Senate File 512 H-1506 Amend Senate File 512, as passed by the Senate, as 1 follows: 2 1. By striking everything after the enacting clause 3 and inserting: 4 < DIVISION I 5 INTERNAL REVENUE CODE REFERENCES 6 Section 1. Section 422.3, subsection 5, Code 2011, 7 is amended to read as follows: 8 5. “Internal Revenue Code” means the Internal 9 Revenue Code of 1954, prior to the date of its 10 redesignation as the Internal Revenue Code of 1986 11 by the Tax Reform Act of 1986, or means the Internal 12 Revenue Code of 1986 as amended to and including 13 January 1, 2008 2011 . 14 Sec. 2. Section 422.7, subsection 29A, Code 2011, 15 is amended by striking the subsection. 16 Sec. 3. Section 422.9, subsection 2, paragraph i, 17 Code 2011, is amended to read as follows: 18 i. The deduction for state sales and use taxes 19 is allowable only if the taxpayer elected to deduct 20 the state sales and use taxes in lieu of state income 21 taxes under section 164 of the Internal Revenue Code. 22 A deduction for state sales and use taxes is not 23 allowed if the taxpayer has taken the deduction for 24 state income taxes or claimed the standard deduction 25 under section 63 of the Internal Revenue Code. This 26 paragraph applies to taxable years beginning after 27 December 31, 2003, and before January 1, 2006 2008, and 28 to taxable years beginning after December 31, 2009, and 29 before January 1, 2012 . 30 Sec. 4. Section 422.32, subsection 7, Code 2011, is 31 amended to read as follows: 32 7. “Internal Revenue Code” means the Internal 33 Revenue Code of 1954, prior to the date of its 34 redesignation as the Internal Revenue Code of 1986 35 by the Tax Reform Act of 1986, or means the Internal 36 Revenue Code of 1986 as amended to and including 37 January 1, 2008 2011 . 38 Sec. 5. EFFECTIVE UPON ENACTMENT. This division of 39 this Act, being deemed of immediate importance, takes 40 effect upon enactment. 41 Sec. 6. RETROACTIVE APPLICABILITY. The following 42 provision or provisions of this division of this Act 43 apply retroactively to January 1, 2010, for tax years 44 beginning on or after that date: 45 1. The section of this Act amending section 422.3. 46 2. The section of this Act amending section 422.32. 47 Sec. 7. RETROACTIVE APPLICABILITY. The following 48 provision or provisions of this division of this Act 49 apply retroactively to January 1, 2011, for tax years 50 -1- SF512.2216 (2) 84 jp/tm 1/ 9 #1.

beginning on or after that date: 1 1. The section of this Act amending section 422.7, 2 subsection 29A. 3 DIVISION IV 4 RESEARCH ACTIVITIES CREDIT 5 Sec. 8. Section 15.335, subsection 4, Code 2011, is 6 amended to read as follows: 7 4. a. In lieu of the credit amount computed in 8 subsection 2 , an eligible business may elect to compute 9 the credit amount for qualified research expenses 10 incurred in this state in a manner consistent with the 11 alternative incremental simplified credit described in 12 section 41(c)(4) 41(c)(5) of the Internal Revenue Code. 13 The taxpayer may make this election regardless of the 14 method used for the taxpayer’s federal income tax. The 15 election made under this paragraph is for the tax year 16 and the taxpayer may use another or the same method for 17 any subsequent year. 18 b. For purposes of the alternate credit computation 19 method in paragraph “a” , the credit percentages 20 applicable to qualified research expenses described in 21 clauses (i), (ii), and (iii) of section 41(c)(4)(A) 22 41(c)(5)(A) and clause (ii) of section 41(c)(5)(B) of 23 the Internal Revenue Code are as follows: 24 (1) In the case of an eligible business whose gross 25 revenues do not exceed twenty million dollars per 26 year, the credit percentages are two and fifty-four 27 hundredths percent, three and thirty-eight hundredths 28 percent, and four and twenty-three hundredths seven 29 percent and three percent, respectively. 30 (2) In the case of an eligible business whose 31 gross revenues exceed twenty million dollars per year, 32 the credit percentages are seventy-six hundredths 33 percent, one and two hundredths percent, and one and 34 twenty-seven hundredths two and one-tenth percent and 35 nine-tenths percent, respectively. 36 Sec. 9. Section 15.335, subsection 7, Code 2011, is 37 amended to read as follows: 38 7. a. For purposes of this section , “base amount” , 39 “basic research payment” , and “qualified research 40 expense” mean the same as defined for the federal 41 credit for increasing research activities under section 42 41 of the Internal Revenue Code, except that for the 43 alternative incremental simplified credit such amounts 44 are for research conducted within this state. 45 b. For purposes of this section , “Internal Revenue 46 Code” means the Internal Revenue Code in effect on 47 January 1, 2009 2011 . 48 Sec. 10. Section 15A.9, subsection 8, paragraphs b, 49 c, and e, Code 2011, are amended to read as follows: 50 -2- SF512.2216 (2) 84 jp/tm 2/ 9

b. In lieu of the credit amount computed in 1 paragraph “a” , subparagraph (1), subparagraph division 2 (a), a business may elect to compute the credit amount 3 for qualified research expenses incurred in this 4 state within the zone in a manner consistent with the 5 alternative incremental simplified credit described in 6 section 41(c)(4) 41(c)(5) of the Internal Revenue Code. 7 The taxpayer may make this election regardless of the 8 method used for the taxpayer’s federal income tax. The 9 election made under this paragraph is for the tax year 10 and the taxpayer may use another or the same method for 11 any subsequent year. 12 c. For purposes of the alternate credit computation 13 method in paragraph “b” , the credit percentages 14 applicable to qualified research expenses described in 15 clauses (i), (ii), and (iii) of section 41(c)(4)(A) 16 41(c)(5)(A) and clause (ii) of section 41(c)(5)(B) 17 of the Internal Revenue Code are three and thirty 18 hundredths percent, four and forty hundredths percent, 19 and five and fifty hundredths percent, respectively as 20 follows: 21 (1) In the case of an eligible business whose gross 22 revenues do not exceed twenty million dollars per year, 23 the credit percentages are seven percent and three 24 percent, respectively. 25 (2) In the case of an eligible business whose gross 26 revenues exceed twenty million dollars per year, the 27 credit percentages are two and one-tenths percent and 28 nine-tenths percent, respectively . 29 e. (1) For the purposes of this subsection , 30 “base amount” , “basic research payment” , and “qualified 31 research expense” mean the same as defined for the 32 federal credit for increasing research activities under 33 section 41 of the Internal Revenue Code, except that 34 for the alternative incremental simplified credit such 35 amounts are for research conducted within this state 36 within the zone. 37 (2) For purposes of this subsection , “Internal 38 Revenue Code” means the Internal Revenue Code in effect 39 on January 1, 2009 2011 . 40 Sec. 11. Section 422.10, subsection 1, paragraphs b 41 and c, Code 2011, are amended to read as follows: 42 b. In lieu of the credit amount computed in 43 paragraph “a” , subparagraph (1), subparagraph division 44 (a), a taxpayer may elect to compute the credit amount 45 for qualified research expenses incurred in this state 46 in a manner consistent with the alternative incremental 47 simplified credit described in section 41(c)(4) 48 41(c)(5) of the Internal Revenue Code. The taxpayer 49 may make this election regardless of the method used 50 -3- SF512.2216 (2) 84 jp/tm 3/ 9

for the taxpayer’s federal income tax. The election 1 made under this paragraph is for the tax year and the 2 taxpayer may use another or the same method for any 3 subsequent year. 4 c. For purposes of the alternate credit computation 5 method in paragraph “b” , the credit percentages 6 applicable to qualified research expenses described in 7 clauses (i), (ii), and (iii) of section 41(c)(4)(A) 8 41(c)(5)(A) and clause (ii) of section 41(c)(5)(B) 9 of the Internal Revenue Code are one and sixty-five 10 hundredths percent, two and twenty hundredths percent, 11 and two and seventy-five hundredths four and fifty-five 12 hundredths percent and one and ninety-five hundredths 13 percent, respectively. 14 Sec. 12. Section 422.10, subsection 3, Code 2011, 15 is amended to read as follows: 16 3. a. For purposes of this section , “base amount” , 17 “basic research payment” , and “qualified research 18 expense” mean the same as defined for the federal 19 credit for increasing research activities under section 20 41 of the Internal Revenue Code, except that for the 21 alternative incremental simplified credit such amounts 22 are for research conducted within this state. 23 b. For purposes of this section , “Internal Revenue 24 Code” means the Internal Revenue Code in effect on 25 January 1, 2009 2011 . 26 Sec. 13. Section 422.33, subsection 5, paragraphs 27 b, c, and d, Code 2011, are amended to read as follows: 28 b. In lieu of the credit amount computed in 29 paragraph “a” , subparagraph (1), a corporation may 30 elect to compute the credit amount for qualified 31 research expenses incurred in this state in a manner 32 consistent with the alternative incremental simplified 33 credit described in section 41(c)(4) 41(c)(5) of 34 the Internal Revenue Code. The taxpayer may make 35 this election regardless of the method used for the 36 taxpayer’s federal income tax. The election made under 37 this paragraph is for the tax year and the taxpayer may 38 use another or the same method for any subsequent year. 39 c. For purposes of the alternate credit computation 40 method in paragraph “b” , the credit percentages 41 applicable to qualified research expenses described in 42 clauses (i), (ii), and (iii) of section 41(c)(4)(A) 43 41(c)(5)(A) and clause (ii) of section 41(c)(5)(B) 44 of the Internal Revenue Code are one and sixty-five 45 hundredths percent, two and twenty hundredths percent, 46 and two and seventy-five hundredths four and fifty-five 47 hundredths percent and one and ninety-five hundredths 48 percent, respectively. 49 d. (1) For purposes of this subsection , “base 50 -4- SF512.2216 (2) 84 jp/tm 4/ 9

amount” , “basic research payment” , and “qualified 1 research expense” mean the same as defined for the 2 federal credit for increasing research activities under 3 section 41 of the Internal Revenue Code, except that 4 for the alternative incremental simplified credit such 5 amounts are for research conducted within this state. 6 (2) For purposes of this subsection , “Internal 7 Revenue Code” means the Internal Revenue Code in effect 8 on January 1, 2009 2011 . 9 Sec. 14. EFFECTIVE UPON ENACTMENT. This division 10 of this Act, being deemed of immediate importance, 11 takes effect upon enactment. 12 Sec. 15. RETROACTIVE APPLICABILITY. The following 13 provision or provisions of this division of this Act 14 apply retroactively to July 1, 2010, for tax credits 15 awarded on or after that date: 16 1. The section of this Act amending section 15.335, 17 subsection 4. 18 2. The section of this Act amending section 15A.9. 19 Sec. 16. RETROACTIVE APPLICABILITY. The following 20 provision or provisions of this division of this Act 21 apply retroactively to January 1, 2010, for tax years 22 beginning on or after that date: 23 1. The section of this Act amending section 15.335, 24 subsection 7. 25 2. The section of this Act amending section 422.10, 26 subsection 1. 27 3. The section of this Act amending section 422.10, 28 subsection 3. 29 4. The section of this Act amending section 422.33. 30 DIVISION III 31 BONUS DEPRECIATION 32 Sec. 17. Section 422.5, subsection 2, paragraph 33 b, subparagraph (1), Code 2011, is amended to read as 34 follows: 35 (1) Add items of tax preference included in federal 36 alternative minimum taxable income under section 57, 37 except subsections (a)(1), (a)(2), and (a)(5), of the 38 Internal Revenue Code, make the adjustments included 39 in federal alternative minimum taxable income under 40 section 56, except subsections (a)(4), (b)(1)(C)(iii), 41 and (d), of the Internal Revenue Code, and add losses 42 as required by section 58 of the Internal Revenue 43 Code. To the extent that any preference or adjustment 44 is determined by an individual’s federal adjusted 45 gross income, the individual’s federal adjusted 46 gross income is computed in accordance with section 47 422.7, subsection subsections 39 , 39A, 39B, and 48 53 . In the case of an estate or trust, the items 49 of tax preference, adjustments, and losses shall 50 -5- SF512.2216 (2) 84 jp/tm 5/ 9

be apportioned between the estate or trust and the 1 beneficiaries in accordance with rules prescribed by 2 the director. 3 Sec. 18. Section 422.7, Code 2011, is amended by 4 adding the following new subsections: 5 NEW SUBSECTION . 39A. The additional first-year 6 depreciation allowance authorized in section 168(k) 7 of the Internal Revenue Code, as enacted by Pub. L. 8 No. 110-185, section 103, Pub. L. No. 111-5, section 9 1201, Pub. L. No. 111-240, section 2022, and Pub. L. 10 No. 111-312, section 401, does not apply in computing 11 net income for state tax purposes. If the taxpayer has 12 taken the additional first-year depreciation allowance 13 for purposes of computing federal adjusted gross 14 income, then the taxpayer shall make the following 15 adjustments to federal adjusted gross income when 16 computing net income for state tax purposes: 17 a. Add the total amount of depreciation taken under 18 section 168(k) of the Internal Revenue Code for the tax 19 year. 20 b. Subtract the amount of depreciation allowable 21 under the modified accelerated cost recovery system 22 described in section 168 of the Internal Revenue Code 23 and calculated without regard to section 168(k). 24 c. Any other adjustments to gains or losses 25 necessary to reflect the adjustments made in paragraphs 26 “a” and “b” . The director shall adopt rules for the 27 administration of this paragraph. 28 NEW SUBSECTION . 39B. The additional first-year 29 depreciation allowance authorized in section 168(n) of 30 the Internal Revenue Code, as enacted by Pub. L. No. 31 110-343, section 710, does not apply in computing net 32 income for state tax purposes. If the taxpayer has 33 taken the additional first-year depreciation allowance 34 for purposes of computing federal adjusted gross 35 income, then the taxpayer shall make the following 36 adjustments to federal adjusted gross income when 37 computing net income for state tax purposes: 38 a. Add the total amount of depreciation taken under 39 section 168(n) of the Internal Revenue Code for the tax 40 year. 41 b. Subtract the amount of depreciation allowable 42 under the modified accelerated cost recovery system 43 described in section 168 of the Internal Revenue Code 44 and calculated without regard to section 168(n). 45 c. Any other adjustments to gains or losses 46 necessary to reflect the adjustments made in paragraphs 47 “a” and “b” . The director shall adopt rules for the 48 administration of this paragraph. 49 Sec. 19. Section 422.7, subsection 53, Code 2011, 50 -6- SF512.2216 (2) 84 jp/tm 6/ 9

is amended to read as follows: 1 53. A taxpayer is not allowed to take the increased 2 expensing allowance under section 179 of the Internal 3 Revenue Code, as amended by Pub. L. No. 110-185 111-5, 4 section 1202 , in computing adjusted gross income for 5 state tax purposes. 6 Sec. 20. Section 422.9, subsection 2, paragraph h, 7 Code 2011, is amended to read as follows: 8 h. For purposes of calculating the deductions 9 in this subsection that are authorized under the 10 Internal Revenue Code, and to the extent that any 11 of such deductions is determined by an individual’s 12 federal adjusted gross income, the individual’s federal 13 adjusted gross income is computed in accordance with 14 section 422.7, subsection subsections 39 , 39A, 39B, and 15 53 . 16 Sec. 21. Section 422.35, Code 2011, is amended by 17 adding the following new subsections: 18 NEW SUBSECTION . 19A. The additional first-year 19 depreciation allowance authorized in section 168(k) 20 of the Internal Revenue Code, as enacted by Pub. L. 21 No. 110-185, section 103, Pub. L. No. 111-5, section 22 1201, Pub. L. No. 111-240, section 2022, and Pub. L. 23 No. 111-312, section 401, does not apply in computing 24 net income for state tax purposes. If the taxpayer has 25 taken the additional first-year depreciation allowance 26 for purposes of computing federal taxable income, then 27 the taxpayer shall make the following adjustments to 28 federal taxable income when computing net income for 29 state tax purposes: 30 a. Add the total amount of depreciation taken under 31 section 168(k) of the Internal Revenue Code for the tax 32 year. 33 b. Subtract the amount of depreciation allowable 34 under the modified accelerated cost recovery system 35 described in section 168 of the Internal Revenue Code 36 and calculated without regard to section 168(k). 37 c. Any other adjustments to gains or losses 38 necessary to reflect the adjustments made in paragraphs 39 “a” and “b” . The director shall adopt rules for the 40 administration of this paragraph. 41 NEW SUBSECTION . 19B. The additional first-year 42 depreciation allowance authorized in section 168(n) of 43 the Internal Revenue Code, as enacted by Pub. L. No. 44 110-343, section 710, does not apply in computing net 45 income for state tax purposes. If the taxpayer has 46 taken the additional first-year depreciation allowance 47 for purposes of computing federal taxable income, then 48 the taxpayer shall make the following adjustments to 49 federal taxable income when computing net income for 50 -7- SF512.2216 (2) 84 jp/tm 7/ 9

state tax purposes: 1 a. Add the total amount of depreciation taken under 2 section 168(n) of the Internal Revenue Code for the tax 3 year. 4 b. Subtract the amount of depreciation allowable 5 under the modified accelerated cost recovery system 6 described in section 168 of the Internal Revenue Code 7 and calculated without regard to section 168(n). 8 c. Any other adjustments to gains or losses 9 necessary to reflect the adjustments made in paragraphs 10 “a” and “b” . The director shall adopt rules for the 11 administration of this paragraph. 12 Sec. 22. Section 422.35, subsection 24, Code 2011, 13 is amended to read as follows: 14 24. A taxpayer is not allowed to take the increased 15 expensing allowance under section 179 of the Internal 16 Revenue Code, as amended by Pub. L. No. 110-185 111-5, 17 section 1202 , in computing taxable income for state tax 18 purposes. 19 Sec. 23. EFFECTIVE UPON ENACTMENT. This division 20 of this Act, being deemed of immediate importance, 21 takes effect upon enactment. 22 Sec. 24. RETROACTIVE APPLICABILITY. The following 23 provision or provisions of this division of this Act 24 apply retroactively to January 1, 2008, for tax years 25 ending on or after that date: 26 1. The section of this Act amending section 422.5. 27 2. The section of this Act enacting section 422.7, 28 new subsections 39A and 39B. 29 3. The section of this Act amending section 422.9. 30 4. The section of this Act enacting section 422.35, 31 new subsections 19A and 19B. 32 Sec. 25. RETROACTIVE APPLICABILITY. The following 33 provision or provisions of this division of this Act 34 apply retroactively to January 1, 2009, for tax years 35 beginning on or after that date, and before January 1, 36 2010: 37 1. The section of this Act amending section 422.7, 38 subsection 53. 39 2. The section of this Act amending section 422.35, 40 subsection 24. 41 DIVISION IV 42 STATE PUBLIC DEFENDER TRANSFER 43 Sec. 26. TRANSFER AUTHORIZATION —— STATE PUBLIC 44 DEFENDER. 45 1. Notwithstanding section 8.39, subsection 2, 46 while the general assembly is in regular session, the 47 director of the department of management, with the 48 approval of the governor, may make an interdepartmental 49 transfer from any other department, institution, or 50 -8- SF512.2216 (2) 84 jp/tm 8/ 9

agency of the state having an appropriation in excess 1 of its needs, of sufficient funds to supplement the 2 following appropriations made to the office of the 3 public defender of the department of inspections and 4 appeals, in order to meet the obligations incurred 5 under the appropriations: 6 a. For the office of the state public defender, in 7 2010 Iowa Acts, chapter 1190, section 10, subsection 1. 8 b. For the fees of court-appointed attorneys for 9 indigent adults and juveniles, in accordance with 10 section 232.141 and chapter 815, in 2010 Iowa Acts, 11 chapter 1190, section 10, subsection 2. 12 2. A transfer made under this section is subject 13 to the notice and reporting requirements applicable 14 to transfers made under section 8.39. However, the 15 chairpersons’ review and comment period under section 16 8.39, subsection 3, is not applicable. 17 Sec. 27. EFFECTIVE UPON ENACTMENT. This division 18 of this Act, being deemed of immediate importance, 19 takes effect upon enactment. > 20 2. Title page, by striking lines 1 through 3 and 21 inserting < An Act relating to public funding matters by 22 updating the Code references to the Internal Revenue 23 Code and by decoupling from certain federal bonus 24 depreciation provisions, authorizing appropriation 25 transfers, and including effective date and retroactive 26 applicability provisions. > 27 3. By renumbering as necessary. 28 ______________________________ COMMITTEE ON WAYS AND MEANS SANDS of Louisa, Chairperson -9- SF512.2216 (2) 84 jp/tm 9/ 9 #2. #3.