Text: HF00253 Text: HF00255 Text: HF00200 - HF00299 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 1, Code 1999, is 1 3 amended to read as follows: 1 4 The tax imposed upon the taxable income of a resident 1 5shareholder inowner of an S corporationwhich has in effect1 6for the tax year an election under subchapter S of the1 7Internal Revenue Code and, partnership, limited liability 1 8 company, sole proprietorship, or other business entity which 1 9 carries on business within and without the state may be 1 10 computed by reducing the amount determined pursuant to 1 11 paragraphs "a" through "i" by the amounts of nonrefundable 1 12 credits under this division and by multiplying this resulting 1 13 amount by a fraction of which the resident's net income 1 14 allocated to Iowa, as determined in section 422.8, subsection 1 15 2, paragraph "b", is the numerator and the resident's total 1 16 net income computed under section 422.7 is the denominator. 1 17 If a residentshareholderowner has elected to take advantage 1 18 of this subparagraph, and for the next tax year elects not to 1 19 take advantage of this subparagraph, the residentshareholder1 20 owner shall not reelect to take advantage of this subparagraph 1 21 for the three tax years immediately following the first tax 1 22 year for which theshareholderresident elected not to take 1 23 advantage of this subparagraph, unless the director consents 1 24 to the reelection. This subparagraph also applies to 1 25 individuals who are residents of Iowa for less than the entire 1 26 tax year. 1 27 Sec. 2. Section 422.5, subsection 1, paragraph k, 1 28 unnumbered paragraph 4, Code 1999, is amended to read as 1 29 follows: 1 30 In the case of a resident, including a resident estate or 1 31 trust, the state's apportioned share of the state alternative 1 32 minimum tax is one hundred percent of the state alternative 1 33 minimum tax computed in this subsection. In the case of a 1 34 resident or part-year residentshareholder inowner of an S 1 35 corporationwhich has in effect for the tax year an election2 1under subchapter S of the Internal Revenue Code and, 2 2 partnership, limited liability company, sole proprietorship, 2 3 or other business entity which carries on business within and 2 4 without the state, a nonresident, including a nonresident 2 5 estate or trust, or an individual, estate, or trust that is 2 6 domiciled in the state for less than the entire tax year, the 2 7 state's apportioned share of the state alternative minimum tax 2 8 is the amount of tax computed under this subsection, reduced 2 9 by the applicable credits in sections 422.10 through 422.12 2 10 and this result multiplied by a fraction with a numerator of 2 11 the sum of state net income allocated to Iowa as determined in 2 12 section 422.8, subsection 2, paragraph "a" or "b" as 2 13 applicable, plus tax preference items, adjustments, and losses 2 14 under subparagraph (1) attributable to Iowa and with a 2 15 denominator of the sum of total net income computed under 2 16 section 422.7 plus all tax preference items, adjustments, and 2 17 losses under subparagraph (1). In computing this fraction, 2 18 those items excludable under subparagraph (1) shall not be 2 19 used in computing the tax preference items. Married taxpayers 2 20 electing to file separate returns or separately on a combined 2 21 return must allocate the minimum tax computed in this 2 22 subsection in the proportion that each spouse's respective 2 23 preference items, adjustments, and losses under subparagraph 2 24 (1) bear to the combined preference items, adjustments, and 2 25 losses under subparagraph (1) of both spouses. 2 26 Sec. 3. Section 422.8, subsection 2, paragraph b, Code 2 27 1999, is amended to read as follows: 2 28 b. A resident's income allocable to Iowa is the income 2 29 determined under section 422.7 reduced by items of income and 2 30 expenses from an S corporation, partnership, limited liability 2 31 company, sole proprietorship, or other business entity that 2 32 carries on business within and without the state when those 2 33 items of income and expenses pass directly to theshareholders2 34 owners of the business entity under provisions of the Internal 2 35 Revenue Code. These items of income and expenses are 3 1 increased by the greater of the following: 3 2 (1) The net income or loss of thecorporationbusiness 3 3 entity which is fairly and equitably attributable to this 3 4 state under section 422.33, subsections 2 and 3. 3 5 (2) Any cash or the value of property distributions which 3 6 are made only to the extent that they are paid from income 3 7 upon which Iowa income tax has not been paid, as determined 3 8 under rules of the director, reduced byfifty percent ofthe 3 9 amount of any of these distributions that are made to enable 3 10 theshareholderowner of the business entity to pay federal 3 11 income tax on items of income, loss, and expenses from the 3 12corporationbusiness entity. 3 13 Sec. 4. Section 422.8, subsection 6, Code 1999, is amended 3 14 to read as follows: 3 15 6. If the resident or part-year resident isa shareholder3 16 an owner of an S corporationwhich has in effect an election3 17under subchapter S of the Internal Revenue Code, partnership, 3 18 limited liability company, sole proprietorship, or other 3 19 business entity, subsections 1 and 3 do not apply to any 3 20 income taxes paid to another state or foreign country on the 3 21 income from thecorporation which has in effect an election3 22under subchapter S of the Internal Revenue Codebusiness 3 23 entity. 3 24 Sec. 5. This Act applies retroactively to January 1, 1999, 3 25 for tax years beginning on or after that date. 3 26 EXPLANATION 3 27 The bill allows resident owners of partnerships, limited 3 28 liability companies, sole proprietorships, and other business 3 29 entities to reduce their state individual income tax in the 3 30 same manner as resident owners of S corporations presently do. 3 31 In recomputing the income tax liability, the taxpayer does not 3 32 include all of the income and expenses of the taxpayer's share 3 33 of the business entity but only the greater of that income and 3 34 expenses attributable to the state based upon Iowa's corporate 3 35 tax allocation rules or the actual cash or other property 4 1 distributed to the taxpayer which was not previously subject 4 2 to Iowa tax, less any amount distributed that was used to pay 4 3 federal income taxes. This is the same computation presently 4 4 done for S corporations except only 50 percent of the amount 4 5 distributed to pay federal income taxes are deducted for S 4 6 corporations. The bill increases that to 100 percent for all 4 7 business entities including S corporations. 4 8 The bill applies retroactively to January 1, 1999, for tax 4 9 years beginning on or after that date. 4 10 LSB 1916HH 78 4 11 mg/sc/14.1
Text: HF00253 Text: HF00255 Text: HF00200 - HF00299 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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