House
Study
Bill
215
-
Introduced
HOUSE
FILE
_____
BY
(PROPOSED
COMMITTEE
ON
WAYS
AND
MEANS
BILL
BY
CHAIRPERSON
SANDS)
A
BILL
FOR
An
Act
relating
to
the
individual
income
tax
by
providing
1
an
alternative
base
income
tax
and
related
alternative
2
cumulative
income
surtax
imposed
at
the
election
of
the
3
taxpayer
and
including
effective
date
and
retroactive
4
applicability
provisions.
5
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
6
TLSB
1400YC
(5)
86
mm/sc
H.F.
_____
DIVISION
I
1
ALTERNATIVE
BASE
INCOME
TAX
AND
2
ALTERNATIVE
CUMULATIVE
INCOME
SURTAX
3
Section
1.
Section
298.14,
Code
2015,
is
amended
to
read
as
4
follows:
5
298.14
School
district
income
surtaxes.
6
1.
a.
For
each
fiscal
year,
the
cumulative
total
of
the
7
percents
of
surtax
approved
by
the
board
of
directors
of
a
8
school
district
and
collected
by
the
department
of
revenue
9
under
sections
257.21
,
257.29
,
and
298.2
,
and
the
enrichment
10
surtax
under
section
442.15
,
Code
1989,
and
an
income
surtax
11
collected
by
a
political
subdivision
under
chapter
422D
,
shall
12
not
exceed
twenty
percent.
13
b.
Notwithstanding
paragraph
“a”
,
or
any
other
provision
14
of
law
to
the
contrary,
for
a
taxpayer
who
makes
an
election
15
under
section
422.5A,
subsection
2,
and
who
is
subject
to
an
16
income
surtax
as
provided
in
section
257.21,
257.29,
298.2,
17
442.15,
Code
1989,
or
chapter
422D,
the
appropriate
governing
18
body
shall
impose,
and
the
department
of
revenue
shall
collect,
19
an
alternative
cumulative
income
surtax
from
the
taxpayer
in
an
20
amount
equal
to
one
hundred
twenty-two
percent
of
the
amount
21
generated
by
each
surtax
imposed
on
the
taxpayer
by
the
school
22
district
or
political
subdivision
for
the
tax
year
in
which
the
23
election
is
made.
24
2.
A
school
district
income
surtax
fund
is
created
in
the
25
office
of
treasurer
of
state.
Income
surtaxes
collected
by
26
the
department
of
revenue
under
sections
257.21
,
257.29
,
and
27
298.2
and
section
442.15
,
Code
1989,
shall
be
deposited
in
the
28
school
district
income
surtax
fund
to
the
credit
of
each
school
29
district.
A
separate
accounting
of
each
surtax,
by
school
30
district,
shall
be
maintained.
31
3.
The
director
of
the
department
of
administrative
32
services
shall
draw
warrants
in
payment
of
the
surtaxes
33
collected
in
each
school
district.
Warrants
shall
be
payable
34
in
two
installments
to
be
paid
on
approximately
the
first
day
35
-1-
LSB
1400YC
(5)
86
mm/sc
1/
9
H.F.
_____
of
December
and
the
first
day
of
February
following
collection
1
of
the
taxes
and
shall
be
delivered
to
the
respective
school
2
districts.
3
Sec.
2.
NEW
SECTION
.
422.5A
Tax
imposed
——
alternative
base
4
income
tax.
5
1.
For
purposes
of
this
section,
“base
income”
means
the
6
adjusted
gross
income
before
the
net
operating
loss
deduction
7
as
properly
computed
for
federal
income
tax
purposes
under
the
8
Internal
Revenue
Code,
with
the
following
adjustments:
9
a.
Subtract
a
standard
deduction
equal
to
six
thousand
two
10
hundred
thirty-five
dollars
for
a
married
person
who
files
11
separately
or
a
single
person
or
equal
to
twelve
thousand
four
12
hundred
seventy
dollars
for
a
married
couple
who
files
a
joint
13
return,
a
surviving
spouse,
or
a
head
of
household.
14
b.
Subtract
interest
and
dividends
from
federal
securities.
15
c.
Subtract,
to
the
extent
included,
the
amount
of
social
16
security
benefits
taxable
under
section
86
of
the
Internal
17
Revenue
Code.
18
d.
Subtract,
to
the
extent
included,
the
total
amount
of
a
19
governmental
or
other
pension
or
retirement
pay,
including
but
20
not
limited
to
defined
benefit
or
defined
contribution
plans,
21
annuities,
individual
retirement
accounts,
plans
maintained
or
22
contributed
to
by
an
employer,
or
maintained
or
contributed
23
to
by
a
self-employed
person
as
an
employer,
and
deferred
24
compensation
plans
or
any
earnings
attributable
to
the
deferred
25
compensation
plans.
26
2.
Notwithstanding
any
other
provision
of
law,
a
resident
27
or
nonresident
may,
in
lieu
of
the
taxes
imposed
under
section
28
422.5,
elect
to
be
subject
to
state
income
tax
as
imposed
and
29
computed
pursuant
to
subsection
3.
Such
election
must
be
made
30
not
later
than
the
due
date
for
filing
the
return
for
a
taxable
31
year,
including
extensions
thereof,
and
under
rules
to
be
32
prescribed
by
the
director.
33
3.
A
tax
is
imposed
upon
every
resident
and
nonresident
34
of
the
state
making
the
election
under
subsection
2
which
tax
35
-2-
LSB
1400YC
(5)
86
mm/sc
2/
9
H.F.
_____
shall
be
levied,
collected,
and
paid
annually
in
an
amount
1
equal
to
the
base
income
of
the
resident
or
nonresident
times
2
five
percent.
3
4.
Notwithstanding
any
other
provision
of
law
to
the
4
contrary,
a
resident
or
nonresident
making
the
election
5
under
subsection
2
shall
not
be
allowed
any
nonrefundable
or
6
refundable
credit
otherwise
allowed
under
this
division
for
the
7
tax
year
for
which
the
election
is
made,
except
for
the
credits
8
for
withheld
tax
and
estimated
tax
paid
under
section
422.16.
9
5.
A
taxpayer
making
the
election
under
subsection
2
shall
10
be
subject
to
an
alternative
cumulative
income
surtax
as
11
provided
in
section
298.14,
if
applicable.
12
6.
a.
The
director
shall
determine
for
the
2016
calendar
13
year
and
each
subsequent
calendar
year
the
annual
and
14
cumulative
standard
deduction
factors
to
be
applied
to
tax
15
years
beginning
on
or
after
January
1
of
that
calendar
year.
16
The
director
shall
compute
the
new
dollar
amounts
of
the
17
standard
deductions
specified
in
section
422.5A,
subsection
18
1,
paragraph
“a”
,
by
the
latest
cumulative
standard
deduction
19
factor
and
round
off
the
result
to
the
nearest
ten
dollars.
20
The
annual
and
cumulative
standard
deduction
factors
determined
21
by
the
director
under
this
subsection
are
not
rules
as
defined
22
in
section
17A.2,
subsection
11.
23
b.
For
purposes
of
this
subsection
and
notwithstanding
24
section
422.4,
subsection
2,
paragraph
“b”
,
“cumulative
standard
25
deduction
factor”
means
the
product
of
the
annual
standard
26
deduction
factor
for
the
2016
calendar
year
and
all
annual
27
standard
deduction
factors
for
subsequent
calendar
years
28
as
determined
pursuant
to
this
subsection.
The
cumulative
29
standard
deduction
factor
applies
to
all
tax
years
beginning
30
on
or
after
January
1
of
the
calendar
year
for
which
the
latest
31
annual
standard
deduction
factor
has
been
determined.
32
Sec.
3.
Section
422.13,
Code
2015,
is
amended
by
adding
the
33
following
new
subsection:
34
NEW
SUBSECTION
.
1A.
a.
Notwithstanding
subsection
1,
35
-3-
LSB
1400YC
(5)
86
mm/sc
3/
9
H.F.
_____
a
resident
or
nonresident
of
this
state
who
is
at
least
1
sixty-five
years
old
on
December
31
of
the
tax
year
and
who
2
elects
to
be
subject
to
the
alternative
base
income
tax
in
3
subsection
422.5A,
shall
not
be
required
to
make
and
file
a
4
return
if
the
taxpayer’s
base
income
does
not
exceed
thirty-two
5
thousand
dollars
in
the
case
of
married
persons
filing
jointly
6
or
filing
separately
on
a
combined
return,
heads
of
household,
7
and
surviving
spouses
or
twenty-four
thousand
dollars
in
the
8
case
of
all
other
persons.
For
purposes
of
this
subsection,
9
“base
income”
means
the
same
as
defined
in
section
422.5A,
10
subsection
1,
except
that
it
includes
all
amounts
of
pensions
11
or
other
retirement
income
received
from
any
source
which
is
12
not
taxable
under
section
422.5A,
but
does
not
include
military
13
retirement
pay
described
in
section
422.7,
subsections
31A
and
14
31B.
15
b.
A
taxpayer
who
is
at
least
sixty-five
years
old
on
16
December
31
of
the
tax
year
and
whose
base
income
does
not
17
exceed
the
applicable
amounts
in
paragraph
“a”
and
who
does
18
not
make
and
file
a
return
pursuant
to
this
section
shall
be
19
deemed
to
have
made
the
election
required
in
section
422.5A,
20
subsection
2.
21
Sec.
4.
Section
422.13,
subsection
2,
Code
2015,
is
amended
22
to
read
as
follows:
23
2.
For
purposes
of
determining
the
requirement
for
filing
24
a
return
under
subsection
1
or
1A
,
the
combined
net
income
or
25
base
income,
as
the
case
may
be,
of
a
husband
and
wife
from
26
sources
taxable
under
this
division
shall
be
considered.
27
DIVISION
II
28
CONFORMING
CHANGES
29
Sec.
5.
Section
68A.102,
subsection
21,
Code
2015,
is
30
amended
to
read
as
follows:
31
21.
“State
income
tax
liability”
means
either
the
state
32
individual
income
tax
imposed
under
section
422.5
,
less
the
33
amounts
of
nonrefundable
credits
allowed
under
chapter
422,
34
division
II
,
or
the
alternative
base
income
tax
imposed
under
35
-4-
LSB
1400YC
(5)
86
mm/sc
4/
9
H.F.
_____
section
422.5A
if
applicable
.
1
Sec.
6.
Section
257.21,
subsection
2,
Code
2015,
is
amended
2
to
read
as
follows:
3
2.
The
instructional
support
income
surtax
shall
be
imposed
4
on
the
state
individual
income
tax
for
the
calendar
year
during
5
which
the
school’s
budget
year
begins,
or
for
a
taxpayer’s
6
fiscal
year
ending
during
the
second
half
of
that
calendar
year
7
and
after
the
date
the
board
adopts
a
resolution
to
participate
8
in
the
program
or
the
first
half
of
the
succeeding
calendar
9
year,
and
shall
be
imposed
on
all
individuals
residing
in
the
10
school
district
on
the
last
day
of
the
applicable
tax
year.
As
11
used
in
this
section
,
“state
individual
income
tax”
means
either
12
the
taxes
computed
under
section
422.5
,
less
the
amounts
of
13
nonrefundable
credits
allowed
under
chapter
422,
division
II
,
14
except
for
the
Iowa
taxpayers
trust
fund
tax
credit
allowed
15
under
section
422.11E
,
or
the
tax
computed
under
section
422.5A
16
if
applicable
.
17
Sec.
7.
Section
422.16,
subsection
8,
Code
2015,
is
amended
18
to
read
as
follows:
19
8.
An
employer
or
withholding
agent
shall
be
liable
for
20
the
payment
of
the
tax
required
to
be
deducted
and
withheld
21
or
the
amount
actually
deducted,
whichever
is
greater,
under
22
subsections
1
and
12
of
this
section
;
and
any
amount
deducted
23
and
withheld
as
tax
under
subsections
1
and
12
of
this
section
24
during
any
calendar
year
upon
the
wages
of
any
employee,
25
nonresident,
or
other
person
shall
be
allowed
as
a
credit
to
26
the
employee,
nonresident,
or
other
person
against
the
tax
27
imposed
by
section
422.5
,
or
section
422.5A
if
applicable
,
28
irrespective
of
whether
or
not
such
tax
has
been,
or
will
29
be,
paid
over
by
the
employer
or
withholding
agent
to
the
30
department
as
provided
by
this
chapter
.
31
Sec.
8.
Section
422.21,
subsection
1,
Code
2015,
is
amended
32
to
read
as
follows:
33
1.
Returns
shall
be
in
the
form
the
director
prescribes,
34
and
shall
be
filed
with
the
department
on
or
before
the
last
35
-5-
LSB
1400YC
(5)
86
mm/sc
5/
9
H.F.
_____
day
of
the
fourth
month
after
the
expiration
of
the
tax
year.
1
However,
cooperative
associations
as
defined
in
section
6072(d)
2
of
the
Internal
Revenue
Code
shall
file
their
returns
on
or
3
before
the
fifteenth
day
of
the
ninth
month
following
the
4
close
of
the
taxable
year
and
nonprofit
corporations
subject
5
to
the
unrelated
business
income
tax
imposed
by
section
6
422.33,
subsection
1A
,
shall
file
their
returns
on
or
before
7
the
fifteenth
day
of
the
fifth
month
following
the
close
of
8
the
taxable
year.
If,
under
the
Internal
Revenue
Code,
a
9
corporation
is
required
to
file
a
return
covering
a
tax
period
10
of
less
than
twelve
months,
the
state
return
shall
be
for
the
11
same
period
and
is
due
forty-five
days
after
the
due
date
of
12
the
federal
tax
return,
excluding
any
extension
of
time
to
13
file.
In
case
of
sickness,
absence,
or
other
disability,
or
14
if
good
cause
exists,
the
director
may
allow
further
time
for
15
filing
returns.
The
director
shall
cause
to
be
prepared
blank
16
forms
for
the
returns
and
shall
cause
them
to
be
distributed
17
throughout
the
state
and
to
be
furnished
upon
application,
18
but
failure
to
receive
or
secure
the
form
does
not
relieve
19
the
taxpayer
from
the
obligation
of
making
a
return
that
is
20
required.
The
department
may
as
far
as
consistent
with
the
21
Code
draft
income
tax
forms
to
conform
to
the
income
tax
22
forms
of
the
internal
revenue
department
of
the
United
States
23
government.
Each
return
by
a
taxpayer
upon
whom
a
tax
is
24
imposed
by
section
422.5
or
422.5A
shall
show
the
county
of
the
25
residence
of
the
taxpayer.
26
Sec.
9.
Section
422D.2,
Code
2015,
is
amended
to
read
as
27
follows:
28
422D.2
Local
income
surtax.
29
A
county
may
impose
by
ordinance
a
local
income
surtax
as
30
provided
in
section
422D.1
at
the
rate
set
by
the
board
of
31
supervisors,
of
up
to
one
percent,
on
the
state
individual
32
income
tax
of
each
individual
residing
in
the
county
at
the
33
end
of
the
individual’s
applicable
tax
year.
However,
the
34
cumulative
total
of
the
percents
of
income
surtax
imposed
on
35
-6-
LSB
1400YC
(5)
86
mm/sc
6/
9
H.F.
_____
any
taxpayer
in
the
county
shall
not
exceed
twenty
percent
,
1
except
as
provided
in
section
298.14
.
The
reason
for
imposing
2
the
surtax
and
the
amount
needed
shall
be
set
out
in
the
3
ordinance.
The
surtax
rate
shall
be
set
to
raise
only
the
4
amount
needed.
For
purposes
of
this
section
,
“state
individual
5
income
tax”
means
the
tax
computed
under
section
422.5
,
less
6
the
amounts
of
nonrefundable
credits
allowed
under
chapter
7
422,
division
II
,
except
for
the
Iowa
taxpayers
trust
fund
tax
8
credit
allowed
under
section
422.11E
,
or
the
tax
computed
under
9
section
422.5A
if
applicable
.
10
DIVISION
III
11
IMPLEMENTATION
12
Sec.
10.
EFFECTIVE
UPON
ENACTMENT.
This
Act,
being
deemed
13
of
immediate
importance,
takes
effect
upon
enactment.
14
Sec.
11.
RETROACTIVE
APPLICABILITY.
This
Act
applies
15
retroactively
to
January
1,
2015,
for
tax
years
beginning
on
16
or
after
that
date.
17
EXPLANATION
18
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
19
the
explanation’s
substance
by
the
members
of
the
general
assembly.
20
This
bill
relates
to
the
individual
income
tax
by
creating
21
an
alternative
base
income
tax
imposed
at
the
election
of
the
22
taxpayer.
23
Division
I
relates
to
the
computation
and
imposition
of
an
24
alternative
base
income
tax.
25
In
lieu
of
the
regular
personal
net
income
tax
computed
and
26
imposed
under
Code
section
422.5,
a
resident
or
nonresident
27
individual
may
elect
to
be
subject
to
an
alternative
base
28
income
tax
as
provided
in
the
division.
An
election
must
be
29
made
not
later
than
the
due
date
for
filing
the
return
for
30
a
taxable
year,
including
extensions,
and
under
rules
to
be
31
prescribed
by
the
director.
32
The
state
income
tax
of
a
taxpayer
making
an
election
33
shall
be
an
amount
of
tax
equal
to
the
taxpayer’s
base
income
34
times
5
percent.
“Base
income”
is
defined
as
the
taxpayer’s
35
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H.F.
_____
adjusted
gross
income
before
the
net
operating
loss
deduction
1
as
properly
computed
for
federal
income
tax
purposes,
less
a
2
standard
deduction
of
$6,235
for
a
married
person
who
files
3
separately
or
a
single
person
or
$12,470
for
a
married
couple
4
filing
a
joint
return,
a
surviving
spouse,
or
a
head
of
5
household,
less
interest
and
dividends
from
federal
securities,
6
and
less
social
security
benefits
and
retirement
income.
The
7
division
indexes
the
standard
deduction
amounts
for
future
8
inflation.
A
taxpayer
shall
not
be
allowed
any
nonrefundable
9
or
refundable
tax
credit
for
the
tax
year
for
which
the
10
election
is
made,
except
the
credits
for
withheld
tax
and
11
estimated
tax
paid
under
Code
section
422.16.
12
Taxpayers
who
are
65
years
of
age
or
older
who
elect
the
13
alternative
base
income
tax
are
not
required
to
file
an
14
income
tax
return
if
base
income
does
not
exceed
$32,000
for
15
a
married
person
filing
jointly
or
filing
separately
on
a
16
combined
return,
a
head
of
household,
or
a
surviving
spouse,
17
or
$24,000
for
all
other
persons.
For
purposes
of
calculating
18
base
income
for
the
filing
threshold,
taxpayers
are
required
19
to
add
back
any
social
security
benefits
or
retirement
income
20
otherwise
exempt
under
the
bill
except
for
military
retirement
21
pay.
Taxpayers
who
meet
these
requirements
and
who
do
not
file
22
a
tax
return
are
deemed
to
have
elected
to
be
subject
to
the
23
alternative
base
income
tax.
24
If
a
taxpayer
making
an
election
is
also
subject
to
a
local
25
income
surtax,
that
taxpayer
is
subject
to
a
local
income
26
surtax
rate
that
is
22
percent
higher
than
the
rate
otherwise
27
imposed
by
the
school
district
or
political
subdivision.
28
Division
II
relates
to
miscellaneous
conforming
changes.
29
The
division
makes
conforming
changes
to
the
definitions
of
30
“state
income
tax
liability”
for
purposes
of
the
Iowa
election
31
campaign
fund
income
tax
checkoff
in
Code
chapter
68A,
and
32
“state
individual
income
tax”
for
purposes
of
the
emergency
33
medical
services
income
surtax
in
Code
chapter
422D,
the
34
instructional
support
income
surtax
in
Code
section
257.21,
35
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and,
by
reference,
the
educational
improvement
income
surtax
1
in
Code
section
257.29
and
the
physical
plant
and
equipment
2
income
surtax
in
Code
section
298.2,
to
include
income
tax
3
computed
and
imposed
under
the
alternative
system
in
new
Code
4
section
422.5A.
The
division
also
amends
Code
sections
422.16
5
and
422.21
to
include
references
to
new
Code
section
422.5A
6
in
provisions
of
those
Code
sections
that
reference
the
tax
7
imposed
under
Code
section
422.5.
8
Division
III
relates
to
implementation
of
the
bill.
9
The
division
provides
that
the
bill
takes
effect
upon
10
enactment
and
applies
retroactively
to
January
1,
2015,
for
tax
11
years
beginning
on
or
after
that
date.
12
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