5 14 b. Net capital gain from the sale of cattle or horses held 5 15 by the taxpayer for breeding, draft, dairy, or sporting 5 16 purposes for a period of twenty-four months or more from the 5 17 date of acquisition; but only if the taxpayer received more 5 18 than one-half of the taxpayer's gross income from farming or 5 19 ranching operations during the tax year. 5 20 c. Net capital gain from the sale of breeding livestock, 5 21 other than cattle or horses, if the livestock is held by the 5 22 taxpayer for a period of twelve months or more from the date 5 23 of acquisition; but only if the taxpayer received more than 5 24 one-half of the taxpayer's gross income from farming or 5 25 ranching operations during the tax year. 5 26 d. Net capital gain from the sale of timber as defined in 5 27 section 631(a) of the Internal Revenue Code. 5 28 However, to the extent otherwise allowed, the deduction 5 29 provided in this subsection is not allowed for purposes of 5 30 computation of a net operating loss in section 422.9, 5 31 subsection 3, and in computing the income for the taxable year 5 32 or years for which a net operating loss is deducted. 5 33 6. Subtract, to the extent not otherwise deducted in 5 34 computing adjusted gross income, the amounts paid by the 5 35 taxpayer for the purchase of health benefits coverage or 6 1 insurance for the taxpayer or taxpayer's spouse or dependent. 6 2 7. For a person who is disabled, or is fifty-five years of 6 3 age or older, or is the surviving spouse of an individual or a 6 4 survivor having an insurable interest in an individual who 6 5 would have qualified for the exemption under this subsection 6 6 for the tax year, subtract, to the extent included, the total 6 7 amount of a governmental or other pension or retirement pay, 6 8 including, but not limited to, defined benefit or defined 6 9 contribution plans, annuities, individual retirement accounts, 6 10 plans maintained or contributed to by an employer, or 6 11 maintained or contributed to by a self-employed person as an 6 12 employer, and deferred compensation plans or any earnings 6 13 attributable to the deferred compensation plans, up to a 6 14 maximum of five thousand dollars for a person, other than a 6 15 husband or wife, who files a separate state income tax return 6 16 and up to a maximum of ten thousand dollars for a husband and 6 17 wife who file a joint state income tax return. However, a 6 18 surviving spouse who is not disabled or fifty-five years of 6 19 age or older can only exclude the amount of pension or 6 20 retirement pay received as a result of the death of the other 6 21 spouse. A husband and wife filing separate state income tax 6 22 returns are allowed a combined maximum exclusion under this 6 23 subsection of up to ten thousand dollars. The ten thousand 6 24 dollar exclusion shall be allocated to the husband or wife in 6 25 the proportion that each spouse's respective pension and 6 26 retirement pay received bears to total combined pension and 6 27 retirement pay received. 6 28 Sec. 5. Section 422.9, subsection 2, paragraph i, Code 6 29 1999, is amended to read as follows: 6 30 i. If the taxpayer has a deduction for medical care 6 31 expenses under section 213 of the Internal Revenue Code, the 6 32 taxpayer shall recompute for the purposes of this subsection 6 33 the amount of the deduction under section 213 by excluding 6 34 from medical care, as defined in section 213, the amount 6 35 subtracted under section 422.7, subsection326. 7 1 Sec. 6. Section 422.12, Code 1999, is amended by adding 7 2 the following new subsection: 7 3 NEW SUBSECTION. 2A. If married taxpayers file jointly, a 7 4 second-earner tax credit equal to two and sixty-five 7 5 hundredths percent of the taxable income of the lesser earning 7 6 spouse. 7 7 Sec. 7. Section 422.12B, subsection 2, Code 1999, is 7 8 amended to read as follows: 7 9 2. Married taxpayers electing to file separate returnsor7 10filing separately on a combined returnmay avail themselves of 7 11 the earned income credit by allocating the earned income 7 12 credit to each spouse in the proportion that each spouse's 7 13 respective earned income bears to the total combined earned 7 14 income. Taxpayers affected by the allocation provisions of 7 15 section 422.8 shall be permitted a deduction for the credit 7 16 only in the amount fairly and equitably allocable to Iowa 7 17 under rules prescribed by the director. 7 18 Sec. 8. Section 422.12C, subsection 3, Code 1999, is 7 19 amended to read as follows: 7 20 3. Married taxpayers who have filed joint federal returns 7 21 electing to file separate returnsor to file separately on a7 22combined return formmust determine the child and dependent 7 23 care credit under subsection 1 based upon their combined net 7 24 income and allocate the total credit amount to each spouse in 7 25 the proportion that each spouse's respective net income bears 7 26 to the total combined net income. Nonresidents or part-year 7 27 residents of Iowa must determine their Iowa child and 7 28 dependent care credit in the ratio of their Iowa source net 7 29 income to their all source net income. Nonresidents or part- 7 30 year residents who are married and elect to file separate 7 31 returnsor to file separately on a combined return formmust 7 32 allocate the Iowa child and dependent care credit between the 7 33 spouses in the ratio of each spouse's Iowa source net income 7 34 to the combined Iowa source net income of the taxpayers. 7 35 Sec. 9. Section 422.21, unnumbered paragraphs 2 and 7, 8 1 Code 1999, are amended to read as follows: 8 2 An individual in the armed forces of the United States 8 3 serving in an area designated by the president of the United 8 4 States or the United States Congress as a combat zone, or an 8 5 individual serving in support of those forces, is allowed the 8 6 same additional time period after leaving the combat zone, or 8 7 after a period of continuous hospitalization, to file a state 8 8 income tax return or perform other acts related to the 8 9 department, as would constitute timely filing of the return or 8 10 timely performance of other acts described in section 7508(a) 8 11 of the Internal Revenue Code. For the purposes of this 8 12 paragraph, "other acts related to the department" includes 8 13 filing claims for refund for any tax administered by the 8 14 department, making tax payments other than withholding 8 15 payments, filing appeals on the tax matters, filing other tax 8 16 returns, and performing other acts described in the 8 17 department's rules. The additional time period allowed 8 18 applies to the spouse of the individual described in this 8 19 paragraph to the extent the spouse files jointlyor separately8 20on the combined return formwith the individual or when the 8 21 spouse is a party with the individual to any matter for which 8 22 the additional time period is allowed. For the purposes of 8 23 this paragraph, the Internal Revenue Code shall be interpreted 8 24 to include the provisions of Pub. L. No. 102-2. 8 25 If married taxpayers file a joint returnor file separately8 26on a combined returnin accordance with rules prescribed by 8 27 the director, both spouses are jointly and severally liable 8 28 for the total tax due on the return, except when one spouse is 8 29 considered to be an innocent spouse under criteria established 8 30 pursuant to section 6013(e) of the Internal Revenue Code. 8 31 Sec. 10. Section 541A.3, subsection 2, Code 1999, is 8 32 amended by striking the subsection. 8 33 Sec. 11. This Act, being deemed of immediate importance, 8 34 takes effect upon enactment and applies retroactively to 8 35 January 1, 1999, for tax years beginning on or after that 9 1 date. 9 2 EXPLANATION 9 3 Under present law, the computation of individuals' income 9 4 tax begins with federal adjusted gross income with 9 5 approximately 32 adjustments. This bill reduces that to seven 9 6 adjustments which are presently available. These include the 9 7 exclusion of interest from federal securities, certain capital 9 8 gains, health coverage premiums, and some pension benefits, 9 9 less social security benefits being taxed, the inclusion of 9 10 state, foreign, and local government interest not specifically 9 11 excluded elsewhere in the Code, and the inclusion of certain 9 12 interest and dividends from regulated investment companies. 9 13 The bill eliminates the ability for married taxpayers to 9 14 file separately on a combined return and provides in lieu 9 15 thereof a second-earner tax credit. 9 16 The bill takes effect upon enactment and applies 9 17 retroactively to January 1, 1999, for tax years beginning on 9 18 or after that date. 9 19 LSB 1369YH 78 9 20 mg/cf/24
Text: HF00020 Text: HF00022 Text: HF00000 - HF00099 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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