House File 28

                                  HOUSE FILE       
                                  BY  J.K. VAN FOSSEN, BOAL, RAYHONS,
                                      KRAMER, HANSON, DE BOEF, BAUDLER,
                                      CHAMBERS, HEATON, JONES, BOGGESS,
                                      HUTTER, WILDERDYKE, ALONS,
                                      DRAKE, HOFFMAN, LUKAN, ELGIN,
                                      GREINER, LALK, CARROLL, TYMESON,
                                      RASMUSSEN, DENNIS, WATTS, HUSEMAN,
                                      UPMEYER, S. OLSON, HAHN, and PAULSEN


    Passed House, Date                Passed Senate,  Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act phasing out the tax on social security benefits under the
  2    state individual income tax and including a retroactive
  3    applicability date provision.
  4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  5 TLSB 1145YH 80
  6 mg/sh/8

PAG LIN

  1  1    Section 1.  Section 422.7, subsection 13, Code 2003, is
  1  2 amended to read as follows:
  1  3    13.  a.  Subtract, to the extent included, the amount of
  1  4 additional social security benefits taxable under the Internal
  1  5 Revenue Code for tax years beginning on or after January 1,
  1  6 1994, but before January 1, 2006.  The amount of social
  1  7 security benefits taxable as provided in section 86 of the
  1  8 Internal Revenue Code, as amended up to and including January
  1  9 1, 1993, continues to apply for state income tax purposes for
  1 10 tax years beginning on or after January 1, 1994, but before
  1 11 January 1, 2006.
  1 12    b.  Subtract, to the extent included after the subtraction
  1 13 in paragraph "a", the following:
  1 14    (1)  For tax years beginning in the 2003 calendar year,
  1 15 one=fourth of taxable social security benefits received.
  1 16    (2)  For tax years beginning in the 2004 calendar year,
  1 17 one=half of taxable social security benefits received.
  1 18    (3)  For tax years beginning in the 2005 calendar year,
  1 19 three=fourths of taxable social security benefits received.
  1 20    c.  Married taxpayers, who file a joint federal income tax
  1 21 return and who elect to file separate returns or who elect
  1 22 separate filing on a combined return for state income tax
  1 23 purposes, shall allocate between the spouses the amount of
  1 24 benefits subtracted under paragraphs "a" and "b" from net
  1 25 income in the ratio of the social security benefits received
  1 26 by each spouse to the total of these benefits received by both
  1 27 spouses.
  1 28    d.  Subtract, to the extent included, the amount of social
  1 29 security benefits taxable under section 86 of the Internal
  1 30 Revenue Code for tax years beginning on or after January 1,
  1 31 2006.
  1 32    Sec. 2.  APPLICABILITY DATE.  This Act applies
  1 33 retroactively to January 1, 2003, for tax years beginning on
  1 34 or after that date.
  1 35                           EXPLANATION
  2  1    This bill exempts from the state individual income tax all
  2  2 social security benefits received by the taxpayer for tax
  2  3 years beginning on or after January 1, 2006.  Prior to this
  2  4 date, the tax on social security benefits is phased out.  One=
  2  5 fourth is exempt for tax years beginning in the 2003 calendar
  2  6 year, one=half is exempt for tax years beginning in the 2004
  2  7 calendar year, and three=fourths is exempt for tax years
  2  8 beginning in the 2005 calendar year.  The bill applies
  2  9 retroactively to January 1, 2003, for tax years beginning on
  2 10 or after that date.
  2 11 LSB 1145YH 80
  2 12 mg/sh/8