1998 Summary of Legislation Published by the Iowa General Assembly -- Legislative Service Bureau

TAXATION

TAXATION LEGISLATION

SENATE FILE 2288 - Sales and Use Taxes and Exemptions Relating to Computers, Machinery, and Equipment (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act amends the statute on sales and use taxes imposed on optional service or warranty contracts involving computer software maintenance or support services and amends the statute that exempts sales of certain industrial machinery, equipment, computers, fuel, and electricity from tax. The Act provides that if there is no separately stated fee for services on an optional service contract or warranty contract, the sales tax is imposed on 50 percent of the gross receipts from the sale of the contract. It also expands the exemption allowed to sales of fuel and electricity used in computers, machinery and equipment. The Act provides that sales of vehicles subject to registration are not exempt machinery or equipment sales unless the vehicles are directly and primarily used in recycling or reprocessing waste products. The Act defines "receipt or producing of raw materials" to confine the phrase to activities performed on tangible personal property only.

The Act also exempts from state sales tax machinery and equipment used in activities subsequent to extraction of materials through mining or quarrying by adding a business engaged in that activity to the definition of "manufacturer."

Provisions of the Act relating to the fuel and electricity exemption, to sales of vehicles subject to registration, and to the definition of "receipt or producing of raw materials" are retroactively effective to July 1, 1997. The remaining sections of the Act take effect July 1, 1998.

SENATE FILE 2357 - Internal Revenue Code References and Income Tax Provisions (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act updates the references to the Internal Revenue Code to make the federal income tax revisions enacted by Congress in 1997 applicable for Iowa income tax purposes and makes other changes related to Iowa income tax.

Iowa Code Sections 15.335, 15A.9, 422.10, and 422.33 are amended to update the Iowa Code references to the state research activities credit for individuals, corporations, corporations in economic development areas, and corporations in quality jobs enterprise zones to include the 1997 changes to the federal research activities credits. These amendments apply retroactively to January 1, 1997, for tax years beginning on or after that date.

Iowa Code Section 422.3 is amended to update the reference in the Iowa Code to the Internal Revenue Code to January 1, 1998, to include the federal income tax revisions made by Congress in the 1997 calendar year, making those revisions applicable for Iowa income tax purposes. These amendments apply retroactively to January 1, 1997, for tax years beginning on or after that date.

Iowa Code Section 422.6 is amended to exempt preneed funeral trusts electing special tax treatment for federal tax purposes, and beneficiaries of such trusts, from Iowa income tax on the income accruing to such trusts. This amendment applies retroactively to tax years ending after August 5, 1997.

Iowa Code Sections 422.9 and 422.35 are amended to revise the carryback and carryforward periods for net operating losses and casualty losses to conform with the federal changes in the carryback and carryforward periods for these losses in the federal Taxpayer Relief Act of 1997. The carryback is now up to two years and the carryforward is up to 20 years. These amendments apply retroactively to losses arising in taxable years beginning after August 5, 1997.

Iowa Code Section 422.73 is amended to authorize refunds beyond the state's three-year statute of limitations for refund if a taxpayer qualifies for refund for federal tax purposes as a result of retroactive application of a provision of the federal Taxpayer Relief Act of 1997. This amendment applies retroactively to January 1, 1977, for tax years beginning on or after that date.

The Act takes effect April 13, 1998.

SENATE FILE 2364 - Food and Beverage Sales and Use Tax Exemption (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act provides an exemption from the sales and use taxes of the sales of food and beverages by nonprofit organizations not subject to federal income tax if their primary purpose is the promotion of a food or beverage product for human consumption produced, grown or raised in the state.

Refunds of sales or use taxes paid shall be allowed, but only in the aggregate of $25,000, and only if applied for by October 1, 1998. If the amount of claims exceeds $25,000, the claimants will receive a proportionate amount of their claims.

The Act takes effect April 14, 1998, and applies retroactively to July 1, 1988.

SENATE FILE 2365 - Sales and Use Taxes and Exemptions Associated With Providing Water (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act amends Code Chapter 357A, which provides for the organization and management of rural water districts. Code Section 357A.15 provides that facilities constructed or acquired by a rural water district organized under that chapter are not subject to taxes imposed by the state. This Act amends that section by providing that a rural water district organized under Code Chapter 504A shall receive a refund of sales or use taxes upon submitting an application to the Department of Revenue and Finance for such refund of taxes imposed upon the gross receipts of all sales of building materials, supplies or equipment sold to a person constructing facilities for the rural water district to the same extent as a rural water district organized under Code Chapter 357A.

The Act also exempts from the sales and use tax the gross receipts from the sale of electricity to water companies assessed for property tax which is used solely for the purpose of pumping water from a river or well.

SENATE FILE 2407 - Excise Tax on Motor Fuel Containing Ethanol (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act extends the one cent tax reduction granted for ethanol to June 30, 2007. A tax rate of 20 cents per gallon is imposed on all motor fuel used by vehicles except ethanol, which is taxed at a rate of 19 cents per gallon.

SENATE FILE 2416 - Utilities -- Property Tax Replacement and Statewide Property Tax (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act generally replaces the current central property tax assessment procedures utilized by the Director of Revenue and Finance in valuing property of entities involved primarily in the production, delivery and transmission of electricity and natural gas within this state, with excise taxes on electricity and natural gas, and a statewide property tax on certain property of such entities. The Act generally takes effect January 1, 1999, and is applicable to property tax assessment years beginning on or after January 1, 1999, and to replacement tax years beginning on or after January 1, 1999. A provision of the Act that creates a task force to study the effects of the replacement tax takes effect May 14, 1998.

The Act creates a new Code Chapter 437A, the purpose of which as stated in the chapter is to replace property taxes imposed on electric and natural gas companies, electric cooperatives and municipal utilities with a system of taxation that will enable such entities to effectively compete in a competitive marketplace, while preserving revenue neutrality and debt capacity for local governments and taxpayers.

This Act imposes a replacement tax on the delivery of electricity to a consumer within this state. The replacement delivery tax is an amount equal to the number of kilowatt-hours delivered to consumers by the taxpayer within each electric competitive service area during the tax year multiplied by the electric replacement delivery tax rate for each competitive service area plus, if applicable, the number of kilowatt-hours delivered to consumers by the taxpayer within each electric competitive service area during the tax year multiplied by the electric transfer replacement tax rate for each electric competitive service area. The tax rate is to be calculated by the Director of Revenue and Finance.

The Act provides that the replacement tax includes electric generation, transmission and delivery tax components. The Act provides for municipal electric transfer replacement tax rates which are to be calculated annually by the city council of each city located within an electric competitive service area served by a municipal utility as of January 1, 1998. The Act also provides for the recalculation of the electric replacement delivery tax as a result of an increase or decrease in the number of taxable kilowatt-hours of electricity reported with respect to any electric competitive service area.

The Act imposes a replacement tax on the delivery of natural gas to a consumer within this state. The replacement delivery tax is an amount equal to the number of therms delivered to consumers by the taxpayer within each natural gas competitive service area during the tax year multiplied by the natural gas delivery tax rate for each competitive service area plus, if applicable, the number of therms of natural gas delivered to consumers by the taxpayer within each natural gas competitive service area during the tax year multiplied by the municipal natural gas transfer replacement tax rate for each natural gas competitive service area. The tax rate is to be calculated by the Director of Revenue and Finance.

The Act provides for municipal natural gas transfer replacement tax rates which are to be calculated annually by the city council of each city located within a natural gas competitive service area served by a municipal utility as of January 1, 1998. The Act also provides for the recalculation of the natural gas replacement delivery tax as a result of an increase or decrease in the number of taxable therms of natural gas reported with respect to any natural gas competitive service area.

This Act sets forth the filing requirements, including the information to be included on the tax return. The Act requires a taxpayer to remit to the county treasurer of each county to which replacement tax is allocated, one-half of the replacement tax due on or before September 30 with the remainder to be remitted on or before the following March 31.

The Act establishes a three-year statute of limitations for the Director of Revenue and Finance to examine and assess additional tax, if the return is found to be incorrect. The Act provides that if a return is not filed, or when filed is incorrect and after notice from the director a corrected return is not filed, the director is authorized to estimate the tax due.

The Act establishes a lien on the property of a taxpayer if any replacement tax, together with any costs which accrue, goes unpaid. The Act provides that such lien is prior to and superior over all subsequent liens.

The Act provides for correction of errors, refunds or credits of replacement tax paid, and for the confidentiality of information provided on a return by a taxpayer. The Act provides that claims for refund or credit are to be filed with the Director of Revenue and Finance and must be filed within three years after the replacement tax payment upon which a refund or credit is claimed became due, or one year after the replacement tax payment was made, whichever time is later. Claims for refund or credit of municipal transfer replacement tax are to be filed with the appropriate city's chief financial officer.

The Act provides for the allocation of all replacement tax revenue by the Director of Revenue and Finance. The Act provides that all replacement taxes owed by a taxpayer are to be allocated among the local taxing districts in which such taxpayer's property is located in accordance with a general allocation formula determined by the Department of Management on the basis of general property tax equivalents. Effective May 14, 1998, the Act also directs the Department of Management, in consultation with the Department of Revenue and Finance, to initiate and coordinate the establishment of a task force to study the effects of the replacement tax on local taxing districts and taxpayers.

The Act imposes an annual statewide property tax of three cents per $1,000 of assessed value on all property that is primarily and directly used in the production, generation, transmission, or delivery of electricity or natural gas owned or leased to a person subject to taxation under new Code Chapter 437A.

The Act establishes reporting requirements for all electric companies, natural gas companies, electric cooperatives, municipal utilities, and any other person subject to the replacement taxes established in new Code Chapter 437A for property added or disposed of by such entities. The Act provides a mechanism for the adjustment and reevaluation of the value of the property of such entities.

The Act provides that all revenue from the statewide property tax is to be deposited in the General Fund of the State, with 50 percent of such revenue being available to the Department of Management for salaries, support, services, and equipment to administer the replacement tax, and 50 percent of such revenue being available to the Department of Revenue and Finance for salaries, support, services, and equipment to administer and enforce the replacement tax and the statewide property tax.

The Act provides that the replacement tax imposed under new Code Chapter 437A is to be reflected in the charges of utilities subject to rate regulation. The board is authorized to determine the amount of replacement tax properly included in retail rates subject to the board's jurisdiction. The Utilities Board, in consultation with the Department of Revenue and Finance, is to initiate and coordinate a replacement tax study committee to study the effects of the replacement tax on both restructuring and the development of competition in the natural gas and electric industries in this state.

The Act requires all taxpayers to file a report with the Department of Revenue and Finance within 90 days of the effective date of the Act, January 1, 1999, including data necessary to compute the replacement tax.

HOUSE FILE 2153 - State Tax Status of Certain Public Retirement System Contributions (full text of act)

BY COMMITTEE ON STATE GOVERNMENT. This Act provides that, beginning January 1, 1999, the required financial contribution by employee members covered under the Public Safety Peace Officers' Retirement, Accident, and Disability System, the Iowa Public Employees' Retirement System, and the Statewide Fire and Police Retirement System shall be considered employer contributions, and not part of the employee's salary, for state income tax purposes. Prior law provided, as of January 1, 1995, that these employee contributions for these systems are considered employer contributions for federal income tax purposes only.

The Act also provides that member contributions to a pension and annuity retirement system for teachers established pursuant to Code Chapter 294 are considered employer contributions for state income tax purposes, beginning January 1, 1999, or on the January 1 following submission of an application for qualification to the Internal Revenue Service, whichever is later.

This Act takes effect January 1, 1999, and applies to tax years beginning on or after that date.

HOUSE FILE 2374 - Sales and Use Tax Exemption for Organ Procurement Organizations (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act exempts from the state sales and use taxes the gross receipts from the sale of tangible personal property or from services performed for statewide nonprofit organ procurement organizations. An organ procurement organization is an entity that performs or coordinates the performance of retrieving, preserving or transplanting organs; maintains a system of locating prospective recipients; and is registered with the United Network for Organ Sharing.

HOUSE FILE 2513 - Taxation -- Miscellaneous Provisions (full text of act)

BY COMMITTEE ON WAYS AND MEANS.

Division I - Capital Gains

Division I of this Act eliminates, for individual income tax purposes, the taxation of certain qualifying net capital gains, including gains from the sale of certain livestock and timber and business real property. Prior law allowed only a 45 percent deduction. This Division also eliminates the material participation requirement from sales of businesses to lineal descendants for purposes of the taxation of net capital gains from these sales.

This Division provides for complete exemption from the state individual income tax of capital gains from each capital asset when it is part of a sale of the taxpayer's business if the sale is made to a lineal descendant of the taxpayer.

This Division takes effect May 6, 1998, and applies retroactively to January 1, 1998, for tax years beginning on or after that date.

Division II - Pension Income Exclusion

Division II of the Act increases the amount of the exemption allowed under the individual income tax for pension and deferred compensation income. The exemption is increased from $3,000 to $5,000 for separate filers, except spouses filing separately, and from $6,000 to $10,000 for joint filers. Spouses filing separately may receive an exclusion of up to $10,000 of pension and deferred compensation income received between them. This Division takes effect May 6, 1998, and applies retroactively to January 1, 1998, for tax years beginning on or after that date.

Division III - Personal Exemption Credit

Division III of the Act doubles the amounts of the personal exemption credits for single filers, heads of household and joint filers under the state individual income tax. This Division applies retroactively to January 1, 1998, for tax years beginning on or after that date.

Division IV - Tuition Tax Credit

Division IV of the Act increases the tuition and textbook tax credit from 10 percent to 25 percent of the first $1,000 paid by the taxpayer for tuition and textbooks for each dependent attending an accredited elementary or secondary school. This Division also expands the definitions of "tuition" and "textbooks" to include those expenses, materials or charges relating to extracurricular activities. The credit is a nonrefundable credit that is applied against the taxpayer's state individual income tax.

This Division applies retroactively to January 1, 1998, for tax years beginning on or after that date.

Division V - Sales Tax Exemption for Hospitals

Division V of the Act exempts sales and services made to nonprofit hospitals from the state sales and use taxes if the hospital is licensed under Code Chapter 135B by the Department of Inspections and Appeals and the property and services are used in the operation of the hospital.

Division VI - Additional Homestead Credit and Rent Reimbursement

Division VI of the Act changes the law that grants a mobile home tax credit, additional homestead credit, and reimbursement for rent constituting property taxes paid for certain low-income persons based upon household incomes. Under current law, the maximum credit and reimbursement is granted to those with household incomes of $6,000 or less, with no credit or reimbursement granted to those with household incomes of $14,000 or more. This Division increases these figures to $8,500 or less and $16,500 or more, respectively, and adjusts these figures for inflation on an annual basis.

This Division applies to claims for credits or reimbursements filed on or after January 1, 1999.

HOUSE FILE 2541 - Use Tax Exemption for Vehicles Used in Interstate Commerce (full text of act)

BY COMMITTEE ON WAYS AND MEANS. Current law allows a use tax exemption for commercial vehicles used substantially in interstate commerce. To be used "substantially in interstate commerce," at least 25 percent of the miles operated by the vehicle must be in states other than Iowa. This Act provides that if this 25 percent minimum requirement is met for each year of the first four-year period of operation, the exemption continues until the vehicle is sold or transferred.

This Act also provides that if the exemption requirements are not met or the exemption is revoked, the tax is imposed on the lesser of the book value or market value at the time the requirements are not met or the exemption is revoked.

HOUSE FILE 2550 - Services Tax Exemption for Massage Therapy (full text of act)

BY COMMITTEE ON WAYS AND MEANS. This Act exempts from the state sales and services tax services provided by massage therapists licensed under Code Chapter 152C.

RELATED LEGISLATION

SENATE FILE 530 -- Enhanced E911 Emergency Telephone Systems -- Wireless Communications Surcharge and E911 Administrator (Complete summary under LOCAL GOVERNMENT.)

This Act establishes an E911 wireless communications surcharge, establishes an E911 administrator in the Department of Public Defense, expands the membership on the E911 Communications Council, and provides appropriations for the E911 administrator and for telecommunicator training.

SENATE FILE 2061 -- Tax Statements (Complete summary under LOCAL GOVERNMENT.)

This Act relates to the statutory requirement to include comparative information on property tax statements, a deferral on implementation of that requirement, and the imposition of fees for property tax statements and property tax statement information requested by certain persons.

The Act takes effect May 14, 1998.

SENATE FILE 2119 -- Corn Promotion Board and Fund -- State Assessment on Corn (Complete summary under AGRICULTURE.)

This Act increases the allowable assessment from one-half cent to one cent per bushel of corn collected by the Iowa Corn Promotion Board to be used for promoting corn and corn products.

SENATE FILE 2340 -- Iowa Egg Council -- Assessment on Eggs Sold (Complete summary under AGRICULTURE.)

This Act amends a number of provisions in Code Chapter 196A, which provides for the establishment and administration of the Iowa Egg Council and the assessment of an excise tax on eggs used to support the council's activities, by eliminating the ceiling on the assessment amount which may be established by the council.

SENATE FILE 2400 -- Powers and Duties of County Treasurers (Complete summary under LOCAL GOVERNMENT.)

This Act makes a number of changes to the powers and duties of county treasurers relating to property taxation, including special assessment installment payments, taxation of modular homes, and notice of delinquent taxes and tax sales.

S.J.R. 2004 -- Proposed Constitutional Amendments -- State Expenditures and Taxes (Complete summary under STATE GOVERNMENT.

This Joint Resolution proposes two amendments which relate to state budgets within a new Article XIII to the Constitution of the State of Iowa. One amendment establishes a State General Fund expenditure limitation. The other amendment provides that any bill which enacts, amends or repeals the state income tax or the state sales and use taxes, and which causes, in the aggregate, an increase in state tax revenues, as determined by the General Assembly, must be adopted by three-fifths of the whole membership of each house of the General Assembly. This amendment also requires a three-fifths majority vote of each house of the General Assembly in order to enact a new state tax to be imposed by the state. The Joint Resolution will be referred to the next General Assembly for consideration. If the next General Assembly adopts this Joint Resolution, the amendments will be submitted to the voters for ratification.

HOUSE FILE 721 -- New Jobs and Income Program -- Insurance Premium Tax Credit (Complete summary under ECONOMIC DEVELOPMENT. )

This Act authorizes an eligible business under the New Jobs and Income Program to claim an insurance premium tax credit of up to a maximum of 10 percent of the new investment directly related to new jobs created by the location or expansion of an eligible business under the program. A similar insurance premium tax credit is allowed for a business that adds new jobs as a result of a training program handled by a community college.

HOUSE FILE 2049 -- County Contracts for Public Improvements and Redemption of Parcels at Property Tax Sales (Complete summary under LOCAL GOVERNMENT.)

This Act allows a county to redeem on behalf of a delinquent taxpayer a parcel sold at tax sale, if the taxpayer shows that the taxpayer is unable to contribute to the public revenue, in the same manner that a county may suspend the taxes due of a person otherwise deemed unable to contribute to the public revenue.

The Act also increases the contract price for a public improvement requiring a contractor's bond from $5,000 to $15,000.

HOUSE FILE 2119 -- Iowa Educational Savings Plan Trust (Complete summary under EDUCATION.)

This Act provides for the establishment of an Iowa Educational Savings Plan Trust. The Act provides that the Iowa Educational Savings Plan Trust constitutes a qualified state tuition program exempt from federal income taxation pursuant to Section 529 of the Internal Revenue Code. The Act adds provisions concerning state income taxation, providing a deduction for the amount of the annual contribution to the trust, investment income earned on contributions, and for gifts, grants and donations made to the endowment fund component of the trust.

HOUSE FILE 2282 -- School Infrastructure Funding (Complete summary under EDUCATION.)

This Act provides for the imposition of a local sales and services tax by a county or a school district to be utilized for school infrastructure purposes, separate and distinct from any other local sales and services tax otherwise imposed by a city or county. The tax is subject to a 1 percent maximum rate, for up to a 10-year duration, and is imposed county-wide.

HOUSE FILE 2492 -- Drainage District Repairs and Improvements -- Period for Financing (Complete summary under AGRICULTURE.)

This Act provides that drainage repairs and improvements may be financed by an assessment payable by landowners over a number of years provided that the installments may be collected in not more than 20 installments. Prior law limited installments to fewer than 10.

HOUSE FILE 2494 -- Regulation of Animal Feeding Operations and Related Provisions (Complete summary under AGRICULTURE.)

This Act amends a number of provisions which apply to the regulation of animal feeding operations, including provisions regarding the Manure Storage Indemnity Fund and fees and appropriations used to support the fund.

HOUSE FILE 2538 -- Enterprise Zones -- Eligible Housing Businesses and Related Matters (Complete summary under ECONOMIC DEVELOPMENT.)

This Act amends the Enterprise Zone Program legislation enacted during the 1997 legislative session by creating housing-related incentives and assistance for eligible businesses. The Act provides that an approved eligible housing business shall receive a sales, services and use tax refund and a 10 percent new investment income tax credit. As an alternative to using a new jobs credit from withholding, an eligible business under the Enterprise Zone Program that is not an eligible housing business may establish a housing assistance program in the form of down payment assistance and rental assistance for employees in new jobs who buy or rent housing located within the enterprise zone. The program shall be funded through a credit from withholding based on the wages paid to the employees participating in the housing program.

HOUSE FILE 2542 -- Bulk Dry Animal Nutrient Products (Complete summary under AGRICULTURE.)

This Act creates a new Code Chapter 200A titled the "Bulk Dry Animal Nutrient Products Law." The Act regulates certain bulk dry animal manure for use as a fertilizer or soil conditioner and especially the distribution of the manure. The provisions of the Act are administered by the Department of Agriculture and Land Stewardship. The Act imposes a fee upon persons licensed to distribute the product. The Act also imposes a fee for the inspection of the product by the department.

HOUSE FILE 2545 -- County Mental Health, Mental Retardation, and Developmental Disabilities Service Funding (Complete summary under LOCAL GOVERNMENT.)

This Act relates to county mental health, mental retardation and developmental disabilities service funding and planning by providing for distribution of an FY 1999-2000 appropriation for allowed growth in expenditures, based upon a variety of factors. The Act establishes various funding pools within the Property Tax Relief Fund.

HOUSE FILE 2560 -- Aircraft Registration Fees and Sales Tax Exemptions (Complete summary under STATE GOVERNMENT.)

This Act provides that an aircraft dealer who rents or leases the aircraft or uses the aircraft for any purpose but resale forfeits a sales and use tax exemption unless the aircraft is kept in the inventory of the dealer for sale at all times and the aircraft will be immediately taken from the renter or lessee when a buyer is found. This Act also exempts from the sales and use taxes the sales or rentals of tangible personal property that is permanently attached to aircraft used in air carrier operations and services on such aircraft and such tangible personal property.

© 1998 Cornell College and League of Women Voters of Iowa

Comments about this site or page? webmaster@legis.iowa.gov.
Please remember that the person listed above does not vote on bills. Direct all comments concerning legislation to State Legislators.

Last update: THU July 30 1998
sw/sam