House File 678
HOUSE FILE
BY COMMITTEE ON COMMERCE,
REGULATION AND LABOR
(SUCCESSOR TO HSB 293)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the imposition of a tax on certain credit
2 unions and including an applicability provision.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 3019HV 80
5 jj/sh/8
PAG LIN
1 1 Section 1. Section 422.60, subsection 1, Code 2003, is
1 2 amended to read as follows:
1 3 1. a. A franchise tax according to and measured by net
1 4 income is imposed on financial institutions, except
1 5 nonqualified credit unions, for the privilege of doing
1 6 business in this state as financial institutions.
1 7 b. A revenue nondistribution tax measured by the increase
1 8 in equity is imposed on nonqualified credit unions for the
1 9 privilege of doing business in this state as financial
1 10 institutions.
1 11 Sec. 2. Section 422.60, subsection 2, Code 2003, is
1 12 amended by adding the following new unnumbered paragraph after
1 13 unnumbered paragraph 1:
1 14 NEW UNNUMBERED PARAGRAPH. A nonqualified credit union
1 15 incorporated or authorized to do business under chapter 533 is
1 16 not subject to the state alternative minimum tax.
1 17 Sec. 3. Section 422.61, Code 2003, is amended by adding
1 18 the following new subsection:
1 19 NEW SUBSECTION. 0A. "Equity" means, in the case of a
1 20 nonqualified credit union, the sum of all items included in
1 21 the equity section of its annual report under section 533.6
1 22 including, but not limited to, the following:
1 23 a. Undivided earnings.
1 24 b. Regular reserves.
1 25 c. Appropriations for nonconforming investments.
1 26 d. Other reserves.
1 27 e. Miscellaneous equity.
1 28 f. Accumulated unrealized net gains (losses) on for sale
1 29 securities and other comprehensive income.
1 30 g. Accumulated unrealized gains (losses) on cash flow
1 31 hedges.
1 32 h. Other comprehensive income unless already included in
1 33 paragraph "f" or "g".
1 34 i. Net income unless already included in paragraph "a".
1 35 In the case of a credit union designated as serving
2 1 predominantly low=income members, "equity" also includes
2 2 uninsured secondary capital.
2 3 Sec. 4. Section 422.61, subsection 1, Code 2003, is
2 4 amended to read as follows:
2 5 1. "Financial institution" means a state bank as defined
2 6 in section 524.103, subsection 33, a state bank chartered
2 7 under the laws of any other state, a national banking
2 8 association, a trust company, a federally chartered savings
2 9 and loan association, an out=of=state state chartered savings
2 10 bank, a financial institution chartered by the federal home
2 11 loan bank board, a non=Iowa chartered savings and loan
2 12 association, a nonqualified credit union incorporated or
2 13 authorized to do business under chapter 533, a nonqualified
2 14 credit union incorporated or authorized to do business under
2 15 the laws of another state, an association incorporated or
2 16 authorized to do business under chapter 534, or a production
2 17 credit association.
2 18 Sec. 5. Section 422.61, Code 2003, is amended by adding
2 19 the following new subsections:
2 20 NEW SUBSECTION. 1A. "Increase in equity", in the case of
2 21 a nonqualified credit union, means the increase in the amount
2 22 of equity of the credit union at the end of the taxable year
2 23 as reflected in its annual report under section 533.6 over the
2 24 amount of equity of the credit union at the end of the
2 25 previous taxable year as reflected in the previous year's
2 26 annual report under section 533.6.
2 27 NEW SUBSECTION. 3A. "Nonqualified credit union" means a
2 28 credit union that does not meet the requirements to be a
2 29 qualified credit union, as specified in section 533.24,
2 30 subsection 3.
2 31 Sec. 6. Section 422.61, subsection 3, unnumbered paragraph
2 32 1, Code 2003, is amended to read as follows:
2 33 "Net income", for a financial institution other than a
2 34 nonqualified credit union, means the net income of the
2 35 financial institution computed in accordance with section
3 1 422.35, with the following adjustments:
3 2 Sec. 7. Section 422.62, Code 2003, is amended to read as
3 3 follows:
3 4 422.62 DUE AND DELINQUENT DATES.
3 5 The franchise tax or revenue nondistribution tax, as
3 6 applicable, is due and payable on the first day following the
3 7 end of the taxable year of each financial institution, and.
3 8 In the case of a financial institution other than a
3 9 nonqualified credit union, the tax is delinquent after the
3 10 last day of the fourth month following the due date or forty=
3 11 five days after the due date of the federal tax return,
3 12 excluding extensions of time to file, whichever is the later.
3 13 In the case of a nonqualified credit union, the tax is
3 14 delinquent after the last day of the fourth month following
3 15 the due date. Every financial institution shall file a return
3 16 as prescribed by the director on or before the delinquency
3 17 date.
3 18 Sec. 8. Section 422.63, Code 2003, is amended to read as
3 19 follows:
3 20 422.63 AMOUNT OF TAX.
3 21 The franchise tax is imposed annually in an amount equal to
3 22 five percent of the net income received or accrued during the
3 23 taxable year. The revenue nondistribution tax is imposed
3 24 annually in an amount equal to five percent of the increase in
3 25 equity for the taxable year. If the net income or increase in
3 26 equity, as applicable, of the financial institution is derived
3 27 from its business carried on entirely within the state, the
3 28 tax shall be imposed on the entire net income or increase in
3 29 equity, as applicable, but if the business is carried on
3 30 partly within and partly without the state, the portion of net
3 31 income or increase in equity, as applicable, reasonably
3 32 attributable to the business within the state shall be
3 33 specifically allocated or equitably apportioned within and
3 34 without the state under rules of the director.
3 35 Sec. 9. Section 422.66, Code 2003, is amended to read as
4 1 follows:
4 2 422.66 DEPARTMENT TO ENFORCE.
4 3 The department shall administer and enforce the provisions
4 4 of this division, and all applicable provisions of sections
4 5 422.24, 422.25, 422.26, 422.28, 422.29, and 422.30, and
4 6 division VI of this chapter, apply to financial institutions
4 7 and to the franchise tax and revenue nondistribution tax
4 8 imposed by this division.
4 9 Sec. 10. Section 533.24, Code 2003, is amended to read as
4 10 follows:
4 11 533.24 TAXATION.
4 12 1. A credit union shall be deemed an institution for
4 13 savings and is subject to taxation only as to its real estate
4 14 and moneys and credits. However, those nonqualified credit
4 15 unions subject to the state revenue nondistribution tax
4 16 imposed in chapter 422, division V shall not be taxed on their
4 17 moneys and credits. The shares shall not be taxed.
4 18 2. a. The moneys and credits tax on credit unions, except
4 19 those nonqualified credit unions subject to the state revenue
4 20 nondistribution tax, is imposed at a rate of five mills on
4 21 each dollar of the legal and special reserves which are
4 22 required to be maintained by the credit union under section
4 23 533.17, and shall be levied by the board of supervisors, and
4 24 placed upon the tax list and collected by the county
4 25 treasurer, except that an exemption shall be given to each
4 26 credit union in the amount of forty thousand dollars. The
4 27 amount collected in each taxing district within a city shall
4 28 be apportioned twenty percent to the county, thirty percent to
4 29 the city general fund, and fifty percent to the general fund
4 30 of the state, and the amount collected in each taxing district
4 31 outside of cities shall be apportioned fifty percent to the
4 32 county and fifty percent to the general fund of the state.
4 33 The moneys and credits tax shall be collected at the location
4 34 of the credit union as shown in its articles of incorporation.
4 35 b. The moneys and credits tax imposed under this section
5 1 subsection shall be reduced by an investment tax credit
5 2 authorized pursuant to section 15E.43.
5 3 c. The moneys and credits tax imposed under this section
5 4 subsection shall be reduced by an investment tax credit
5 5 authorized pursuant to section 15E.51.
5 6 3. a. A credit union that does not meet the requirements
5 7 of a qualified credit union as specified in paragraph "b" is
5 8 subject to the state revenue nondistribution tax imposed in
5 9 chapter 422, division V.
5 10 b. A credit union is a qualified credit union if the
5 11 credit union meets all of the following requirements:
5 12 (1) The credit union has less than one hundred fifty
5 13 million dollars in assets as shown in its latest annual report
5 14 under section 533.6, provided that this requirement shall not
5 15 apply to a credit union with a field of membership limited
5 16 exclusively to an occupational, industry, or employer common
5 17 bond based upon common business, employer, or corporate
5 18 parent.
5 19 (2) The credit union does not make or participate in
5 20 commercial loans or business purpose loans that together at
5 21 any time exceed an aggregate amount equal to the lesser of one
5 22 and three=fourths times the credit union's net worth or twelve
5 23 and one=fourth percent of the credit union's total assets.
5 24 c. For purposes of this subsection:
5 25 (1) "Agricultural purpose" means the same as defined in
5 26 section 535.13.
5 27 (2) "Business purpose" means a for=profit activity by an
5 28 individual or a for=profit entity including, but not limited
5 29 to, a commercial, service, or industrial enterprise carried on
5 30 for profit, or an investment activity.
5 31 (3) "Commercial loan" means a loan to an individual or
5 32 entity for a business purpose or an agricultural purpose.
5 33 "Commercial loan" does not include a loan the proceeds of
5 34 which will be used primarily for the purchase, construction,
5 35 or improvement of real property, including a single=family or
6 1 a two=family dwelling occupied or to be occupied by the
6 2 borrower.
6 3 (4) "Loan" includes the refinancing of a contract of sale,
6 4 and the refinancing of a prior loan, whether or not the
6 5 borrower was also the borrower under the prior loan, and the
6 6 assumption of a prior loan.
6 7 (5) "Net worth" means the credit union's retained earnings
6 8 including undivided earnings, regular reserves, and any other
6 9 appropriations designated by management or regulatory
6 10 authority.
6 11 Sec. 11. APPLICABILITY DATE. This Act applies to taxable
6 12 years beginning on or after the effective date of this Act.
6 13 EXPLANATION
6 14 This bill imposes a revenue nondistribution tax as part of
6 15 the tax on financial institutions doing business in Iowa and
6 16 subject to taxation by the state on chartered credit unions of
6 17 this or another state that do not meet certain requirements.
6 18 A credit union will not be subject to the revenue
6 19 nondistribution tax if it has assets of less than $150 million
6 20 or its members share a common bond such as single employer or
6 21 occupation, and it does not make or participate in commercial
6 22 or business purpose loans of a certain quantity.
6 23 For the purpose of computing the tax, the increase in the
6 24 equity of the credit union determined at the end of the
6 25 taxable year is the taxable event.
6 26 Various credits applicable to the franchise tax apply to
6 27 the revenue nondistribution tax and the tax is subjected to
6 28 prepayment requirements.
6 29 The moneys and credits tax currently imposed on all credit
6 30 unions is made inapplicable for those credit unions that are
6 31 subject to the revenue nondistribution tax.
6 32 The bill applies to taxable years beginning on or after the
6 33 effective date of the bill.
6 34 LSB 3019HV 80
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