Senate File 2408 - Enrolled

PAG LIN



  1  1                                              SENATE FILE 2408
  1  2
  1  3                             AN ACT
  1  4 RELATING TO ELDERLY INCOME TAX RELIEF BY PROVIDING FOR AN
  1  5    ELDERLY TAXPAYER INCOME TAX EXCLUSION AND THE PHASING OUT OF
  1  6    THE INCOME TAX ON SOCIAL SECURITY BENEFITS AND INCLUDING
  1  7    EFFECTIVE AND APPLICABILITY DATE PROVISIONS.
  1  8
  1  9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  1 10
  1 11    Section 1.  Section 422.5, Code 2005, is amended by adding
  1 12 the following new subsection:
  1 13    NEW SUBSECTION.  2A.  However, the tax shall not be imposed
  1 14 on a resident or nonresident who is at least sixty=five years
  1 15 old on December 31 of the tax year and whose net income, as
  1 16 defined in section 422.7, is twenty=four thousand dollars or
  1 17 less in the case of married persons filing jointly or filing
  1 18 separately on a combined return, unmarried heads of household,
  1 19 and surviving spouses or eighteen thousand dollars or less in
  1 20 the case of all other persons; but in the event that the
  1 21 payment of tax under this division would reduce the net income
  1 22 to less than twenty=four thousand dollars or eighteen thousand
  1 23 dollars as applicable, then the tax shall be reduced to that
  1 24 amount which would result in allowing the taxpayer to retain a
  1 25 net income of twenty=four thousand dollars or eighteen
  1 26 thousand dollars as applicable.  The preceding sentence does
  1 27 not apply to estates or trusts.  For the purpose of this
  1 28 subsection, the entire net income, including any part of the
  1 29 net income not allocated to Iowa, shall be taken into account.
  1 30 For purposes of this subsection, net income includes all
  1 31 amounts of pensions or other retirement income received from
  1 32 any source which is not taxable under this division as a
  1 33 result of the government pension exclusions in section 422.7,
  1 34 or any other state law.  If the combined net income of a
  1 35 husband and wife exceeds twenty=four thousand dollars, neither
  2  1 of them shall receive the benefit of this subsection, and it
  2  2 is immaterial whether they file a joint return or separate
  2  3 returns.  However, if a husband and wife file separate returns
  2  4 and have a combined net income of twenty=four thousand dollars
  2  5 or less, neither spouse shall receive the benefit of this
  2  6 paragraph, if one spouse has a net operating loss and elects
  2  7 to carry back or carry forward the loss as provided in section
  2  8 422.9, subsection 3.  A person who is claimed as a dependent
  2  9 by another person as defined in section 422.12 shall not
  2 10 receive the benefit of this subsection if the person claiming
  2 11 the dependent has net income exceeding twenty=four thousand
  2 12 dollars or eighteen thousand dollars as applicable or the
  2 13 person claiming the dependent and the person's spouse have
  2 14 combined net income exceeding twenty=four thousand dollars or
  2 15 eighteen thousand dollars as applicable.
  2 16    In addition, if the married persons', filing jointly or
  2 17 filing separately on a combined return, unmarried head of
  2 18 household's, or surviving spouse's net income exceeds
  2 19 twenty=four thousand dollars, the regular tax imposed under
  2 20 this division shall be the lesser of the maximum state
  2 21 individual income tax rate times the portion of the net income
  2 22 in excess of twenty=four thousand dollars or the regular tax
  2 23 liability computed without regard to this sentence.  Taxpayers
  2 24 electing to file separately shall compute the alternate tax
  2 25 described in this paragraph using the total net income of the
  2 26 husband and wife.  The alternate tax described in this
  2 27 paragraph does not apply if one spouse elects to carry back or
  2 28 carry forward the loss as provided in section 422.9,
  2 29 subsection 3.
  2 30    This subsection applies even though one spouse has not
  2 31 attained the age of sixty=five, if the other spouse is at
  2 32 least sixty=five at the end of the tax year.
  2 33    This subsection is repealed January 1, 2009.
  2 34    Sec. 2.  Section 422.5, Code 2005, is amended by adding the
  2 35 following new subsection:
  3  1    NEW SUBSECTION.  2B.  However, the tax shall not be imposed
  3  2 on a resident or nonresident who is at least sixty=five years
  3  3 old on December 31 of the tax year and whose net income, as
  3  4 defined in section 422.7, is thirty=two thousand dollars or
  3  5 less in the case of married persons filing jointly or filing
  3  6 separately on a combined return, unmarried heads of household,
  3  7 and surviving spouses or twenty=four thousand dollars or less
  3  8 in the case of all other persons; but in the event that the
  3  9 payment of tax under this division would reduce the net income
  3 10 to less than thirty=two thousand dollars or twenty=four
  3 11 thousand dollars as applicable, then the tax shall be reduced
  3 12 to that amount which would result in allowing the taxpayer to
  3 13 retain a net income of thirty=two thousand dollars or
  3 14 twenty=four thousand dollars as applicable.  The preceding
  3 15 sentence does not apply to estates or trusts.  For the purpose
  3 16 of this subsection, the entire net income, including any part
  3 17 of the net income not allocated to Iowa, shall be taken into
  3 18 account.  For purposes of this subsection, net income includes
  3 19 all amounts of pensions or other retirement income received
  3 20 from any source which is not taxable under this division as a
  3 21 result of the government pension exclusions in section 422.7,
  3 22 or any other state law.  If the combined net income of a
  3 23 husband and wife exceeds thirty=two thousand dollars, neither
  3 24 of them shall receive the benefit of this subsection, and it
  3 25 is immaterial whether they file a joint return or separate
  3 26 returns.  However, if a husband and wife file separate returns
  3 27 and have a combined net income of thirty=two thousand dollars
  3 28 or less, neither spouse shall receive the benefit of this
  3 29 paragraph, if one spouse has a net operating loss and elects
  3 30 to carry back or carry forward the loss as provided in section
  3 31 422.9, subsection 3.  A person who is claimed as a dependent
  3 32 by another person as defined in section 422.12 shall not
  3 33 receive the benefit of this subsection if the person claiming
  3 34 the dependent has net income exceeding thirty=two thousand
  3 35 dollars or twenty=four thousand dollars as applicable or the
  4  1 person claiming the dependent and the person's spouse have
  4  2 combined net income exceeding thirty=two thousand dollars or
  4  3 twenty=four thousand dollars as applicable.
  4  4    In addition, if the married persons', filing jointly or
  4  5 filing separately on a combined return, unmarried head of
  4  6 household's, or surviving spouse's net income exceeds
  4  7 thirty=two thousand dollars, the regular tax imposed under
  4  8 this division shall be the lesser of the maximum state
  4  9 individual income tax rate times the portion of the net income
  4 10 in excess of thirty=two thousand dollars or the regular tax
  4 11 liability computed without regard to this sentence.  Taxpayers
  4 12 electing to file separately shall compute the alternate tax
  4 13 described in this paragraph using the total net income of the
  4 14 husband and wife.  The alternate tax described in this
  4 15 paragraph does not apply if one spouse elects to carry back or
  4 16 carry forward the loss as provided in section 422.9,
  4 17 subsection 3.
  4 18    This subsection applies even though one spouse has not
  4 19 attained the age of sixty=five, if the other spouse is at
  4 20 least sixty=five at the end of the tax year.
  4 21    Sec. 3.  Section 422.5, subsection 7, Code 2005, is amended
  4 22 to read as follows:
  4 23    7.  In addition to the other taxes imposed by this section,
  4 24 a tax is imposed on the amount of a lump sum distribution for
  4 25 which the taxpayer has elected under section 402(e) of the
  4 26 Internal Revenue Code to be separately taxed for federal
  4 27 income tax purposes for the tax year.  The rate of tax is
  4 28 equal to twenty=five percent of the separate federal tax
  4 29 imposed on the amount of the lump sum distribution.  A
  4 30 nonresident is liable for this tax only on that portion of the
  4 31 lump sum distribution allocable to Iowa.  The total amount of
  4 32 the lump sum distribution subject to separate federal tax
  4 33 shall be included in net income for purposes of determining
  4 34 eligibility under the thirteen thousand five hundred dollar or
  4 35 less or nine thousand dollar or less exclusion, as applicable
  5  1 subsections 2 and 2A or 2B, as applicable.
  5  2    Sec. 4.  Section 422.7, subsection 13, Code Supplement
  5  3 2005, is amended to read as follows:
  5  4    13.  a.  Subtract, to the extent included, the amount of
  5  5 additional social security benefits taxable under the Internal
  5  6 Revenue Code for tax years beginning on or after January 1,
  5  7 1994, but before January 1, 2014.  The amount of social
  5  8 security benefits taxable as provided in section 86 of the
  5  9 Internal Revenue Code, as amended up to and including January
  5 10 1, 1993, continues to apply for state income tax purposes for
  5 11 tax years beginning on or after January 1, 1994, but before
  5 12 January 1, 2014.
  5 13    b.  (1)  For tax years beginning in the 2007 calendar year,
  5 14 subtract, to the extent included, thirty=two percent of
  5 15 taxable social security benefits remaining after the
  5 16 subtraction in paragraph "a".
  5 17    (2)  For tax years beginning in the 2008 calendar year,
  5 18 subtract, to the extent included, thirty=two percent of
  5 19 taxable social security benefits remaining after the
  5 20 subtraction in paragraph "a".
  5 21    (3)  For tax years beginning in the 2009 calendar year,
  5 22 subtract, to the extent included, forty=three percent of
  5 23 taxable social security benefits remaining after the
  5 24 subtraction in paragraph "a".
  5 25    (4)  For tax years beginning in the 2010 calendar year,
  5 26 subtract, to the extent included, fifty=five percent of
  5 27 taxable social security benefits remaining after the
  5 28 subtraction in paragraph "a".
  5 29    (5)  For tax years beginning in the 2011 calendar year,
  5 30 subtract, to the extent included, sixty=seven percent of
  5 31 taxable social security benefits remaining after the
  5 32 subtraction in paragraph "a".
  5 33    (6)  For tax years beginning in the 2012 calendar year,
  5 34 subtract, to the extent included, seventy=seven percent of
  5 35 taxable social security benefits remaining after the
  6  1 subtraction in paragraph "a".
  6  2    (7)  For tax years beginning in the 2013 calendar year,
  6  3 subtract, to the extent included, eighty=nine percent of
  6  4 taxable social security benefits remaining after the
  6  5 subtraction in paragraph "a".
  6  6    c.  Married taxpayers, who file a joint federal income tax
  6  7 return and who elect to file separate returns or who elect
  6  8 separate filing on a combined return for state income tax
  6  9 purposes, shall allocate between the spouses the amount of
  6 10 benefits subtracted under paragraphs "a" and "b" from net
  6 11 income in the ratio of the social security benefits received
  6 12 by each spouse to the total of these benefits received by both
  6 13 spouses.
  6 14    d.  For tax years beginning on or after January 1, 2014,
  6 15 subtract, to the extent included, the amount of social
  6 16 security benefits taxable under section 86 of the Internal
  6 17 Revenue Code.
  6 18    Sec. 5.  EFFECTIVE AND APPLICABILITY DATE PROVISIONS.
  6 19    1.  The section of this Act enacting section 422.5,
  6 20 subsection 2A, takes effect January 1, 2007, and applies to
  6 21 tax years beginning on or after January 1, 2007, but before
  6 22 January 1, 2009.
  6 23    2.  The section of this Act enacting section 422.5,
  6 24 subsection 2B, takes effect January 1, 2009, for tax years
  6 25 beginning on or after that date.
  6 26    3.  The section of this Act amending section 422.5,
  6 27 subsection 7, takes effect January 1, 2007, for tax years
  6 28 beginning on or after that date.
  6 29    4.  The section of this Act amending section 422.7,
  6 30 subsection 13, takes effect January 1, 2007, for tax years
  6 31 beginning on or after that date.
  6 32
  6 33
  6 34                                                             
  6 35                               JEFFREY M. LAMBERTI
  7  1                               President of the Senate
  7  2
  7  3
  7  4                                                             
  7  5                               CHRISTOPHER C. RANTS
  7  6                               Speaker of the House
  7  7
  7  8    I hereby certify that this bill originated in the Senate and
  7  9 is known as Senate File 2408, Eighty=first General Assembly.
  7 10
  7 11
  7 12                                                             
  7 13                               MICHAEL E. MARSHALL
  7 14                               Secretary of the Senate
  7 15 Approved                , 2006
  7 16
  7 17
  7 18                                
  7 19 THOMAS J. VILSACK
  7 20 Governor