Text: SSB01167 Text: SSB01169 Text: SSB01100 - SSB01199 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 DIVISION I 1 2 INDIVIDUAL INCOME TAX 1 3 SINGLE TAX RATE 1 4 Section 1. Section 422.4, subsections 1 and 2, Code 2003, 1 5 are amended by striking the subsections. 1 6 Sec. 2. Section 422.4, subsection 16, Code 2003, is 1 7 amended to read as follows: 1 8 16.The words "taxable"Taxable income"meanmeans the net 1 9 income as defined in section 422.7 minus the deductions 1 10 allowed by section 422.9, in the case of individuals; in. In 1 11 the case of estates or trusts,the words"taxable income"mean1 12 means the taxable income,(without a deduction for personal 1 13 exemption), as computed for federal income tax purposes under 1 14 the Internal Revenue Code, but with the adjustments specified 1 15 in section 422.7plus the Iowa income tax deducted in1 16computing the federal taxable income and minus federal income1 17taxes as provided in section 422.9. 1 18 Sec. 3. Section 422.5, subsection 1, Code 2003, is amended 1 19 by striking the subsection and inserting in lieu thereof the 1 20 following: 1 21 1. a. A tax is imposed upon every resident and 1 22 nonresident of the state which tax shall be levied, collected, 1 23 and paid annually upon and with respect to the entire taxable 1 24 income at the rate of three and one-half percent. 1 25 b. (1) The tax imposed upon the taxable income of a 1 26 nonresident shall be computed by reducing the amount 1 27 determined pursuant to paragraph "a" by the amounts of 1 28 nonrefundable credits under this division and by multiplying 1 29 this resulting amount by a fraction of which the nonresident's 1 30 net income allocated to Iowa, as determined in section 422.8, 1 31 subsection 2, paragraph "a", is the numerator and the 1 32 nonresident's total net income computed under section 422.7 is 1 33 the denominator. This provision also applies to individuals 1 34 who are residents of Iowa for less than the entire tax year. 1 35 (2) The tax imposed upon the taxable income of a resident 2 1 shareholder in an S corporation which has in effect for the 2 2 tax year an election under subchapter S of the Internal 2 3 Revenue Code and carries on business within and without the 2 4 state may be computed by reducing the amount determined 2 5 pursuant to paragraph "a" by the amounts of nonrefundable 2 6 credits under this division and by multiplying this resulting 2 7 amount by a fraction of which the resident's net income 2 8 allocated to Iowa, as determined in section 422.8, subsection 2 9 2, paragraph "b", is the numerator and the resident's total 2 10 net income computed under section 422.7 is the denominator. 2 11 If a resident shareholder has elected to take advantage of 2 12 this subparagraph, and for the next tax year elects not to 2 13 take advantage of this subparagraph, the resident shareholder 2 14 shall not reelect to take advantage of this subparagraph for 2 15 the three tax years immediately following the first tax year 2 16 for which the shareholder elected not to take advantage of 2 17 this subparagraph, unless the director consents to the 2 18 reelection. This subparagraph also applies to individuals who 2 19 are residents of Iowa for less than the entire tax year. 2 20 c. (1) A bill containing among its provisions an increase 2 21 in the tax rate under this section or the imposition upon 2 22 individuals or estates or trusts of an income surtax or 2 23 alternative minimum tax shall require the affirmative votes of 2 24 at least three-fourths of the members elected to each house of 2 25 the general assembly for passage. 2 26 (2) A lawsuit challenging the proper enactment of a bill 2 27 pursuant to subparagraph (1) shall be filed no later than one 2 28 year following the enactment. Failure to file such a lawsuit 2 29 within the one-year time limit shall negate the three-fourths 2 30 majority requirement as it applies to the bill. 2 31 (3) Each bill to which subparagraph (1) applies shall 2 32 include a separate provision describing the requirements for 2 33 enactment prescribed by subparagraphs (1) and (2). 2 34 Sec. 4. Section 422.5, subsection 2, Code 2003, is amended 2 35 by striking the subsection and inserting in lieu thereof the 3 1 following: 3 2 2. a. However, if the married persons' filing jointly, 3 3 unmarried head of household's, or surviving spouse's net 3 4 income exceeds fifteen thousand dollars or eleven thousand 3 5 dollars in the case of all other persons, the regular tax 3 6 imposed under this division shall be the lesser of the product 3 7 of eight percent times the portion of the net income in excess 3 8 of fifteen thousand dollars or eleven thousand dollars, as 3 9 applicable, or the regular tax liability computed without 3 10 regard to this paragraph. 3 11 b. Paragraph "a" does not apply to estates and trusts. 3 12 Married taxpayers electing to file separately shall compute 3 13 the alternate tax described in paragraph "a" using the total 3 14 net income of the husband and wife. The alternate tax 3 15 described in paragraph "a" does not apply if one spouse elects 3 16 to carry back or carry forward the loss as provided in section 3 17 422.9, subsection 3. A person who is claimed as a dependent 3 18 by another person as defined in section 422.12 shall not 3 19 receive the benefit of paragraph "a" if the person claiming 3 20 the dependent has net income exceeding fifteen thousand 3 21 dollars or eleven thousand dollars as applicable or the person 3 22 claiming the dependent and the person's spouse have combined 3 23 net income exceeding fifteen thousand dollars or eleven 3 24 thousand dollars as applicable. 3 25 Sec. 5. Section 422.5, subsections 5 and 7, Code 2003, are 3 26 amended by striking the subsections. 3 27 Sec. 6. Section 422.7, Code 2003, is amended by striking 3 28 the section and inserting in lieu thereof the following: 3 29 422.7 "NET INCOME" – HOW COMPUTED. 3 30 The term "net income" means the adjusted gross income 3 31 before the net operating loss deduction as properly computed 3 32 for federal income tax purposes under the Internal Revenue 3 33 Code, with the following adjustments: 3 34 1. The adjusted gross income is adjusted by adding the sum 3 35 of the following: 4 1 a. Add the amount of federal income tax refunds received 4 2 in a tax year beginning on or after January 1, 2004, but 4 3 before January 1, 2007, to the extent that the federal income 4 4 tax was deducted on an Iowa individual income tax return for a 4 5 tax year beginning prior to January 1, 2004. 4 6 b. Add interest and dividends from foreign securities and 4 7 from securities of state and other political subdivisions 4 8 exempt from federal income tax under the Internal Revenue 4 9 Code. 4 10 c. Add interest and dividends from regulated investment 4 11 companies exempt from federal income tax under the Internal 4 12 Revenue Code. 4 13 d. Add, to the extent not already included, income from 4 14 the sale of obligations of the state and its political 4 15 subdivisions. Income from the sale of these obligations is 4 16 exempt from the taxes imposed by this division only if the law 4 17 authorizing these obligations specifically exempts the income 4 18 from the sale from the state individual income tax. 4 19 e. Add the amount resulting from the cancellation of a 4 20 participation agreement refunded to the taxpayer as a 4 21 participant in the Iowa educational savings plan trust under 4 22 chapter 12D to the extent previously deducted as a 4 23 contribution to the trust. 4 24 2. The adjusted gross income is adjusted by subtracting 4 25 the sum of the following: 4 26 a. Subtract the amount of federal income taxes paid or 4 27 accrued, as the case may be, in a tax year beginning on or 4 28 after January 1, 2004, but before January 1, 2007, to the 4 29 extent the federal tax payment is for a tax year beginning 4 30 prior to January 1, 2004. 4 31 b. Subtract interest and dividends from federal 4 32 securities. 4 33 c. Subtract the loss on the sale or exchange of a share of 4 34 a regulated investment company held for six months or less to 4 35 the extent the loss was disallowed under section 852(b)(4)(B) 5 1 of the Internal Revenue Code. 5 2 d. (1) Subtract, to the extent included, the amount of 5 3 additional social security benefits taxable under the Internal 5 4 Revenue Code for tax years beginning before January 1, 2008. 5 5 The amount of social security benefits taxable as provided in 5 6 section 86 of the Internal Revenue Code, as amended up to and 5 7 including January 1, 1993, continues to apply for state income 5 8 tax purposes for tax years beginning before January 1, 2008. 5 9 (2) Subtract, to the extent included after the subtraction 5 10 in subparagraph (1), the following: 5 11 (a) For tax years beginning in the 2004 calendar year, 5 12 one-fifth of taxable social security benefits received. 5 13 (b) For tax years beginning in the 2005 calendar year, 5 14 two-fifths of taxable social security benefits received. 5 15 (c) For tax years beginning in the 2006 calendar year, 5 16 three-fifths of taxable social security benefits received. 5 17 (d) For tax years beginning in the 2007 calendar year, 5 18 four-fifths of taxable social security benefits received. 5 19 (3) Married taxpayers, who file a joint federal income tax 5 20 return and who elect to file separate returns for state income 5 21 tax purposes, shall allocate between the spouses the amount of 5 22 benefits subtracted under subparagraphs (1) and (2) from net 5 23 income in the ratio of the social security benefits received 5 24 by each spouse to the total of these benefits received by both 5 25 spouses. 5 26 (4) Subtract, to the extent included, the amount of social 5 27 security benefits taxable under section 86 of the Internal 5 28 Revenue Code for tax years beginning on or after January 1, 5 29 2008. 5 30 e. (1) Subtract, to the extent included, for tax years 5 31 beginning before January 1, 2008, for a person who is 5 32 disabled, or is fifty-five years of age or older, or is the 5 33 surviving spouse of an individual or a survivor having an 5 34 insurable interest in an individual who would have qualified 5 35 for the exemption under this paragraph for the tax year, the 6 1 total amount of a governmental or other pension or retirement 6 2 pay, including, but not limited to, defined benefit or defined 6 3 contribution plans, annuities, individual retirement accounts, 6 4 plans maintained or contributed to by an employer, or 6 5 maintained or contributed to by a self-employed person as an 6 6 employer, and deferred compensation plans or any earnings 6 7 attributable to the deferred compensation plans, up to a 6 8 maximum of six thousand dollars for a person, other than a 6 9 husband or wife, who files a separate state income tax return 6 10 and up to a maximum of twelve thousand dollars for a husband 6 11 and wife who file a joint state income tax return. 6 12 (2) Subtract, to the extent included after the subtraction 6 13 in subparagraph (1), the following: 6 14 (a) For tax years beginning in the 2004 calendar year, 6 15 one-fifth of the amount of governmental or other pension or 6 16 retirement pay included. 6 17 (b) For tax years beginning in the 2005 calendar year, 6 18 two-fifths of the amount of governmental or other pension or 6 19 retirement pay included. 6 20 (c) For tax years beginning in the 2006 calendar year, 6 21 three-fifths of the amount of governmental or other pension or 6 22 retirement pay included. 6 23 (d) For tax years beginning in the 2007 calendar year, 6 24 four-fifths of the amount of governmental or other pension or 6 25 retirement pay included. 6 26 (3) However, a surviving spouse who is not disabled or 6 27 fifty-five years of age or older can only exclude the amount 6 28 of pension or retirement pay received as a result of the death 6 29 of the other spouse. A husband and wife filing separate state 6 30 income tax returns are allowed a combined maximum exclusion 6 31 under this paragraph "e" of up to the amount allowed for a 6 32 husband and wife who file a joint state income tax return. 6 33 The exclusion shall be allocated to the husband or wife in the 6 34 proportion that each spouse's respective pension and 6 35 retirement pay received bears to total combined pension and 7 1 retirement pay received. 7 2 (4) Subtract, to the extent included, the total amount of 7 3 governmental or other pension or retirement pay for tax years 7 4 beginning on or after January 1, 2008. 7 5 f. Notwithstanding the method for computing income from an 7 6 installment sale under section 453 of the Internal Revenue 7 7 Code, as defined in section 422.3, the method to be used in 7 8 computing income from an installment sale shall be the method 7 9 under section 453 of the Internal Revenue Code, as amended up 7 10 to and including January 1, 2000. A taxpayer affected by this 7 11 paragraph shall make adjustments in the adjusted gross income 7 12 pursuant to rules adopted by the director. 7 13 The adjustment to net income provided in this paragraph is 7 14 repealed for tax years beginning on or after January 1, 2002. 7 15 However, to the extent that a taxpayer using the accrual 7 16 method of accounting reported the entire capital gain from the 7 17 sale or exchange of property on the Iowa return for the tax 7 18 year beginning in the 2001 calendar year and the capital gain 7 19 was reported on the installment method on the federal income 7 20 tax return, any additional installment from the capital gain 7 21 reported for federal income tax purposes is not to be included 7 22 in net income in tax years beginning on or after January 1, 7 23 2002. 7 24 g. Subtract, if the taxpayer is the owner of an individual 7 25 development account certified under chapter 541A at any time 7 26 during the tax year, all of the following: 7 27 (1) Contributions made to the account by persons and 7 28 entities, other than the taxpayer, as authorized in chapter 7 29 541A. 7 30 (2) The amount of any savings refund authorized under 7 31 section 541A.3, subsection 1. 7 32 (3) Earnings from the account. 7 33 h. (1) Subtract the maximum contribution that may be 7 34 deducted for income tax purposes as a participant in the Iowa 7 35 educational savings plan trust pursuant to section 12D.3, 8 1 subsection 1, paragraph "a". 8 2 (2) Subtract, to the extent included, income from interest 8 3 and earnings received from the Iowa educational savings plan 8 4 trust created in chapter 12D. 8 5 (3) Subtract, to the extent not deducted for federal 8 6 income tax purposes, the amount of any gift, grant, or 8 7 donation made to the Iowa educational savings plan trust for 8 8 deposit in the endowment fund of that trust. 8 9 i. Subtract, to the extent included, active duty pay 8 10 received by a person in the national guard or armed forces 8 11 military reserve for services performed on or after August 2, 8 12 1990, pursuant to military orders related to the Persian Gulf 8 13 Conflict. 8 14 j. Subtract, to the extent included, active duty pay 8 15 received by a person in the national guard or armed forces 8 16 military reserve for service performed on or after November 8 17 21, 1995, pursuant to military orders related to peacekeeping 8 18 in Bosnia-Herzegovina. 8 19 k. Subtract, to the extent included, the following: 8 20 (1) Payments made to the taxpayer because of the 8 21 taxpayer's status as a victim of persecution for racial, 8 22 ethnic, or religious reasons by Nazi Germany or any other Axis 8 23 regime or as an heir of such victim. 8 24 (2) Items of income attributable to, derived from, or in 8 25 any way related to assets stolen from, hidden from, or 8 26 otherwise lost to a victim of persecution for racial, ethnic, 8 27 or religious reasons by Nazi Germany or any other Axis regime 8 28 immediately prior to, during, and immediately after World War 8 29 II, including, but not limited to, interest on the proceeds 8 30 receivable as insurance under policies issued to a victim of 8 31 persecution for racial, ethnic, or religious reasons by Nazi 8 32 Germany or any other Axis regime by European insurance 8 33 companies immediately prior to and during World War II. 8 34 However, income from assets acquired with such assets or with 8 35 the proceeds from the sale of such assets shall not be 9 1 subtracted. This subparagraph shall only apply to a taxpayer 9 2 who was the first recipient of such assets after recovery of 9 3 the assets and who is a victim of persecution for racial, 9 4 ethnic, or religious reasons by Nazi Germany or any other Axis 9 5 regime or is an heir of such victim. 9 6 3. a. In determining the amount of federal income tax 9 7 refunds or taxes paid or accrued under subsection 1 or 9 8 subsection 2, for tax years beginning in the 2001 calendar 9 9 year, the amount shall not be adjusted by the amount received 9 10 during the tax year of the advanced refund of the rate 9 11 reduction tax credit provided pursuant to the federal Economic 9 12 Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 9 13 107-16, and the advanced refund of such credit shall not be 9 14 subject to taxation under this division. 9 15 b. In determining the amount of federal income tax refunds 9 16 or taxes paid or accrued under subsection 1 or subsection 2, 9 17 for tax years beginning in the 2002 calendar year, the amount 9 18 for the tax year shall not be adjusted by the amount of the 9 19 rate reduction credit received in the tax year to the extent 9 20 that the credit is attributable to the rate reduction credit 9 21 provided pursuant to the federal Economic Growth and Tax 9 22 Relief Reconciliation Act of 2001, Pub. L. No. 107-16, and the 9 23 amount of such credit shall not be taxable under this 9 24 division. 9 25 Sec. 7. Section 422.8, subsection 2, paragraph a, Code 9 26 2003, is amended to read as follows: 9 27 a. Nonresident's net income allocated to Iowa is the net 9 28 income, or portion of net income, which is derived from a 9 29 business, trade, profession, or occupation carried on within 9 30 this state or income from any property, trust, estate, or 9 31 other source within Iowa. However, income derived from a 9 32 business, trade, profession, or occupation carried on within 9 33 this state and income from any property, trust, estate, or 9 34 other source within Iowa shall not include distributions from 9 35 pensions, including defined benefit or defined contribution 10 1 plans, annuities, individual retirement accounts, and deferred 10 2 compensation plans or any earnings attributable theretoso10 3long as the distribution is directly related to an10 4individual's documented retirement and received while the10 5individual is a nonresident of this state. If a business, 10 6 trade, profession, or occupation is carried on partly within 10 7 and partly without the state, only the portion of the net 10 8 income which is fairly and equitably attributable to that part 10 9 of the business, trade, profession, or occupation carried on 10 10 within the state is allocated to Iowa for purposes of section 10 11 422.5, subsection 1, paragraph"j""b", and section 422.13 and 10 12 income from any property, trust, estate, or other source 10 13 partly within and partly without the state is allocated to 10 14 Iowa in the same manner, except that annuities, interest on 10 15 bank deposits and interest-bearing obligations, and dividends 10 16 are allocated to Iowa only to the extent to which they are 10 17 derived from a business, trade, profession, or occupation 10 18 carried on within the state. 10 19 Sec. 8. Section 422.8, subsection 4, Code 2003, is amended 10 20 by striking the subsection. 10 21 Sec. 9. Section 422.9, unnumbered paragraph 1 and 10 22 subsections 1 and 2, Code 2003, are amended by striking the 10 23 unnumbered paragraph and the subsections and inserting in lieu 10 24 thereof the following: 10 25 In computing taxable income of individuals, there shall be 10 26 deducted from net income the following: 10 27 1. A standard deduction equal to the following: 10 28 a. For a single individual, or a married person filing 10 29 separately, two thousand dollars. 10 30 b. For a head of household, or a husband and wife filing a 10 31 joint return, four thousand dollars. 10 32 c. For each dependent, an additional two thousand dollars. 10 33 As used in this section, the term "dependent" has the same 10 34 meaning as provided by the Internal Revenue Code. 10 35 2. In addition to the amount in subsection 1, the 11 1 following: 11 2 a. For a single individual, husband, wife, or head of 11 3 household, an additional exemption of one thousand dollars for 11 4 each such individual who has attained the age of sixty-five 11 5 years before the close of the tax year or on the first day 11 6 following the end of the tax year. 11 7 b. For a single individual, husband, wife, or head of 11 8 household, an additional exemption of one thousand dollars for 11 9 each such individual who is blind at the close of the tax 11 10 year. For the purposes of this paragraph, an individual is 11 11 blind only if the individual's central visual acuity does not 11 12 exceed twenty-two hundredths in the better eye with correcting 11 13 lenses, or if the individual's visual acuity is greater than 11 14 twenty-two hundredths but is accompanied by a limitation in 11 15 the fields of vision such that the widest diameter of the 11 16 visual field subtends an angle no greater than twenty degrees. 11 17 Sec. 10. Section 422.9, subsections 4 through 7, Code 11 18 2003, are amended by striking the subsections. 11 19 Sec. 11. Section 422.11B, subsection 1, Code 2003, is 11 20 amended to read as follows: 11 21 1. There is allowed as a credit against the tax determined 11 22 in section 422.5, subsection 1, paragraphs "a" through "j" for 11 23 a tax year an amount equal to the minimum tax credit for that 11 24 tax year. 11 25 The minimum tax credit for a tax year is the excess, if 11 26 any, of the adjusted net minimum tax imposed for all prior tax 11 27 years beginning on or after January 1, 1987, but before 11 28 January 1, 2004, over the amount allowable as a credit under 11 29 this section for those prior tax years. 11 30 If a minimum tax credit is available to a tax period 11 31 beginning on or after January 1, 2004, the credit can be 11 32 carried over to tax years beginning on or after January 1, 11 33 2004, but before January 1, 2007. The minimum tax credit is 11 34 limited to the tax determined in section 422.5, subsection 1, 11 35 paragraphs "a" and "b". 12 1 Sec. 12. Section 422.12, subsection 1, Code 2003, is 12 2 amended by striking the subsection and inserting in lieu 12 3 thereof the following: 12 4 1. A personal exemption credit in the following amounts: 12 5 a. If the net income of an estate or trust, a single 12 6 individual, or a married person filing a separate return is no 12 7 more than twenty-five thousand dollars, forty dollars. 12 8 b. If the net income of a head of household or a husband 12 9 and wife filling a joint return is no more than fifty thousand 12 10 dollars, eighty dollars. 12 11 c. For each dependent of a taxpayer described in paragraph 12 12 "a" or "b", an additional forty dollars. As used in this 12 13 section, "dependent" means the same as provided in the 12 14 Internal Revenue Code. 12 15 Sec. 13. Section 422.12B, subsection 2, Code 2003, is 12 16 amended to read as follows: 12 17 2. Married taxpayers electing to file separate returnsor12 18filing separately on a combined returnmay avail themselves of 12 19 the earned income credit by allocating the earned income 12 20 credit to each spouse in the proportion that each spouse's 12 21 respective earned income bears to the total combined earned 12 22 income. Taxpayers affected by the allocation provisions of 12 23 section 422.8 shall be permitted a deduction for the credit 12 24 only in the amount fairly and equitably allocable to Iowa 12 25 under rules prescribed by the director. 12 26 Sec. 14. Section 422.12C, subsection 3, Code 2003, is 12 27 amended to read as follows: 12 28 3. Married taxpayers who have filed joint federal returns 12 29 electing to file separate returnsor to file separately on a12 30combined return formmust determine the child and dependent 12 31 care credit under subsection 1 based upon their combined net 12 32 income and allocate the total credit amount to each spouse in 12 33 the proportion that each spouse's respective net income bears 12 34 to the total combined net income. Nonresidents or part-year 12 35 residents of Iowa must determine their Iowa child and 13 1 dependent care credit in the ratio of their Iowa source net 13 2 income to their all source net income. Nonresidents or part- 13 3 year residents who are married and elect to file separate 13 4 returnsor to file separately on a combined return formmust 13 5 allocate the Iowa child and dependent care credit between the 13 6 spouses in the ratio of each spouse's Iowa source net income 13 7 to the combined Iowa source net income of the taxpayers. 13 8 Sec. 15. Section 422.13, subsection 1, paragraph c, and 13 9 subsection 1A, Code 2003, are amended to read as follows: 13 10 c. However, if that part of the net income of a 13 11 nonresident which is allocated to Iowa pursuant to section 13 12 422.8, subsection 2, is less than one thousand dollars the 13 13 nonresident is not required to make and sign a returnexcept13 14when the nonresident is subject to the state alternative13 15minimum tax imposed pursuant to section 422.5, subsection 1,13 16paragraph "k". 13 17 1A. Notwithstanding any other provision in this section, a 13 18 resident of this state is not required to make and file a 13 19 return if the person's net income is equal to or less thanthe13 20appropriate dollar amount listed in section 422.5, subsection13 212, upon which tax is not imposedfifteen thousand dollars in 13 22 the case of married persons filing jointly, unmarried heads of 13 23 households, and surviving spouses, or is equal to or less than 13 24 eleven thousand dollars in the case of all other persons. A 13 25 nonresident of this state is not required to make and file a 13 26 return if the person's total net incomein section 422.5,13 27subsection 1, paragraph "j",is equal to or less thanthe13 28appropriate dollar amount provided in section 422.5,13 29subsection 2, upon which tax is not imposedfifteen thousand 13 30 dollars in the case of married persons filing jointly, 13 31 unmarried heads of households, and surviving spouses, or is 13 32 equal to or less than eleven thousand dollars in the case of 13 33 all other persons. For purposes of this subsection, the 13 34 amount of a lump sum distribution subject to separate federal 13 35 tax shall be included in net income for purposes of 14 1 determining if a resident is required to file a return and the 14 2 portion of the lump sum distribution that is allocable to Iowa 14 3 is included in total net income for purposes of determining if 14 4 a nonresident is required to make and file a return. 14 5 Sec. 16. Section 422.21, unnumbered paragraphs 1 and 2, 14 6 Code 2003, are amended to read as follows: 14 7 Returns shall be in the form the director prescribes, and 14 8 shall be filed with the department on or before the last day 14 9 of the fourth month after the expiration of the tax year. 14 10 However, co-operative associations as defined in section 14 11 6072(d) of the Internal Revenue Code shall file their returns 14 12 on or before the fifteenth day of the ninth month following 14 13 the close of the taxable year and nonprofit corporations 14 14 subject to the unrelated business income tax imposed by 14 15 section 422.33, subsection 1A, shall file their returns on or 14 16 before the fifteenth day of the fifth month following the 14 17 close of the taxable year. If, under the Internal Revenue 14 18 Code, a corporation is required to file a return covering a 14 19 tax period of less than twelve months, the state return shall 14 20 be for the same period and is due forty-five days after the 14 21 due date of the federal tax return, excluding any extension of 14 22 time to file. In case of sickness, absence, or other 14 23 disability, or if good cause exists, the director may allow 14 24 further time for filing returns. The director shall cause to 14 25 be prepared blank forms for the returns and shall cause them 14 26 to be distributed throughout the state and to be furnished 14 27 upon application, but failure to receive or secure the form 14 28 does not relieve the taxpayer from the obligation of making a 14 29 return that is required. The department may as far as 14 30 consistent with the Code draft income tax forms to conform to 14 31 the income tax forms of the internal revenue department of the 14 32 United States government. Each return by a taxpayer upon whom 14 33 a tax is imposed by section 422.5 shall show the county of the 14 34 residence of the taxpayer. For tax years beginning on or 14 35 after January 1, 2004, the director shall not prescribe and no 15 1 longer accept income tax returns of married persons filing 15 2 separately on the combined return form. 15 3 An individual in the armed forces of the United States 15 4 serving in an area designated by the president of the United 15 5 States or the United States Congress as a combat zone or as a 15 6 qualified hazardous duty area, or an individual serving in 15 7 support of those forces, is allowed the same additional time 15 8 period after leaving the combat zone or the qualified 15 9 hazardous duty area, or after a period of continuous 15 10 hospitalization, to file a state income tax return or perform 15 11 other acts related to the department, as would constitute 15 12 timely filing of the return or timely performance of other 15 13 acts described in section 7508(a) of the Internal Revenue 15 14 Code. For the purposes of this paragraph, "other acts related 15 15 to the department" includes filing claims for refund for any 15 16 tax administered by the department, making tax payments other 15 17 than withholding payments, filing appeals on the tax matters, 15 18 filing other tax returns, and performing other acts described 15 19 in the department's rules. The additional time period allowed 15 20 applies to the spouse of the individual described in this 15 21 paragraph to the extent the spouse files jointlyor separately15 22on the combined return formwith the individual or when the 15 23 spouse is a party with the individual to any matter for which 15 24 the additional time period is allowed. 15 25 Sec. 17. Section 422.21, unnumbered paragraph 5, Code 15 26 2003, is amended by striking the unnumbered paragraph. 15 27 Sec. 18. Section 422.21, unnumbered paragraph 7, Code 15 28 2003, is amended to read as follows: 15 29 If married taxpayers file a joint returnor file separately15 30on a combined returnin accordance with rules prescribed by 15 31 the director, both spouses are jointly and severally liable 15 32 for the total tax due on the return, except when one spouse is 15 33 considered to be an innocent spouse under criteria established 15 34 pursuant to section 6015 of the Internal Revenue Code. 15 35 Sec. 19. Section 422.11B, Code 2003, is repealed. 16 1 COORDINATING AMENDMENTS 16 2 Sec. 20. Section 12D.9, subsection 2, Code 2003, is 16 3 amended to read as follows: 16 4 2. State income tax treatment of the Iowa educational 16 5 savings plan trust shall be as provided in section 422.7, 16 6subsections 32, 33, and 34subsection 1, paragraph "e", and 16 7 subsection 2, paragraph "h", and section 422.35, subsection 16 8 14. 16 9 Sec. 21. Section 217.39, Code 2003, is amended to read as 16 10 follows: 16 11 217.39 PERSECUTED VICTIMS OF WORLD WAR II – REPARATIONS 16 12 – HEIRS. 16 13 Notwithstanding any other law of this state, payments paid 16 14 to and income from lost property of a victim of persecution 16 15 for racial, ethnic, or religious reasons by Nazi Germany or 16 16 any other Axis regime or as an heir of such victim which is 16 17 exempt from state income tax as provided in section 422.7, 16 18 subsection352, paragraph "k", shall not be considered as 16 19 income or an asset for determining the eligibility for state 16 20 or local government benefit or entitlement programs. The 16 21 proceeds are not subject to recoupment for the receipt of 16 22 governmental benefits or entitlements, and liens, except liens 16 23 for child support, are not enforceable against these sums for 16 24 any reason. 16 25 Sec. 22. Section 422.120, subsection 1, paragraph b, 16 26 subparagraph (3), Code 2003, is amended to read as follows: 16 27 (3) The annual index factor for the 1997 calendar year is 16 28 one hundred percent. Foreach subsequentthe 1998 through 16 29 2002 calendaryearyears, the annual index factor equals the 16 30 annual inflation factor for that calendar year as computed in 16 31 section 422.4 for purposes of the individual income tax. For 16 32 the 2003 calendar year and each subsequent calendar year the 16 33 annual index factor shall be determined by the department by 16 34 October 15 of the calendar year preceding the calendar year 16 35 for which the factor is determined, which reflects the 17 1 purchasing power of the dollar as a result of inflation during 17 2 the fiscal year ending in the calendar year preceding the 17 3 calendar year for which the factor is determined. In 17 4 determining the annual index factor, the department shall use 17 5 the annual percent change, but not less than zero percent, in 17 6 the gross domestic product price deflator computed for the 17 7 second quarter of the calendar year by the bureau of economic 17 8 analysis of the United States department of commerce and shall 17 9 add all of that percent change to one hundred percent. The 17 10 annual index factor and the cumulative index factor shall each 17 11 be expressed as a percentage rounded to the nearest one-tenth 17 12 of one percent. The annual index factor shall not be less 17 13 than one hundred percent. 17 14 Sec. 23. Section 425.23, subsection 4, paragraph b, Code 17 15 2003, is amended to read as follows: 17 16 b. The annual adjustment factor for the 1998 base year is 17 17 one hundred percent. Foreach subsequentthe 1999 through 17 18 2002 baseyearyears, the annual adjustment factor equals the 17 19 annual inflation factor for the calendar year, in which the 17 20 base year begins, as computed in section 422.4 for purposes of 17 21 the individual income tax. For the 2003 base year and each 17 22 subsequent base year, the annual adjustment factor equals the 17 23 annual index factor, in which the base year begins, as 17 24 computed in section 422.120, subsection 1, for purposes of the 17 25 livestock production tax credit. 17 26 Sec. 24. Section 450.4, subsection 8, Code 2003, is 17 27 amended to read as follows: 17 28 8. On the value of that portion of any lump sum or 17 29 installment payments which are received by a beneficiary under 17 30 an annuity which was purchased under an employee's pension or 17 31 retirement plan which was excluded from net incomeas set17 32forth inunder section 422.7, subsection 31. 17 33 Sec. 25. Section 541A.2, subsection 7, unnumbered 17 34 paragraph 1, Code 2003, is amended to read as follows: 17 35 An individual development account closed in accordance with 18 1 this subsection is not subject to the limitations and benefits 18 2 provided by this chapter but is subject to state tax in 18 3 accordance with the provisions of section 422.7, subsection2818 4 2, paragraph "g", and section 450.4, subsection 6. An 18 5 individual development account may be closed for any of the 18 6 following reasons: 18 7 Sec. 26. Section 541A.3, subsection 2, Code 2003, is 18 8 amended to read as follows: 18 9 2. Income earned by an individual development account is 18 10 not subject to state tax, in accordance with the provisions of 18 11 section 422.7, subsection282, paragraph "g". 18 12 EFFECTIVE AND APPLICABILITY DATE PROVISION 18 13 Sec. 27. 18 14 1. Except as provided in subsection 2, this division of 18 15 this Act takes effect January 1, 2004, for tax years beginning 18 16 on or after that date. 18 17 2. The section of this division of this Act repealing 18 18 section 422.11B takes effect January 1, 2007, for tax years 18 19 beginning on or after that date. 18 20 DIVISION II 18 21 SALES, USE, AND CIGARETTE TAXES 18 22 SALES AND USE TAXES 18 23 Sec. 28. Section 422.43, subsections 1, 2, 4, 5, 6, 7, 10, 18 24 11, and 12, Code 2003, are amended to read as follows: 18 25 1. There is imposed a tax of five and one-half percent 18 26 upon the gross receipts from all sales of tangible personal 18 27 property, consisting of goods, wares, or merchandise, except 18 28 as otherwise provided in this division, sold at retail in the 18 29 state to consumers or users; a like rate of tax upon the gross 18 30 receipts from the sales, furnishing, or service of gas, 18 31 electricity, water, heat, pay television service, and 18 32 communication service, including the gross receipts from such 18 33 sales by any municipal corporation or joint water utility 18 34 furnishing gas, electricity, water, heat, pay television 18 35 service, and communication service to the public in its 19 1 proprietary capacity, except as otherwise provided in this 19 2 division, when sold at retail in the state to consumers or 19 3 users; a like rate of tax upon the gross receipts from all 19 4 sales of tickets or admissions to places of amusement, fairs, 19 5 and athletic events except those of elementary and secondary 19 6 educational institutions; a like rate of tax on the gross 19 7 receipts from an entry fee or like charge imposed solely for 19 8 the privilege of participating in an activity at a place of 19 9 amusement, fair, or athletic event unless the gross receipts 19 10 from the sales of tickets or admissions charges for observing 19 11 the same activity are taxable under this division; and a like 19 12 rate of tax upon that part of private club membership fees or 19 13 charges paid for the privilege of participating in any 19 14 athletic sports provided club members. 19 15 2. There is imposed a tax of five and one-half percent 19 16 upon the gross receipts derived from the operation of all 19 17 forms of amusement devices and games of skill, games of 19 18 chance, raffles, and bingo games as defined in chapter 99B, 19 19 operated or conducted within the state, the tax to be 19 20 collected from the operator in the same manner as for the 19 21 collection of taxes upon the gross receipts of tickets or 19 22 admission as provided in this section. The tax shall also be 19 23 imposed upon the gross receipts derived from the sale of 19 24 lottery tickets or shares pursuant to chapter 99E. The tax on 19 25 the lottery tickets or shares shall be included in the sales 19 26 price and distributed to the general fund as provided in 19 27 section 99E.10. 19 28 4. There is imposed a tax of five and one-half percent 19 29 upon the gross receipts from the sales of engraving, 19 30 photography, retouching, printing, and binding services. For 19 31 the purpose of this division, the sales of engraving, 19 32 photography, retouching, printing, and binding services are 19 33 sales of tangible property. 19 34 5. There is imposed a tax of five and one-half percent 19 35 upon the gross receipts from the sales of vulcanizing, 20 1 recapping, and retreading services. For the purpose of this 20 2 division, the sales of vulcanizing, recapping, and retreading 20 3 services are sales of tangible property. 20 4 6. There is imposed a tax of five and one-half percent 20 5 upon the gross receipts from the sales of optional service or 20 6 warranty contracts, except residential service contracts 20 7 regulated under chapter 523C, which provide for the furnishing 20 8 of labor and materials and require the furnishing of any 20 9 taxable service enumerated under this section. The gross 20 10 receipts are subject to tax even if some of the services 20 11 furnished are not enumerated under this section. For the 20 12 purpose of this division, the sale of an optional service or 20 13 warranty contract, other than a residential service contract 20 14 regulated under chapter 523C, is a sale of tangible personal 20 15 property. Additional sales, services, or use taxes shall not 20 16 be levied on services, parts, or labor provided under optional 20 17 service or warranty contracts which are subject to tax under 20 18 this section. 20 19 If the optional service or warranty contract is a computer 20 20 software maintenance or support service contract and there is 20 21 no separately stated fee for the taxable personal property or 20 22 for the nontaxable service, the tax of five and one-half 20 23 percent imposed by this subsection shall be imposed on fifty 20 24 percent of the gross receipts from the sale of such contract. 20 25 If the contract provides for technical support services only, 20 26 no tax shall be imposed under this subsection. The provisions 20 27 of this subsection also apply to the tax imposed by chapter 20 28 423. 20 29 7. There is imposed a tax of five and one-half percent 20 30 upon the gross receipts from the renting of rooms, apartments, 20 31 or sleeping quarters in a hotel, motel, inn, public lodging 20 32 house, rooming house, manufactured or mobile home which is 20 33 tangible personal property, or tourist court, or in any place 20 34 where sleeping accommodations are furnished to transient 20 35 guests for rent, whether with or without meals. "Renting" and 21 1 "rent" include any kind of direct or indirect charge for such 21 2 rooms, apartments, or sleeping quarters, or their use. For 21 3 the purposes of this division, such renting is regarded as a 21 4 sale of tangible personal property at retail. However, this 21 5 tax does not apply to the gross receipts from the renting of a 21 6 room, apartment, or sleeping quarters while rented by the same 21 7 person for a period of more than thirty-one consecutive days. 21 8 10. There is imposed a tax of five and one-half percent 21 9 upon the gross receipts from the rendering, furnishing, or 21 10 performing of services as defined in section 422.42. 21 11 11. The following enumerated services are subject to the 21 12 tax imposed on gross taxable services: alteration and garment 21 13 repair; armored car; vehicle repair; battery, tire, and 21 14 allied; investment counseling; service charges of all 21 15 financial institutions; barber and beauty; boat repair; 21 16 vehicle wash and wax; carpentry; roof, shingle, and glass 21 17 repair; charges for delivery and transportation of tangible 21 18 personal property or services that are taxable when sold at 21 19 retail; dance schools and dance studios; dating services; dry 21 20 cleaning, pressing, dyeing, and laundering; electrical and 21 21 electronic repair and installation; rental of tangible 21 22 personal property, except manufactured or mobile homes which 21 23 are tangible personal property; excavating and grading; farm 21 24 implement repair of all kinds; flying service; furniture, rug, 21 25 upholstery repair and cleaning; fur storage and repair; golf 21 26 and country clubs and all commercial recreation; house and 21 27 building moving; household appliance, television, and radio 21 28 repair; jewelry and watch repair; limousine service, including 21 29 driver; machine operator; machine repair of all kinds; motor 21 30 repair; motorcycle, scooter, and bicycle repair; oilers and 21 31 lubricators; office and business machine repair; painting, 21 32 papering, and interior decorating; parking facilities; pipe 21 33 fitting and plumbing; wood preparation; executive search 21 34 agencies; private employment agencies, excluding services for 21 35 placing a person in employment where the principal place of 22 1 employment of that person is to be located outside of the 22 2 state; sewage services for nonresidential commercial 22 3 operations; sewing and stitching; shoe repair and shoeshine; 22 4 sign construction and installation; storage of household 22 5 goods, mini-storage, and warehousing of raw agricultural 22 6 products; swimming pool cleaning and maintenance; taxidermy 22 7 services; telephone answering service; test laboratories, 22 8 including mobile testing laboratories and field testing by 22 9 testing laboratories, and excluding tests on humans or 22 10 animals; termite, bug, roach, and pest eradicators; tin and 22 11 sheet metal repair; turkish baths, massage, and reducing 22 12 salons, excluding services provided by massage therapists 22 13 licensed under chapter 152C; weighing; welding; well drilling; 22 14 wrapping, packing, and packaging of merchandise other than 22 15 processed meat, fish, fowl, and vegetables; wrecking service; 22 16 wrecker and towing; pay television; campgrounds; carpet and 22 17 upholstery cleaning; gun and camera repair; janitorial and 22 18 building maintenance or cleaning; lawn care, landscaping, and 22 19 tree trimming and removal; pet grooming; reflexology; security 22 20 and detective services; tanning beds or salons; and water 22 21 conditioning and softening. 22 22 For purposes of this subsection, gross taxable services 22 23 from rental includes rents, royalties, and copyright and 22 24 license fees. For purposes of this subsection, "financial 22 25 institutions" means all national banks, federally chartered 22 26 savings and loan associations, federally chartered savings 22 27 banks, federally chartered credit unions, banks organized 22 28 under chapter 524, savings and loan associations and savings 22 29 banks organized under chapter 534, and credit unions organized 22 30 under chapter 533. 22 31 For purposes of the tax on enumerated services under this 22 32 subsection, service charges of financial institutions do not 22 33 include surcharges assessed with regard to nonproprietary ATM 22 34 transactions. This paragraph is repealed June 30, 2003. 22 35 12. A tax of five and one-half percent is imposed upon the 23 1 gross receipts from the sales of prepaid telephone calling 23 2 cards and prepaid authorization numbers. For the purpose of 23 3 this division, the sales of prepaid telephone calling cards 23 4 and prepaid authorization numbers are sales of tangible 23 5 personal property. 23 6 Sec. 29. Section 422.43, subsection 13, paragraph a, 23 7 unnumbered paragraph 1, Code 2003, is amended to read as 23 8 follows: 23 9 A tax of five and one-half percent is imposed upon the 23 10 gross receipts from the sales, furnishing, or service of solid 23 11 waste collection and disposal service. 23 12 Sec. 30. Section 422.43, subsections 16 and 17, Code 2003, 23 13 are amended to read as follows: 23 14 16. a. A tax of five and one-half percent is imposed upon 23 15 the gross receipts from sales of bundled services contracts. 23 16 For purposes of this subsection, a "bundled services contract" 23 17 means an agreement providing for a retailer's performance of 23 18 services, one or more of which is a taxable service enumerated 23 19 in this section and one or more of which is not, in return for 23 20 a consumer's or user's single payment for the performance of 23 21 the services, with no separate statement to the consumer or 23 22 user of what portion of that payment is attributable to any 23 23 one service which is a part of the contract. 23 24 b. For purposes of the administration of the tax on 23 25 bundled services contracts, the director may enter into 23 26 agreements of limited duration with individual retailers, 23 27 groups of retailers, or organizations representing retailers 23 28 of bundled services contracts. Such an agreement shall impose 23 29 the tax rate only upon that portion of the gross receipts from 23 30 a bundled services contract which is attributable to taxable 23 31 services provided under the contract. 23 32 17. A tax of five and one-half percent is imposed upon the 23 33 gross receipts from any mobile telecommunication service which 23 34 this state is allowed to tax by the provisions of the federal 23 35 Mobile Telecommunications Sourcing Act, Pub. L. No. 106-252, 4 24 1 U.S.C. } 116 et seq. For purposes of this subsection, taxes 24 2 on mobile telecommunications service, as defined under the 24 3 federal Mobile Telecommunications Sourcing Act, that are 24 4 deemed to be provided by the customer's home service provider 24 5 shall be paid to the taxing jurisdiction whose territorial 24 6 limits encompass the customer's place of primary use, 24 7 regardless of where the mobile telecommunication service 24 8 originates, terminates, or passes through and shall in all 24 9 other respects be taxed in conformity with the federal Mobile 24 10 Telecommunications Sourcing Act. All other provisions of the 24 11 federal Mobile Telecommunications Sourcing Act are adopted by 24 12 the state of Iowa and incorporated into this subsection by 24 13 reference. With respect to mobile telecommunications service 24 14 under the federal Mobile Telecommunications Sourcing Act the 24 15 director shall, if requested, enter into agreements consistent 24 16 with the provisions of the federal Act. 24 17 Sec. 31. Section 422.45, subsection 2, Code 2003, is 24 18 amended to read as follows: 24 19 2. The gross receipts from the sales, furnishing, or 24 20 service of transportation service except the rental of 24 21 recreational vehicles or recreational boats, except the rental 24 22 of motor vehicles subject to registration which are registered 24 23 for a gross weight of thirteen tons or less for a period of 24 24 sixty days or less, and except the rental of aircraft for a 24 25 period of sixty days or less. This exemption does not apply 24 26 to the transportation of electric energy. This exemption does 24 27 not apply to the transportation of natural gas. This 24 28 exemption does not apply to the delivery or transportation of 24 29 tangible personal property or services that are taxable under 24 30 this division. 24 31 Sec. 32. Section 422.45, subsection 61, Code 2003, is 24 32 amended by striking the subsection and inserting in lieu 24 33 thereof the following: 24 34 61. a. The gross receipts from the sale, furnishing, or 24 35 service of metered gas, electricity, and fuel, including 25 1 propane and heating oil to residential customers which is used 25 2 to provide energy for residential dwellings and units of 25 3 apartment and condominium complexes used for human occupancy 25 4 shall be partially exempt as provided in paragraph "b". 25 5 b. If the date of the utility billing or meter reading 25 6 cycle of the residential customer for the sale, furnishing, or 25 7 service of metered gas and electricity is on or after January 25 8 1, 2003, or if the sale, furnishing, or service of fuel for 25 9 purposes of residential energy and the delivery of the fuel 25 10 occurs on or after January 1, 2003, the rate of tax is three 25 11 percent of the gross receipts. 25 12 c. The partial exemption in this subsection does not apply 25 13 to local option sales and services tax imposed pursuant to 25 14 chapters 422B and 422E. 25 15 Sec. 33. Section 422.47, Code 2003, is amended by adding 25 16 the following new subsection: 25 17 NEW SUBSECTION. 2. Construction contractors may make 25 18 application to the department for a refund of the additional 25 19 one-half of one percent tax paid under this division by reason 25 20 of the increase in the tax from five to five and one-half 25 21 percent for taxes paid on goods, wares, or merchandise under 25 22 the following conditions: 25 23 a. The goods, wares, or merchandise are incorporated into 25 24 an improvement to real estate in fulfillment of a written 25 25 contract fully executed prior to July 1, 2003. The refund 25 26 shall not apply to equipment transferred in fulfillment of a 25 27 mixed construction contract. 25 28 b. The contractor has paid to the department or to a 25 29 retailer the full five and one-half percent tax. 25 30 c. The claim is filed on forms provided by the department 25 31 and is filed within one year of the date the tax is paid. 25 32 A contractor who makes an erroneous application for refund 25 33 shall be liable for payment of the excess refund paid plus 25 34 interest at the rate in effect under section 421.7. In 25 35 addition, a contractor who willfully makes a false application 26 1 for refund is guilty of a simple misdemeanor and is liable for 26 2 a penalty equal to fifty percent of the excess refund claimed. 26 3 Excess refunds, penalties, and interest due under this 26 4 subsection may be enforced and collected in the same manner as 26 5 the tax imposed by this division. 26 6 Sec. 34. Section 422C.3, subsection 1, Code 2003, is 26 7 amended to read as follows: 26 8 1. A tax of five and one-half percent is imposed upon the 26 9 rental price of an automobile if the rental transaction is 26 10 subject to the sales and services tax under chapter 422, 26 11 division IV, or the use tax under chapter 423. The tax shall 26 12 not be imposed on any rental transaction not taxable under the 26 13 state sales and services tax, as provided in section 422.45, 26 14 or the state use tax, as provided in section 423.4, on 26 15 automobile rental receipts. 26 16 Sec. 35. Section 423.2, Code 2003, is amended to read as 26 17 follows: 26 18 423.2 IMPOSITION OF TAX. 26 19 An excise tax is imposed on the use in this state of 26 20 tangible personal property, including aircraft subject to 26 21 registration under section 328.20, purchased for use in this 26 22 state, at the rate of five and one-half percent of the 26 23 purchase price of the property. An excise tax is imposed on 26 24 the use of manufactured housing in this state at the rate of 26 25 five and one-half percent of the purchase price if the 26 26 manufactured housing is sold in the form of tangible personal 26 27 property and at the rate of five and one-half percent of the 26 28 installed purchase price if the manufactured housing is sold 26 29 in the form of realty. An excise tax is imposed on the use of 26 30 leased vehicles at the rate of five and one-half percent of 26 31 the amount otherwise subject to tax as calculated pursuant to 26 32 section 423.7A. The excise tax is imposed upon every person 26 33 using the property within this state until the tax has been 26 34 paid directly to the county treasurer or the state department 26 35 of transportation, to a retailer, or to the department. An 27 1 excise tax is imposed on the use in this state of services 27 2 enumerated in section 422.43 at the rate of five and one-half 27 3 percent. This tax is applicable where services are rendered, 27 4 furnished, or performed in this state or where the product or 27 5 result of the service is used in this state. This tax is 27 6 imposed on every person using the services or the product of 27 7 the services in this state until the user has paid the tax 27 8 either to an Iowa use tax permit holder or to the department. 27 9 Sec. 36. APPLICABILITY. This section applies in regard to 27 10 the increase in the state sales tax from five to five and one- 27 11 half percent. The five and one-half percent rate applies to 27 12 all sales of taxable personal property, consisting of goods, 27 13 wares, or merchandise if delivery occurs on or after July 1, 27 14 2003. The five and one-half percent rate applies to the gross 27 15 receipts from the sale, furnishing, or service of gas, 27 16 electricity, water, heat, pay television service, and 27 17 communication service if the date of billing the customer is 27 18 on or after July 1, 2003. In the case of a service contract 27 19 entered into prior to July 1, 2003, which contract calls for 27 20 periodic payments, the five and one-half percent rate applies 27 21 to those payments made or due on or after July 1, 2003. This 27 22 periodic payment applies, but is not limited to, tickets or 27 23 admissions, private club membership fees, sources of 27 24 amusement, equipment rental, dry cleaning, reducing salons, 27 25 dance schools, and all other services subject to tax, except 27 26 the aforementioned utility services which are subject to a 27 27 special transitional rule. Unlike periodic payments under 27 28 service contracts, installment sales of goods, wares, and 27 29 merchandise are subject to the full amount of sales or use tax 27 30 when the sales contract is entered into. 27 31 CIGARETTE TAX 27 32 Sec. 37. Section 453A.6, subsection 1, Code 2003, is 27 33 amended to read as follows: 27 34 1. There is imposed, and shall be collected and paid to 27 35 the department, the following taxes on all cigarettes used or 28 1 otherwise disposed of in this state for any purpose 28 2 whatsoever: 28 3 CLASS A. On cigarettes weighing not more than three pounds 28 4 per thousand,eighteen millsthree and five hundredths cents 28 5 on each such cigarette. 28 6 CLASS B. On cigarettes weighing more than three pounds per 28 7 thousand,eighteen millsthree and five hundredths cents on 28 8 each such cigarette. 28 9 STUDY COMMITTEES 28 10 Sec. 38. INDUSTRIAL PROCESSING EXEMPTION STUDY COMMITTEE. 28 11 On or before July 1, 2003, the department of revenue and 28 12 finance shall initiate and coordinate the establishment of an 28 13 industrial processing exemption study committee and provide 28 14 staffing assistance to the committee. It is the intent of the 28 15 general assembly that the committee shall include 28 16 representatives of the department of revenue and finance, 28 17 department of management, industrial producers including 28 18 manufacturers, fabricators, printers and publishers, and an 28 19 association that specifically represents business tax issues, 28 20 and other stakeholders. 28 21 The industrial processing exemption under the sales and use 28 22 tax is a significant exemption for business. The committee 28 23 shall study and make legislative and administrative 28 24 recommendations relating to Iowa's processing exemption to 28 25 ensure maximum utilization by Iowa's industries. 28 26 The committee shall study and make recommendations 28 27 regarding all of the following: 28 28 1. The current sales and use tax industrial processing 28 29 exemption. 28 30 2. The corresponding administrative rules, including a 28 31 review and recommendation of an administrative rules process 28 32 relating to the industrial processing exemption prior to 28 33 filing with the administrative rules review committee. 28 34 3. Other states' industrial processing exemptions. 28 35 4. Recommendations for change for issues including 29 1 effectiveness and competitiveness. 29 2 5. Development of additional publications to improve 29 3 compliance. 29 4 The committee shall annually report to the general assembly 29 5 by January 1 of each year through January 1, 2013. 29 6 Sec. 39. IOWA SALES, SERVICES, AND USE TAX STUDY 29 7 COMMITTEE. On or before July 1, 2003, the department of 29 8 revenue and finance shall initiate and coordinate the 29 9 establishment of a state sales, services, and use tax study 29 10 committee and provide staffing assistance to the committee. 29 11 It is the intent of the general assembly that the committee 29 12 shall include representatives of the department of revenue and 29 13 finance, department of management, an association of Iowa 29 14 farmers and other agricultural interests, retail associations, 29 15 contractors, taxpayers, an association that specifically 29 16 represents business tax issues and other stakeholders, two 29 17 members of the general assembly, and a representative of the 29 18 governor's office. 29 19 The committee shall study the current sales, services, and 29 20 use tax law. Programs funded through special features of the 29 21 tax code often escape regular review. It is intended that the 29 22 study committee shall review the current sales, services, and 29 23 use tax exemptions to improve government accountability. 29 24 The committee shall study and make recommendations 29 25 regarding all of the following: 29 26 1. Retaining or eliminating current sales, services, and 29 27 use tax exemptions or providing new exemptions. The decision 29 28 shall be based at least partially on the issues of 29 29 effectiveness and competitiveness and their impact on economic 29 30 behavior. 29 31 2. Tax simplification and consistency issues in applying 29 32 the tax, including recordkeeping burdens on retailers and 29 33 application by the department of revenue and finance. 29 34 3. Streamline sales tax implementation in Iowa. 29 35 4. The tax rate. 30 1 5. Comparison of Iowa sales, services, and use tax 30 2 structure with other states. 30 3 The committee shall report to the general assembly by 30 4 January 1, 2004. The report shall provide rationale for each 30 5 decision made by the study committee. 30 6 DIVISION III 30 7 PROPERTY TAXATION AND LOCAL BUDGETS 30 8 Sec. 40. Section 24.48, unnumbered paragraphs 4, 5, and 7, 30 9 Code 2003, are amended by striking the unnumbered paragraphs. 30 10 Sec. 41. Section 24.48, unnumbered paragraph 6, Code 2003, 30 11 is amended to read as follows: 30 12 For purposes of this section only, "political subdivision" 30 13 means acity,school district,or any other special purpose 30 14 district which certifies its budget to the county auditor and 30 15 derives funds from a property tax levied against taxable 30 16 property situated within the political subdivision, except 30 17 that it does not mean a city or a county. 30 18 Sec. 42. Section 331.421, Code 2003, is amended by adding 30 19 the following new subsections: 30 20 NEW SUBSECTION. 1A. "Budget year" is the fiscal year 30 21 beginning during the calendar year in which a budget is first 30 22 certified. 30 23 NEW SUBSECTION. 2A. "Current fiscal year" is the fiscal 30 24 year ending during the calendar year in which a budget is 30 25 first certified. 30 26 Sec. 43. Section 331.422, unnumbered paragraph 1, Code 30 27 2003, is amended to read as follows: 30 28 Subject to this section and sections 331.423 through 30 29331.426331.425 or as otherwise provided by state law, the 30 30 board of each county shall certify property taxes annually at 30 31 its March session to be levied for county purposes as follows: 30 32 Sec. 44. Section 331.424A, subsection 4, Code 2003, is 30 33 amended to read as follows: 30 34 4. For the fiscal year beginning July 1, 1996, and for 30 35 each subsequent fiscal year, the county shall certify a levy 31 1 for payment of services. For each fiscal year, county 31 2 revenues from taxes imposed by the county credited to the 31 3 services fund shall not exceed an amount equal to the amount 31 4 of base year expenditures for services as defined in section 31 5 331.438, less the amount of property tax relief to be received 31 6 pursuant to section 426B.2, in the fiscal year for which the 31 7 budget is certified. The county auditor and the board of 31 8 supervisors shall reduce the amount of the levy certified for 31 9 the services fund by the amount of property tax relief to be 31 10 received. A levy certified under this section is not subject 31 11 to the appeal provisions of section331.426444.25, subsection 31 12 5, or to any other provision in law authorizing a county to 31 13 exceed, increase, or appeal a property tax levy limit. 31 14 Sec. 45. Section 331.425, unnumbered paragraph 1, Code 31 15 2003, is amended to read as follows: 31 16 The board may certify an addition to a levy in excess of 31 17 the amounts otherwise permitted under sections 331.423,and 31 18 331.424, and 331.426if the proposition to certify an addition 31 19 to a levy has been submitted at a special levy election and 31 20 received a favorable majority of the votes cast on the 31 21 proposition. A special levy election is subject to the 31 22 following: 31 23 Sec. 46. Section 331.434, unnumbered paragraph 1, Code 31 24 2003, is amended to read as follows: 31 25 Annually, the board of each county, subject to sections 31 26 331.423 through331.426331.425 and other applicable state 31 27 law, shall prepare and adopt a budget, certify taxes, and 31 28 provide appropriations as follows: 31 29 Sec. 47. Section 331.434, Code 2003, is amended by adding 31 30 the following new subsection: 31 31 NEW SUBSECTION. 8. a. Budgeted ending fund balances for 31 32 a budget year in excess of twenty-five percent of budgeted 31 33 expenditures in either the general fund or rural services fund 31 34 for that budget year shall be explicitly reserved or 31 35 designated for a specific purpose and specifically described 32 1 in the certified budget. The certified budget for the budget 32 2 year shall include a description of any changes from the 32 3 current fiscal year to the explicitly reserved or designated 32 4 purpose for the excess ending fund balance as specifically 32 5 described in the certified budget. For purposes of this 32 6 section, ending fund balances shall be determined either on a 32 7 cash basis or an accrual basis, whichever is consistent with 32 8 the method used for the county's budget. The description 32 9 shall include the projected date that the expenditures will be 32 10 appropriated for the specific purpose. Budgeted ending fund 32 11 balances reserved or designated shall only be used for the 32 12 purpose specifically described in the certified budget. The 32 13 certified budget shall not be amended for the purpose of 32 14 changing the specific purpose after the budget year begins. 32 15 b. In a protest to the county budget under section 32 16 331.436, the county shall have the burden of proving that the 32 17 budgeted ending fund balances in excess of twenty-five percent 32 18 are reasonably likely to be appropriated for the explicitly 32 19 reserved or designated specific purpose by the date identified 32 20 in the certified budget. 32 21 c. The budgeted ending fund balance in excess of twenty- 32 22 five percent of expenditures for the general fund or rural 32 23 services fund shall be considered an increase in an item in 32 24 the budget for purposes of section 24.28. The state appeal 32 25 board may certify a decision in accordance with section 24.32 32 26 that requires a reduction in the budgeted ending fund balance 32 27 for a particular fund. 32 28 Sec. 48. Section 331.435, unnumbered paragraph 1, Code 32 29 2003, is amended to read as follows: 32 30 The board may amend the adopted county budget, subject to 32 31 sections 331.423 through331.426331.425 and other applicable 32 32 state law, to permit increases in any class of proposed 32 33 expenditures contained in the budget summary published under 32 34 section 331.434, subsection 3. 32 35 Sec. 49. Section 331.436, Code 2003, is amended by adding 33 1 the following new unnumbered paragraph: 33 2 NEW UNNUMBERED PARAGRAPH. For purposes of a protest to the 33 3 adopted budget, "item" means a budgeted expenditure, 33 4 appropriation, or cash reserve from a fund for a service area, 33 5 program, program element, or purpose. 33 6 Sec. 50. NEW SECTION. 421.71 PROPERTY TAX STUDY 33 7 COMMITTEE. 33 8 1. An Iowa property tax study committee coordinated and 33 9 administered by the department of revenue and finance is 33 10 created. 33 11 2. a. The committee shall be composed of one member of 33 12 the Iowa senate appointed by the majority leader of the 33 13 senate, and one member of the Iowa house of representatives 33 14 appointed by the speaker of the house of representatives, the 33 15 governor or the governor's designee, the director of revenue 33 16 and finance or the director's designee, and the director of 33 17 the department of management or the director's designee. 33 18 b. The committee shall also be composed of the following 33 19 persons appointed by the director of revenue and finance: 33 20 (1) One representative of the Iowa state association of 33 21 counties. 33 22 (2) One representative of the Iowa league of cities. 33 23 (3) One representative of the Iowa association of school 33 24 boards. 33 25 (4) One representative of an organization representing 33 26 property taxpayers. 33 27 (5) One representative of an organization representing 33 28 agricultural interests. 33 29 (6) One representative of an organization representing 33 30 business and industry interests. 33 31 (7) One citizen representative. 33 32 3. Staffing for the committee shall be provided by the 33 33 department of revenue and finance and the department of 33 34 management. 33 35 4. The committee's duties shall include, but not be 34 1 limited to, the following: 34 2 a. Monitoring the implementation of this Act, including 34 3 shifts in property tax burden. 34 4 b. Recommending statutory changes relating to this Act. 34 5 c. Examining the impact of this Act on county and city 34 6 budgets. 34 7 d. Compiling information on the number of counties and 34 8 cities that each year appeal for additional property taxes 34 9 pursuant to section 444.25, subsection 5. 34 10 e. Examining the impact of this Act on the school aid 34 11 funding formula and recommending changes to the regular 34 12 program foundation formula. 34 13 f. Recommending other changes to property tax law that may 34 14 go beyond the scope of this Act. 34 15 5. The committee shall report annually to the general 34 16 assembly and the governor on the items listed in subsection 4. 34 17 6. This section is repealed effective July 1, 2009. 34 18 Sec. 51. Section 435.1, subsections 3, 5, and 7, Code 34 19 2003, are amended to read as follows: 34 20 3. "Manufactured home" means a factory-built structure 34 21 built under authority of 42 U.S.C. } 5403, that is required by 34 22 federal law to display a seal from the United States 34 23 department of housing and urban development, and was 34 24 constructed on or after June 15, 1976.If a manufactured home34 25is placed in a manufactured home community or a mobile home34 26park, the home must be titled and is subject to the34 27manufactured or mobile home square foot tax. If a34 28manufactured home is placed outside a manufactured home34 29community or a mobile home park, theA manufactured home must 34 30 be titled and is to be assessed and taxed as real estate. 34 31 5. "Mobile home" means any vehicle without motive power 34 32 used or so manufactured or constructed as to permit its being 34 33 used as a conveyance upon the public streets and highways and 34 34 so designed, constructed, or reconstructed as will permit the 34 35 vehicle to be used as a place for human habitation by one or 35 1 more persons; but shall also include any such vehicle with 35 2 motive power not registered as a motor vehicle in Iowa. A 35 3 "mobile home" is not built to a mandatory building code, 35 4 contains no state or federal seals, and was built before June 35 5 15, 1976.If aA mobile home isplaced outside a mobile home35 6park, the home isto be assessed and taxed as real estate. 35 7 7. "Modular home" means a factory-built structure which is 35 8 manufactured to be used as a place of human habitation, is 35 9 constructed to comply with the Iowa state building code for 35 10 modular factory-built structures, and must display the seal 35 11 issued by the state building code commissioner.If a modular35 12home is placed in a manufactured home community or mobile home35 13park, the home is subject to the annual tax as required by35 14section 435.22. If aA modular home isplaced outside a35 15manufactured home community or a mobile home park, the home35 16shall be considered real property and isto be assessed and 35 17 taxed as real estate. 35 18 Sec. 52. Section 435.22, Code 2003, is amended by striking 35 19 the section and inserting in lieu thereof the following: 35 20 435.22 ASSESSMENT – CREDITS. 35 21 A mobile home or manufactured home used primarily as a 35 22 residence shall be assessed as residential property pursuant 35 23 to section 441.21, and shall be taxed an annual ad valorem tax 35 24 in the same manner as other residential property. A mobile 35 25 home or manufactured home used primarily for commercial or 35 26 industrial purposes shall be assessed as commercial and 35 27 industrial property pursuant to section 441.21, and shall be 35 28 taxed an annual ad valorem tax in the same manner as other 35 29 commercial or industrial property. A person who owns a mobile 35 30 home or manufactured home as a homestead is eligible for the 35 31 homestead tax credit provided in section 425.2. A person who 35 32 owns a mobile home or manufactured home as a homestead and who 35 33 meets the qualifications provided in sections 425.16 through 35 34 425.37 is eligible for an extraordinary property tax credit or 35 35 rent reimbursement. A person who owns a mobile home or 36 1 manufactured home and who meets the qualifications in chapter 36 2 426A is eligible for the military service tax credit. 36 3 Real estate located in a manufactured home community or a 36 4 mobile home park, as defined in section 435.1, shall be 36 5 assessed and taxed as residential property. 36 6 Sec. 53. Section 435.23, Code 2003, is amended to read as 36 7 follows: 36 8 435.23 EXEMPTIONS – PRORATING TAX. 36 9 The manufacturer's and dealer's inventory of mobile homes, 36 10 manufactured homes, or modular homes not in use as a place of 36 11 human habitation shall be exempt from the annual tax. All 36 12 travel trailers shall be exempt from this tax. The homes and 36 13 travel trailers in the inventory of manufacturers and dealers 36 14 shall be exempt from personal property tax.The homes coming36 15into Iowa from out of state and located in a manufactured home36 16community or mobile home park shall be liable for the tax36 17computed pro rata to the nearest whole month, for the time the36 18home is actually situated in Iowa.36 19 Sec. 54. Section 435.24, subsections 1, 2, and 4, Code 36 20 2003, are amended to read as follows: 36 21 1.The annual tax is due and payable to the county36 22treasurer on or after July 1 in each fiscal year and is36 23collectible in the same manner and at the same time as36 24ordinary taxes as provided in sections 445.36, 445.37, and36 25445.39. Interest at the rate prescribed by law shall accrue36 26on unpaid taxes. Both installments of taxes may be paid at36 27one time. The September installment represents a tax period36 28beginning July 1 and ending December 31. The March36 29installment represents a tax period beginning January 1 and36 30ending June 30. A mobile home, manufactured home, or modular36 31home coming into this state from outside the state, put in use36 32from a dealer's inventory, or put in use at any time after36 33July 1 or January 1, and located in a manufactured home36 34community or mobile home park, is subject to the taxes36 35prorated for the remaining unexpired months of the tax period,37 1but the purchaser is not required to pay the tax at the time37 2of purchase. Interest attaches the following April 1 for37 3taxes prorated on or after October 1. Interest attaches the37 4following October 1 for taxes prorated on or after April 1.37 5 Interest at the rate prescribed by law shall accrue on unpaid 37 6 taxes. If the taxes are not paid, the county treasurer shall 37 7 send a statement of delinquent taxes as part of the notice of 37 8 tax sale as provided in section 446.9.The owner of a home37 9who sells the home between July 1 and December 31 and obtains37 10a tax clearance statement is responsible only for the37 11September tax payment and is not required to pay taxes for37 12subsequent tax periods. If the owner of a home located in a37 13manufactured home community or mobile home park sells the37 14home, obtains a tax clearance statement, and obtains a37 15replacement home to be located in a manufactured home37 16community or mobile home park, the owner shall not pay taxes37 17under this chapter for the newly acquired home for the same37 18tax period that the owner has paid taxes on the home sold.37 19 Interest for delinquent taxes shall be calculated to the 37 20 nearest whole dollar. In calculating interest each fraction 37 21 of a month shall be counted as an entire month. 37 22 2. The home owners upon issuance of a certificate of title 37 23 or upon transporting to a new site shall file the address, 37 24 township, and school district, of the location where the home 37 25 is parked with the county treasurer's office. Failure to 37 26 comply is punishable as set out in section 435.18.When the37 27new location is outside of a manufactured home community or37 28mobile home park, theThe county treasurer shall provide to 37 29 the assessor a copy of the tax clearance statement for 37 30 purposes of assessment as real estate on the following January 37 31 1. 37 32 4. The tax is a lien on the vehicle senior to any other 37 33 lien upon it except a judgment obtained in an action to 37 34 dispose of an abandoned home under section 555B.8. The home 37 35 bearing a current registration issued by any other state and 38 1 remaining within this state for an accumulated period not to 38 2 exceed ninety days in any twelve-month period is not subject 38 3 to Iowa tax. However, when one or more persons occupying a 38 4 home bearing a foreign registration are employed in this 38 5 state, there is no exemption from the Iowa tax.This tax is38 6in lieu of all other taxes general or local on a home.38 7 Sec. 55. Section 435.26, subsection 1, paragraph a, Code 38 8 2003, is amended to read as follows: 38 9 a. A mobile home or manufactured home which is located 38 10 outside a manufactured home community or mobile home park 38 11shall be converted to real estate by beingshall be placed on 38 12 a permanent foundation and shall be assessed for real estate 38 13 taxes.A home, after conversion to real estate, is eligible38 14for the homestead tax credit and the military tax exemption as38 15provided in sections 425.2 and 426A.11.Such mobile home or 38 16 manufactured home is subject to the requirements of this 38 17 section. 38 18 Sec. 56. Section 435.27, subsection 1, Code 2003, is 38 19 amended to read as follows: 38 20 1. A mobile home or manufactured homeconverted to real38 21estateunder section 435.26may be reconverted to a home as38 22provided in this section when itthat is moved to a 38 23 manufactured home community or mobile home park or a 38 24 manufactured or mobile home retailer's inventory is subject to 38 25 the requirements of this section.When the home is located38 26within a manufactured home community or mobile home park, the38 27home shall be taxed pursuant to section 435.22, subsection 1.38 28 Sec. 57. Section 435.27, subsection 3, Code 2003, is 38 29 amended by striking the subsection. 38 30 Sec. 58. Section 435.28, Code 2003, is amended to read as 38 31 follows: 38 32 435.28 COUNTY TREASURER TO NOTIFY ASSESSOR. 38 33 Upon issuance of a certificate of title to a mobile home or 38 34 manufactured home which is not located in amanufactured home38 35community or mobile home park ordealer's inventory, the 39 1 county treasurer shall notify the assessor of the existence of 39 2 the home for tax assessment purposes. 39 3 Sec. 59. Section 435.35, Code 2003, is amended to read as 39 4 follows: 39 5 435.35 EXISTING HOME OUTSIDE OF MANUFACTURED HOME 39 6 COMMUNITY OR MOBILE HOME PARK – EXEMPTION. 39 7 A taxable mobile home or manufactured home which is not 39 8 located in a manufactured home community or mobile home park 39 9 as of January 1, 1995,shall be assessed and taxed as real39 10estate. The homeisalsoexempt from the permanent foundation 39 11 requirements of this chapter until the home is relocated. 39 12 Sec. 60. Section 441.1, Code 2003, is amended to read as 39 13 follows: 39 14 441.1 OFFICE OF ASSESSOR CREATED. 39 15InExcept as otherwise provided in section 441.16A, in 39 16 every county in the state of Iowa the office of assessor is 39 17 hereby created. A city having a population of ten thousand or 39 18 more, according to the latest federal census, may by ordinance 39 19 provide for the selection of a city assessor and for the 39 20 assessment of property in the city under the provisions of 39 21 this chapter. A city desiring to provide for assessment under 39 22 the provisions of this chapter shall, not less than sixty days 39 23 before the expiration of the term of the assessor in office, 39 24 notify the taxing bodies affected and proceed to establish a 39 25 conference board, examining board, and board of review and 39 26 select an assessor, all as provided in this chapter. A city 39 27 desiring to abolish the office of city assessor shall repeal 39 28 the ordinance establishing the office of city assessor, notify 39 29 the county conference board and the affected taxing districts, 39 30 provide for the transfer of appropriate records and other 39 31 matters, and provide for the abolition of the respective 39 32 boards and the termination of the terms of office of the 39 33 assessor and members of the respective boards. The abolition 39 34 of the city assessor's office shall take effect on July 1 39 35 following notification of the abolition unless otherwise 40 1 agreed to by the affected conference boards. If notification 40 2 of the proposed abolition is made after January 1, sufficient 40 3 funds shall be transferred from the city assessor's budget to 40 4 fund the additional responsibilities transferred to the county 40 5 assessor for the next fiscal year. 40 6 Sec. 61. NEW SECTION. 441.16A COUNTIES JOINING IN 40 7 EMPLOYMENT OF ASSESSOR. 40 8 The boards of supervisors of two or more adjacent counties 40 9 may enter into an agreement to jointly employ a county 40 10 assessor. Such agreement shall be written and entered in 40 11 their respective minutes and a copy of the agreement 40 12 transmitted to the conference board of each county that is a 40 13 party to the agreement. The written agreement shall provide 40 14 for the manner of allocation of the budget of the assessor's 40 15 office. The provisions of chapter 28E shall be applicable to 40 16 this section, except that such agreement shall not be 40 17 applicable for a period of less than six years beginning from 40 18 the date the multicounty assessor is appointed by the 40 19 conference board. 40 20 The conference board shall be established as provided in 40 21 section 441.2, with representation from each county that is a 40 22 party to the agreement. The conference board shall appoint 40 23 one examining board. 40 24 The term of the multicounty assessor shall begin on July 1 40 25 following the date of the agreement and the terms of the 40 26 incumbent assessor in each county that is a party to the 40 27 agreement shall expire on that date, notwithstanding the term 40 28 specified in section 441.8. 40 29 Sec. 62. Section 441.21, subsection 1, Code 2003, is 40 30 amended by adding the following new paragraph: 40 31 NEW PARAGRAPH. h. The assessor shall determine the value 40 32 of real property in accordance with rules adopted by the 40 33 revenue department and in accordance with forms and guidelines 40 34 contained in the real property appraisal manual prepared by 40 35 the department as updated from time to time, as long as such 41 1 rules, forms, and guidelines are not inconsistent with or 41 2 change the means, as provided in this section, of determining 41 3 the actual, market, taxable, and assessed values. 41 4 If the director of revenue and finance determines that an 41 5 assessor has willfully disregarded the rules of the department 41 6 relating to valuation of property or has willfully disregarded 41 7 the forms and guidelines contained in the real property 41 8 appraisal manual, the department shall take steps to withhold 41 9 the payment authorized in chapter 405A to the county or city, 41 10 as applicable, until the assessor is determined to be in 41 11 compliance. 41 12 Sec. 63. Section 441.21, subsection 2, Code 2003, is 41 13 amended to read as follows: 41 14 2. In the event market value of the property being 41 15 assessed cannot be readily established in the foregoing 41 16 manner, then the assessor may determine the value of the 41 17 property using the other uniform and recognized appraisal 41 18 methods including its productive and earning capacity, if any, 41 19 industrial conditions, its cost, physical and functional 41 20 depreciation and obsolescence and replacement cost, and all 41 21 other factors which would assist in determining the fair and 41 22 reasonable market value of the property but the actual value 41 23 shall not be determined by use of only one such factor. The 41 24 following shall not be taken into consideration: Special 41 25 value or use value of the property to its present owner, and 41 26 the good will or value of a business which uses the property 41 27 as distinguished from the value of the property as property. 41 28 However, in assessing property that is rented or leased to 41 29 low-income individuals and families as authorized by section 41 30 42 of the Internal Revenue Code, as amended, and which section 41 31 limits the amount that the individual or family pays for the 41 32 rental or lease of units in the property, the assessor shall 41 33 use the productive and earning capacity from the actual rents 41 34 received as a method of appraisal and shall take into account 41 35 the extent to which that use and limitation reduces the market 42 1 value of the property. The assessor shall not consider any 42 2 tax credit equity or other subsidized financing as income 42 3 provided to the property in determining the assessed value. 42 4 Upon adoption of uniform rules by the revenue department or 42 5 succeeding authority covering assessments and valuations of 42 6 such properties,saidthe valuation on such properties shall 42 7 be determined in accordancetherewithwith such rules and in 42 8 accordance with forms and guidelines contained in the real 42 9 property appraisal manual prepared by the department as 42 10 updated from time to time for assessment purposes to assure 42 11 uniformity, but such rules, forms, and guidelines shall not be 42 12 inconsistent with or change the foregoing means of determining 42 13 the actual, market, taxable and assessed values. 42 14 Sec. 64. Section 441.21, subsection 4, Code 2003, is 42 15 amended by adding the following new unnumbered paragraphs: 42 16 NEW UNNUMBERED PARAGRAPH. For valuations established as of 42 17 January 1, 2003, and each year thereafter, the percentage of 42 18 actual value, as equalized by the director of revenue and 42 19 finance as provided in section 441.49, at which residential 42 20 property shall be assessed shall not be less than fifty 42 21 percent. If the percentage of actual value of residential 42 22 property as calculated in accordance with this subsection is 42 23 less than fifty percent, the director of revenue and finance 42 24 shall increase the percentage to fifty percent. For purposes 42 25 of determining valuations in the assessment year beginning 42 26 January 1, 2004, and for each subsequent assessment year, the 42 27 actual percentage for the prior year as determined under this 42 28 subsection before adjustment under this paragraph, if 42 29 necessary, shall be the percentage used in making the 42 30 calculation of the dividend for that assessment year. 42 31 NEW UNNUMBERED PARAGRAPH. For valuations established as of 42 32 January 1, 2003, and each year thereafter, the percentage of 42 33 actual value, as equalized by the director of revenue and 42 34 finance as provided in section 441.49, at which agricultural 42 35 property shall be assessed shall not be less than forty 43 1 percent of the market value of agricultural property 43 2 established annually by Iowa state university. If the 43 3 percentage of actual value of agricultural property as 43 4 calculated in accordance with this subsection is less than 43 5 forty percent, the director of revenue and finance shall 43 6 increase the percentage to forty percent. For purposes of 43 7 determining valuations in the assessment year beginning 43 8 January 1, 2004, and for each subsequent assessment year, the 43 9 actual percentage for the prior year as determined under this 43 10 subsection before adjustment under this paragraph, if 43 11 necessary, shall be the percentage used in making the 43 12 calculation of the dividend for that assessment year. 43 13 Sec. 65. Section 441.21, subsection 5, Code 2003, is 43 14 amended by adding the following new unnumbered paragraph: 43 15 NEW UNNUMBERED PARAGRAPH. For valuations established as of 43 16 January 1, 2003, and each year thereafter, the percentage of 43 17 actual value, as equalized by the director of revenue and 43 18 finance as provided in section 441.49, at which commercial and 43 19 industrial property shall be assessed shall not be more than 43 20 eighty-five percent. If the percentage of actual value of 43 21 commercial and industrial property as calculated in accordance 43 22 with this subsection is more than eighty-five percent, the 43 23 director of revenue and finance shall decrease the percentage 43 24 to eighty-five percent. For purposes of determining 43 25 valuations in the assessment year beginning January 1, 2004, 43 26 and for each subsequent assessment year, the actual percentage 43 27 for the prior year as determined under this subsection before 43 28 adjustment under this paragraph, if necessary, shall be the 43 29 percentage used in making the calculation of the dividend for 43 30 that assessment year. 43 31 Sec. 66. Section 441.21, Code 2003, is amended by adding 43 32 the following new subsection: 43 33 NEW SUBSECTION. 13. Beginning with the assessment year 43 34 beginning January 1, 2004, and for all subsequent assessment 43 35 years, commercial property and industrial property shall be 44 1 assessed as one class of property. 44 2 Sec. 67. Section 441.37, subsection 1, Code 2003, is 44 3 amended by adding the following new unnumbered paragraph: 44 4 NEW UNNUMBERED PARAGRAPH. In lieu of filing a protest with 44 5 the local board of review, a property owner or aggrieved 44 6 taxpayer of industrial property may file a protest with the 44 7 director of revenue and finance. Such protest must meet the 44 8 requirements of this subsection. The costs incurred by the 44 9 department associated with the protest of an assessment to the 44 10 director of revenue and finance shall be paid from the 44 11 assessment expense fund of the county where the property is 44 12 located. 44 13 Sec. 68. Section 441.37, subsection 3, Code 2003, is 44 14 amended to read as follows: 44 15 3. a. After the board of review has considered any 44 16 protest filed by a property owner or aggrieved taxpayer and 44 17 made final disposition of the protest, the board shall give 44 18 written notice to the property owner or aggrieved taxpayer who 44 19 filed the protest of the action taken by the board of review 44 20 on the protest. The written notice to the property owner or 44 21 aggrieved taxpayer shall also specify the reasons for the 44 22 action taken by the board of review on the protest. 44 23 b. After the department has considered any protest filed 44 24 by a property owner or aggrieved taxpayer of an industrial 44 25 property assessment and made final disposition of the protest, 44 26 the department shall give written notice to the local board of 44 27 review and to the property owner or aggrieved taxpayer who 44 28 filed the protest of the action taken by the department on the 44 29 protest. The written notice to the local board of review, and 44 30 to the property owner or aggrieved taxpayer, shall also 44 31 specify the reasons for the action taken by the department on 44 32 the protest. Action taken on a protest filed under this 44 33 paragraph is final and the property owner or aggrieved 44 34 taxpayer is prohibited from appealing the action to district 44 35 court. 45 1 Sec. 69. Section 441.54, Code 2003, is amended to read as 45 2 follows: 45 3 441.54 CONSTRUCTION. 45 4 Whenever in the laws of this state, the words "assessor" or 45 5 "assessors" appear, singly or in combination with other words, 45 6 they shall be deemed to mean and refer to the multicounty, 45 7 county, or city assessor, as the case may be. 45 8 Sec. 70. NEW SECTION. 444.25 PROPERTY TAX LIMITATIONS. 45 9 1. COUNTY LIMITATION. 45 10 a. For the fiscal year beginning July 1, 2004, and for all 45 11 subsequent fiscal years, the maximum amount of property tax 45 12 dollars that may be certified by a county for taxes payable in 45 13 the budget year shall not exceed the amount of property tax 45 14 dollars certified by the county for taxes payable in the 45 15 current fiscal year for each of the levies for the following: 45 16 (1) General county services under section 331.422, 45 17 subsection 1. 45 18 (2) Rural county services under section 331.422, 45 19 subsection 2. 45 20 (3) Other taxes under section 331.422, subsection 4. 45 21 b. The limitation provided in this subsection does not 45 22 apply to the levies on the increase in taxable valuation due 45 23 to new construction, additions or improvements to existing 45 24 structures, remodeling of existing structures for which a 45 25 building permit is required, annexation, and phasing out of 45 26 tax exemptions, and on the increase in valuation of taxable 45 27 property as a result of a comprehensive revaluation by a 45 28 private appraiser under a contract entered into prior to 45 29 January 1, 2003, or as a result of a comprehensive revaluation 45 30 directed or authorized by the conference board prior to 45 31 January 1, 2003, with documentation of the contract, 45 32 authorization, or directive on the revaluation provided to the 45 33 director of revenue and finance, if the levies are equal to or 45 34 less than the levies for the previous year; levies on that 45 35 portion of the taxable property located in an urban renewal 46 1 project the tax revenues from which are no longer divided as 46 2 provided in section 403.19, subsection 2; or as otherwise 46 3 provided in this section. 46 4 2. CITY LIMITATION. 46 5 a. For the fiscal year beginning July 1, 2004, and for all 46 6 subsequent fiscal years, the maximum amount of property tax 46 7 dollars that may be certified by a city for taxes payable in 46 8 the budget year shall not exceed the amount in property tax 46 9 dollars certified by the city for taxes payable in the current 46 10 fiscal year for each of the levies for the following: 46 11 (1) City government purposes under section 384.1. 46 12 (2) Capital improvements reserve fund under section 384.7. 46 13 (3) Emergency fund purposes under section 384.8. 46 14 (4) Other city government purposes under section 384.12. 46 15 b. The limitation provided in this subsection does not 46 16 apply to the levies on the increase in taxable valuation due 46 17 to new construction, additions or improvements to existing 46 18 structures, remodeling of existing structures for which a 46 19 building permit is required, annexation, and phasing out of 46 20 tax exemptions, and on the increase in valuation of taxable 46 21 property as a result of a comprehensive revaluation by a 46 22 private appraiser under a contract entered into prior to 46 23 January 1, 2003, or as a result of a comprehensive revaluation 46 24 directed or authorized by the conference board prior to 46 25 January 1, 2003, with documentation of the contract, 46 26 authorization, or directive on the revaluation provided to the 46 27 director of revenue and finance, if the levies are equal to or 46 28 less than the levies for the previous year; levies on that 46 29 portion of the taxable property located in an urban renewal 46 30 project the tax revenues from which are no longer divided as 46 31 provided in section 403.19, subsection 2; or as otherwise 46 32 provided in this section. 46 33 3. GROWTH OPPORTUNITIES. The dollar amount computed under 46 34 subsection 1 or 2 may be increased each year, as provided in 46 35 this subsection. 47 1 a. The dollar amount determined in subsection 1, paragraph 47 2 "a", or subsection 2, paragraph "a", shall be increased by the 47 3 product of the amount in subsection 1, paragraph "a", or 47 4 subsection 2, paragraph "a", and the percentage change in the 47 5 consumer price index or times one and one-half percent, 47 6 whichever is lower. For purposes of this subsection, 47 7 "consumer price index" means the percentage rate of change in 47 8 the consumer price index as tabulated by the United States 47 9 department of labor, bureau of labor statistics, for the 47 10 twelve-month period ending June 30 of the fiscal year 47 11 immediately preceding the current fiscal year. 47 12 b. The dollar amount determined in subsection 1, paragraph 47 13 "a", or subsection 2, paragraph "a", may be increased by an 47 14 additional one percent for the fiscal year following the 47 15 calendar year that the federal government disseminates 47 16 population data pursuant to Pub. L. No. 94-171 if such data 47 17 shows that the population of the county or city, as 47 18 applicable, increased by ten percent or more from the previous 47 19 federal decennial census. 47 20 c. The dollar amount determined in subsection 1, paragraph 47 21 "a", or subsection 2, paragraph "a", may be increased by an 47 22 additional one percent if the budget year enrollment in the 47 23 county or city, as applicable, increased by more than two 47 24 percent over the enrollment in the current fiscal year. For 47 25 purposes of this paragraph, "enrollment" means the number of 47 26 pupils residing in the county or city, as applicable, and 47 27 attending kindergarten through twelfth grade in an accredited 47 28 public or nonpublic school in the state. 47 29 4. EXCEPTIONS. The limitations provided in subsections 1 47 30 and 2 do not apply to the levies made for the following: 47 31 a. Debt service to be deposited into the debt service fund 47 32 pursuant to section 331.430 or 384.4. 47 33 b. Taxes approved by a vote of the people which are 47 34 payable during the fiscal year beginning July 1, 2004, or 47 35 subsequent fiscal years. 48 1 c. Hospitals pursuant to chapters 37, 347, and 347A. 48 2 5. APPEAL PROCEDURES. If a city or county needs to 48 3 increase the amount of property tax dollars raised from a tax 48 4 levy in excess of the amounts allowed in subsections 1 through 48 5 3, the following procedures apply: 48 6 a. Not later than March 1, and after the publication and 48 7 public hearing on the budget in the manner and form prescribed 48 8 by the director of the department of management, 48 9 notwithstanding sections 331.434, 362.3, and 384.16, the city 48 10 or county shall petition the state appeal board for approval 48 11 of a property tax increase in excess of the increases provided 48 12 for in subsection 3, on forms furnished by the director of the 48 13 department of management. Applications received after March 1 48 14 shall be automatically ineligible for consideration by the 48 15 board. 48 16 b. Additional costs incurred by the city or county due to 48 17 any of the following circumstances shall be the basis for 48 18 justifying the extraordinary increase in property tax dollars 48 19 under this subsection: 48 20 (1) Natural disaster or other life-threatening 48 21 emergencies. 48 22 (2) Unusual need for additional moneys to finance existing 48 23 programs that would provide substantial benefit to city or 48 24 county residents or compelling need to finance new programs 48 25 that would provide substantial benefit to city or county 48 26 residents. 48 27 (3) Need for additional moneys for health care, treatment, 48 28 and facilities, including mental health and mental retardation 48 29 care and treatment pursuant to section 331.424, subsection 1, 48 30 paragraphs "a" and "b". 48 31 (4) Judgments, settlements, and related costs arising out 48 32 of civil claims against the city or county and its officers, 48 33 employees, and agents, as defined in chapter 670. 48 34 c. The state appeal board shall approve, disapprove, or 48 35 reduce the amount of excess property tax dollars requested. 49 1 The board shall take into account the intent of this section 49 2 to provide property tax relief. The decision of the board 49 3 shall be rendered at a regular or special meeting of the board 49 4 within twenty days of the board's receipt of an appeal. 49 5 d. Within seven days of receipt of the decision of the 49 6 state appeal board, the county or city shall adopt and certify 49 7 its budget under section 331.434 or 384.16, which budgets may 49 8 be protested as provided in section 331.436 or 384.19. The 49 9 budget shall not contain an amount of property tax dollars in 49 10 excess of the amount approved by the state appeal board. 49 11 6. COUNTY AUDITOR ADJUSTMENT. In addition to the 49 12 requirement of the county auditor in section 444.3 to 49 13 establish a rate of tax which does not exceed the rate 49 14 authorized by law, the county auditor shall also adjust the 49 15 rate if the amount of property tax dollars to be raised is in 49 16 excess of the amount specified in subsections 1 and 3 for a 49 17 county or subsections 2 and 3 for a city, as such rates may be 49 18 adjusted pursuant to subsection 5. 49 19 7. DEFINITIONS. For purposes of this section, "budget 49 20 year" and "current fiscal year" mean the same as defined in 49 21 section 331.421. 49 22 Sec. 71. NEW SECTION. 444.25A OTHER PROPERTY TAX LEVY 49 23 LIMITATIONS NOT AFFECTED. 49 24 Section 444.25 shall not be construed as removing or 49 25 otherwise affecting the property tax limitations otherwise 49 26 provided by law for any tax levy of the political subdivision. 49 27 Sec. 72. Sections 331.426 and 435.34, Code 2003, are 49 28 repealed. 49 29 Sec. 73. EFFECTIVE AND APPLICABILITY DATES. 49 30 1. The sections of this division of this Act amending 49 31 sections 435.22 through 435.24, 435.26 through 435.28, and 49 32 435.35, and repealing section 435.34, apply to property taxes 49 33 on mobile and manufactured homes due and payable in the fiscal 49 34 year beginning July 1, 2005. 49 35 2. The repeal of section 331.426 in this division of this 50 1 Act takes effect July 1, 2004, and applies to fiscal years 50 2 beginning on or after that date. 50 3 EXPLANATION 50 4 DIVISION I – Division I of this bill rewrites the state 50 5 individual income tax by setting a flat rate of 3.5 percent of 50 6 the taxable income. Most adjustments to federal adjusted 50 7 gross income are eliminated. However, deductions for the 50 8 amount of all social security and pensions received are phased 50 9 in over a five-year period. In arriving at the taxable 50 10 income, all of the itemized deductions allowed for federal tax 50 11 purposes are eliminated. A standard deduction is provided 50 12 which is equal to $2,000 for each personal exemption the 50 13 taxpayer is allowed under the federal tax code. An additional 50 14 $1,000 deduction is allowed if the individual or the 50 15 individual's spouse is 65 or older or blind. The present 50 16 personal credit is made contingent on the amount of net 50 17 income. This amounts to a maximum income of $25,000 for 50 18 single filers and $50,000 for joint filers and heads of 50 19 households. The deduction for federal income taxes paid is 50 20 eliminated. The alternative minimum tax is eliminated. The 50 21 division also retains the present credits that are allowed 50 22 except for the minimum tax credit. The ability of married 50 23 persons to file separately on combined returns is eliminated. 50 24 The division requires a three-fourths vote of members elected 50 25 to each house to pass legislation that would increase the 50 26 income tax rate or would impose an alternative minimum tax or 50 27 individual income surtax. A person is not required to file a 50 28 return if the person's net income is no more than $15,000 for 50 29 joint filers, heads of households, and surviving spouses, or 50 30 no more than $11,000 for single filers. 50 31 Division I of the bill takes effect January 1, 2004, for 50 32 tax years beginning on or after that date. 50 33 DIVISION II – Division II of this bill increases the sales 50 34 and use tax rates from 5 percent to 5.5 percent, sets the rate 50 35 for providing gas, electricity, and fuel for residential 51 1 dwellings at 3 percent (total exemption was to occur beginning 51 2 January 1, 2006), and imposes the tax on the charges for 51 3 delivery or transportation of taxable tangible personal 51 4 property and services. 51 5 The division also increases the cigarette tax rate from 1.8 51 6 cents per cigarette, 36 cents a pack, to 3.05 cents per 51 7 cigarette, 61 cents a pack. 51 8 The division requires the department of revenue and finance 51 9 to establish two study committees. The first is to study the 51 10 industrial processing exemption under the sales and use tax 51 11 and report to the legislature annually through January 2013. 51 12 The second is to study the entire sales and use tax law and 51 13 report to the legislature with its recommendations by January 51 14 1, 2004. Both study committees would consist of 51 15 representatives of organizations or businesses with interests 51 16 in the issues. 51 17 DIVISON III – Division III of this bill makes changes 51 18 relating to assessment and taxation of real property and to 51 19 city and county budgets. 51 20 The division requires that if a county's ending fund 51 21 balance for a budget year exceeds 25 percent of budgeted 51 22 expenditures, the excess over 25 percent must be explicitly 51 23 reserved or designated for a specific purpose. The division 51 24 applies to ending fund balances in the general fund and the 51 25 rural services fund. 51 26 The division provides that if the amount of the ending fund 51 27 balance is protested to the state appeal board, the county has 51 28 the burden of proving that the amount over 25 percent is 51 29 reasonably likely to be appropriated for the reserved or 51 30 designated purpose and that the amount is necessary, 51 31 reasonable, and in the interest of the public welfare. The 51 32 division defines "budget year", "current fiscal year", and 51 33 "item". 51 34 The division removes the square footage tax on mobile homes 51 35 and manufactured homes and replaces it with the ad valorem tax 52 1 imposed on other real property. The division provides that 52 2 real estate of a mobile home park or land-leased community 52 3 shall be assessed and taxed as residential property. These 52 4 sections of the division apply to taxes due and payable in the 52 5 fiscal year beginning July 1, 2005. 52 6 The division allows counties to enter into an agreement for 52 7 employment of a multicounty assessor. The division provides 52 8 for conference board representation from each county that is a 52 9 party to the agreement and provides for one examining board in 52 10 the multicounty area. The division requires that an agreement 52 11 for multicounty assessor shall be in force for at least six 52 12 years. 52 13 The division requires local assessors, when assessing 52 14 property, to use the forms and apply the guidelines contained 52 15 in the real property appraisal manual prepared by the 52 16 department of revenue and finance. If the department 52 17 determines that an assessor, when assessing property, is 52 18 willfully disregarding rules, forms, and guidelines of the 52 19 department, the department shall take steps to withhold the 52 20 county's or city's personal property tax replacement payment 52 21 by the state until the assessor complies with the rules, 52 22 forms, and guidelines. 52 23 The division limits the percentage of actual value that 52 24 residential property may be rolled back to 50 percent 52 25 beginning with the assessment year beginning January 1, 2003. 52 26 Beginning with the assessment year beginning January 1, 2003, 52 27 the division limits the percentage of actual value 52 28 (productivity value) that agricultural property may be rolled 52 29 back to an amount equal to 40 percent of the market value of 52 30 agricultural property as established annually by Iowa state 52 31 university. The division also provides that, beginning with 52 32 the assessment year beginning January 1, 2003, the percent of 52 33 actual value at which commercial and industrial property may 52 34 be assessed is limited to 85 percent. 52 35 The division provides that, beginning with the assessment 53 1 year beginning January 1, 2004, commercial and industrial 53 2 property shall be assessed as one class of property. 53 3 The division provides that an owner or aggrieved taxpayer 53 4 of industrial property may protest an assessment to the 53 5 director of revenue and finance. Action taken on a protest 53 6 made to the director of revenue and finance is final and the 53 7 owner or aggrieved taxpayer is not allowed to appeal such 53 8 action to district court. 53 9 The division limits the maximum dollar amounts of property 53 10 tax levies to be imposed by cities and counties to the dollar 53 11 amounts of the property taxes levied in the previous year, 53 12 with certain exceptions. The division also allows the amount 53 13 of the county's or city's previous year's tax levy to be 53 14 increased as follows: by 1.5 percent or the consumer price 53 15 index, whichever is lower; by 1 percent in the fiscal year 53 16 following the federal decennial census if the population of 53 17 the county or city, as applicable, has grown by 10 percent or 53 18 more; and by 1 percent if the budget year enrollment in the 53 19 county or city, as applicable, increased by more than 2 53 20 percent over the enrollment in the current fiscal year. The 53 21 division defines "enrollment". The limitation on property 53 22 taxes may be exceeded for certain expenditures if the county 53 23 or city, as applicable, files a petition with the state appeal 53 24 board by March 1 and the petition is approved by the state 53 25 appeal board. Conforming amendments relating to exceeding 53 26 property tax levies are made to Code sections 24.48 and 53 27 331.426. The limitation on property taxes applies to fiscal 53 28 years beginning on or after July 1, 2004. 53 29 The division creates a property tax study committee to be 53 30 coordinated and administered by the department of revenue and 53 31 finance. Membership on the committee includes representatives 53 32 from the general assembly, the governor's office, the 53 33 department of revenue and finance, the department of 53 34 management, and various interest groups. The committee is to 53 35 be staffed by the department of revenue and finance and the 54 1 department of management. The committee is to monitor 54 2 implementation of this division, including impacts on property 54 3 taxpayer burden, county and city budgets, and the school aid 54 4 funding formula and make recommendations for legislative 54 5 changes related to this division and other changes to property 54 6 tax law that go beyond the scope of the division. The 54 7 committee is to annually report to the general assembly and 54 8 the governor. The section creating the committee is repealed 54 9 effective July 1, 2009. 54 10 LSB 3100XC 80 54 11 mg/sh/8
Text: SSB01167 Text: SSB01169 Text: SSB01100 - SSB01199 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
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