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PAG LIN 1 1 Section 1. Section 15.335, Code Supplement 1999, is 1 2 amended to read as follows: 1 3 15.335 RESEARCH ACTIVITIES CREDIT. 1 4 1. An eligible business may claim a corporate tax credit 1 5 for increasing research activities in this state during the 1 6 period the eligible business is participating in the program. 1 7 a. The credit equalssix and one-half percent of the1 8state's apportioned share of the qualifying expenditures for1 9increasing research activities.the sum of the following: 1 10 (1) Six and one-half percent of the excess of qualified 1 11 research expenses during the tax year over the base amount for 1 12 the tax year based upon the state's apportioned share of the 1 13 qualifying expenditures for increasing research activities. 1 14 (2) Six and one-half percent of the basic research 1 15 payments determined under section 41(e)(1)(A) of the Internal 1 16 Revenue Code during the tax year based upon the state's 1 17 apportioned share of the qualifying expenditures for 1 18 increasing research activities. 1 19 The state's apportioned share of the qualifying 1 20 expenditures for increasing research activities is a percent 1 21 equal to the ratio of qualified research expenditures in this 1 22 state to total qualified research expenditures. 1 23 b. In lieu of the credit amount computed in paragraph "a", 1 24 subparagraph (1), an eligible business may elect to compute 1 25 the credit amount for qualified research expenses incurred in 1 26 this state in a manner consistent with the alternative 1 27 incremental credit described in section 41(c)(4) of the 1 28 Internal Revenue Code. The taxpayer may make this election 1 29 regardless of the method used for the taxpayer's federal 1 30 income tax. The election made under this paragraph is for the 1 31 tax year and the taxpayer may use another or the same method 1 32 for any subsequent year. 1 33 c. For purposes of the alternate credit computation method 1 34 in paragraph "b", the credit percentages applicable to 1 35 qualified research expenses described in clauses (i), (ii), 2 1 and (iii) of section 41(c)(4)(A) of the Internal Revenue Code 2 2 are one and sixty-five hundredths percent, two and twenty 2 3 hundredths percent, and two and seventy-five hundredths 2 4 percent, respectively. 2 5 2. The credit allowed in this section is in addition to 2 6 the credit authorized in section 422.33, subsection 5, and 2 7 section 422.10. However, if the alternative credit 2 8 computation method is used in section 422.33, subsection 5, or 2 9 section 422.10, the credit allowed in this section shall also 2 10 be computed using that method. 2 11 3. If the eligible business is a partnership,subchapterS 2 12 corporation, limited liability company, or estate or trust 2 13 electing to have the income taxed directly to the individual, 2 14 an individual may claim the tax credit allowed. The amount 2 15 claimed by the individual shall be based upon the pro rata 2 16 share of the individual's earnings of the partnership, 2 17subchapterS corporation, limited liability company, or estate 2 18 or trust. 2 19 4. For purposes of this section,"qualifying expenditures2 20for increasing research activities" means the qualifying2 21expenditures"base amount", "basic research payment", and 2 22 "qualified research expense" mean the same as defined for the 2 23 federal credit for increasing research activitieswhich would2 24be allowableunder section 41 of the Internal Revenue Codein2 25effect on January 1, 1999, except that for the alternative 2 26 incremental credit such amounts are for research conducted 2 27 within this state. For purposes of this section, "Internal 2 28 Revenue Code" means the Internal Revenue Code in effect on 2 29 January 1, 2000. 2 30 5. Any credit in excess of the tax liability for the 2 31 taxable year shall be refunded with interest computed under 2 32 section 422.25. In lieu of claiming a refund, a taxpayer may 2 33 elect to have the overpayment shown on its final, completed 2 34 return credited to the tax liability for the following year. 2 35 Sec. 2. Section 15A.9, subsection 8, Code Supplement 1999, 3 1 is amended to read as follows: 3 2 8. CORPORATE TAX RESEARCH CREDIT. A corporate tax credit 3 3 shall be available to the primary business or a supporting 3 4 business for increasing research activities in this state 3 5 within the zone. 3 6 a. The credit equalsthirteen percent of the state's3 7apportioned share of the qualifying expenditures for3 8increasing research activities.the sum of the following: 3 9 (1) Thirteen percent of the excess of qualified research 3 10 expenses during the tax year over the base amount for the tax 3 11 year based upon the state's apportioned share of the 3 12 qualifying expenditures for increasing research activities. 3 13 (2) Thirteen percent of the basic research payments 3 14 determined under section 41(e)(1)(A) of the Internal Revenue 3 15 Code during the tax year based upon the state's apportioned 3 16 share of the qualifying expenditures for increasing research 3 17 activities. 3 18 The state's apportioned share of the qualifying 3 19 expenditures for increasing research activities is a percent 3 20 equal to the ratio of qualified research expenditures in this 3 21 state within the zone to total qualified research 3 22 expenditures. 3 23 b. In lieu of the credit amount computed in paragraph "a", 3 24 subparagraph (1), a business may elect to compute the credit 3 25 amount for qualified research expenses incurred in this state 3 26 within the zone in a manner consistent with the alternative 3 27 incremental credit described in section 41(c)(4) of the 3 28 Internal Revenue Code. The taxpayer may make this election 3 29 regardless of the method used for the taxpayer's federal 3 30 income tax. The election made under this paragraph is for the 3 31 tax year and the taxpayer may use another or the same method 3 32 for any subsequent year. 3 33 c. For purposes of the alternate credit computation method 3 34 in paragraph "b", the credit percentages applicable to 3 35 qualified research expenses described in clauses (i), (ii), 4 1 and (iii) of section 41(c)(4)(A) of the Internal Revenue Code 4 2 are three and thirty hundredths percent, four and forty 4 3 hundredths percent, and five and fifty hundredths percent, 4 4 respectively. 4 5 d. Any credit in excess of the tax liability for the tax 4 6 year shall be refunded with interest computed under section 4 7 422.25. In lieu of claiming a refund, the primary business or 4 8 a supporting business may elect to have the overpayment shown 4 9 on its final return credited to its tax liability for the 4 10 following tax year. 4 11 e. For the purposes of thissection, "qualifying4 12expenditures for increasing research activities" means the4 13qualifying expendituressubsection, "base amount", "basic 4 14 research payment", and "qualified research expense" mean the 4 15 same as defined for the federal credit for increasing research 4 16 activitieswhich would be allowableunder section 41 of the 4 17 Internal Revenue Codein effect on January 1, 1999, except 4 18 that for the alternative incremental credit such amounts are 4 19 for research conducted within this state within the zone. For 4 20 purposes of this subsection, "Internal Revenue Code" means the 4 21 Internal Revenue Code in effect on January 1, 2000. 4 22 f. The credit authorized in this subsection is in lieu of 4 23 the credit authorized in section 422.33, subsection 5 and 4 24 section 422.10. 4 25 Sec. 3. Section 422.10, Code Supplement 1999, is amended 4 26 to read as follows: 4 27 422.10 RESEARCH ACTIVITIES CREDIT. 4 28 1. The taxes imposed under this division shall be reduced 4 29 by a state tax credit for increasing research activities in 4 30 this state. 4 31 a. For individuals, the credit equalssix and one-half4 32percent of the state's apportioned share of the qualifying4 33expenditures for increasing research activities.the sum of 4 34 the following: 4 35 (1) Six and one-half percent of the excess of qualified 5 1 research expenses during the tax year over the base amount for 5 2 the tax year based upon the state's apportioned share of the 5 3 qualifying expenditures for increasing research activities. 5 4 (2) Six and one-half percent of the basic research 5 5 payments determined under section 41(e)(1)(A) of the Internal 5 6 Revenue Code during the tax year based upon the state's 5 7 apportioned share of the qualifying expenditures for 5 8 increasing research activities. 5 9 The state's apportioned share of the qualifying 5 10 expenditures for increasing research activities is a percent 5 11 equal to the ratio of qualified research expenditures in this 5 12 state to total qualified research expenditures. 5 13 b. In lieu of the credit amount computed in paragraph "a", 5 14 subparagraph (1), a taxpayer may elect to compute the credit 5 15 amount for qualified research expenses incurred in this state 5 16 in a manner consistent with the alternative incremental credit 5 17 described in section 41(c)(4) of the Internal Revenue Code. 5 18 The taxpayer may make this election regardless of the method 5 19 used for the taxpayer's federal income tax. The election made 5 20 under this paragraph is for the tax year and the taxpayer may 5 21 use another or the same method for any subsequent year. 5 22 c. For purposes of the alternate credit computation method 5 23 in paragraph "b", the credit percentages applicable to 5 24 qualified research expenses described in clauses (i), (ii), 5 25 and (iii) of section 41(c)(4)(A) of the Internal Revenue Code 5 26 are one and sixty-five hundredths percent, two and twenty 5 27 hundredths percent, and two and seventy-five hundredths 5 28 percent, respectively. 5 29 2. For purposes of this section, an individual may claim a 5 30 research creditfor qualifying research expendituresincurred 5 31 by a partnership,subchapterS corporation, limited liability 5 32 company, estate, or trust electing to have the income taxed 5 33 directly to the individual. The amount claimed by the 5 34 individual shall be based upon the pro rata share of the 5 35 individual's earnings of a partnership,subchapterS 6 1 corporation, limited liability company, estate, or trust. 6 2 3. For purposes of this section,"qualifying expenditures6 3for increasing research activities" means the qualifying6 4expenditures"base amount", "basic research payment", and 6 5 "qualified research expense" mean the same as defined for the 6 6 federal credit for increasing research activitieswhich would6 7be allowableunder section 41 of the Internal Revenue Codein6 8effect on January 1, 1999, except that for the alternative 6 9 incremental credit such amounts are for research conducted 6 10 within this state. For purposes of this section, "Internal 6 11 Revenue Code" means the Internal Revenue Code in effect on 6 12 January 1, 2000. 6 13 4. Any credit in excess of the tax liability imposed by 6 14 section 422.5 less the credits allowed under sections 422.11A, 6 15 422.12, and 422.12B for the taxable year shall be refunded 6 16 with interest computed under section 422.25. In lieu of 6 17 claiming a refund, a taxpayer may elect to have the 6 18 overpayment shown on the taxpayer's final, completed return 6 19 credited to the tax liability for the following taxable year. 6 20 Sec. 4. Section 422.33, subsection 5, Code Supplement 6 21 1999, is amended to read as follows: 6 22 5. a. The taxes imposed under this division shall be 6 23 reduced by a state tax credit for increasing research 6 24 activities in this state equal tosix and one-half percent of6 25the state's apportioned share of the qualifying expenditures6 26for increasing research activities.the sum of the following: 6 27 (1) Six and one-half percent of the excess of qualified 6 28 research expenses during the tax year over the base amount for 6 29 the tax year based upon the state's apportioned share of the 6 30 qualifying expenditures for increasing research activities. 6 31 (2) Six and one-half percent of the basic research 6 32 payments determined under section 41(e)(1)(A) of the Internal 6 33 Revenue Code during the tax year based upon the state's 6 34 apportioned share of the qualifying expenditures for 6 35 increasing research activities. 7 1 The state's apportioned share of the qualifying 7 2 expenditures for increasing research activities is a percent 7 3 equal to the ratio of qualified research expenditures in this 7 4 state to the total qualified research expenditures. 7 5 b. In lieu of the credit amount computed in paragraph "a", 7 6 subparagraph (1), a corporation may elect to compute the 7 7 credit amount for qualified research expenses incurred in this 7 8 state in a manner consistent with the alternative incremental 7 9 credit described in section 41(c)(4) of the Internal Revenue 7 10 Code. The taxpayer may make this election regardless of the 7 11 method used for the taxpayer's federal income tax. The 7 12 election made under this paragraph is for the tax year and the 7 13 taxpayer may use another or the same method for any subsequent 7 14 year. 7 15 c. For purposes of the alternate credit computation method 7 16 in paragraph "b", the credit percentages applicable to 7 17 qualified research expenses described in clauses (i), (ii), 7 18 and (iii) of section 41(c)(4)(A) of the Internal Revenue Code 7 19 are one and sixty-five hundredths percent, two and twenty 7 20 hundredths percent, and two and seventy-five hundredths 7 21 percent, respectively. 7 22 d. For purposes of this subsection,"qualifying7 23expenditures for increasing research activities" means the7 24qualifying expenditures"base amount", "basic research 7 25 payment", and "qualified research expense" mean the same as 7 26 defined for the federal credit for increasing research 7 27 activitieswhich would be allowableunder section 41 of the 7 28 Internal Revenue Codein effect on January 1, 1999, except 7 29 that for the alternative incremental credit such amounts are 7 30 for research conducted within this state. For purposes of 7 31 this subsection, "Internal Revenue Code" means the Internal 7 32 Revenue Code in effect on January 1, 2000. 7 33 e. Any credit in excess of the tax liability for the 7 34 taxable year shall be refunded with interest computed under 7 35 section 422.25. In lieu of claiming a refund, a taxpayer may 8 1 elect to have the overpayment shown on its final, completed 8 2 return credited to the tax liability for the following taxable 8 3 year. 8 4 Sec. 5. APPLICABILITY DATE. This Act applies 8 5 retroactively to January 1, 2000, for tax years beginning on 8 6 or after that date. 8 7 EXPLANATION 8 8 This bill expands the research activities credit for income 8 9 tax purposes for businesses under the new jobs and income 8 10 program, the quality jobs enterprise zone program, the 8 11 incentives for building in enterprise zones, the individual 8 12 income tax, and corporate income tax. The expansion provides 8 13 for an alternative method of computing the tax credit based 8 14 upon the federal approach using an incremental computation 8 15 method for measuring increased research activities. This 8 16 alternative method is in lieu of a portion of Iowa's present 8 17 computation approach. Therefore, the present Iowa law is 8 18 rewritten in a manner that coincides with the computation 8 19 under the federal income tax credit. The federal approach has 8 20 three tiers under the incremented approach with a different 8 21 percentage for each tier. The bill uses the same percentages 8 22 for the three tiers which were used for federal income taxes 8 23 for tax years beginning before July 1, 1999. 8 24 The bill applies retroactively to January 1, 2000, for tax 8 25 years beginning on or after that date. 8 26 LSB 7319SV 78 8 27 mg/cf/24
Text: SF02455 Text: SF02457 Text: SF02400 - SF02499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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