House Study Bill 716
HOUSE FILE
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON VAN FOSSEN)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the standards applicable for purposes of
2 imposing an Iowa business activity tax and including an
3 applicability date provision.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 6896HC 80
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PAG LIN
1 1 Section 1. NEW SECTION. 422.125 SHORT TITLE.
1 2 This division shall be known as and may be cited as the
1 3 "Business Activity Tax Simplification Act".
1 4 Sec. 2. NEW SECTION. 422.126 BUSINESS ACTIVITY TAX ==
1 5 DEFINITION.
1 6 1. As used in this division, unless the context otherwise
1 7 requires, a "business activity tax" means any of the
1 8 following:
1 9 a. A tax imposed on, or measured by, net income.
1 10 b. A tax imposed on, or measured by, gross receipts, gross
1 11 income, or gross profits.
1 12 c. A business license tax.
1 13 d. A business and occupation tax.
1 14 e. A franchise tax.
1 15 f. A single business tax or a capital stock tax.
1 16 g. Any other tax imposed by Iowa on a business for the
1 17 right to do business in the state or measured by the amount
1 18 of, or economic results of, business or related activity
1 19 conducted in the state.
1 20 "Business activity tax" does not include a transaction tax.
1 21 2. Business activity taxes to which this division applies
1 22 include, but are not limited to, all of the following:
1 23 a. Personal income tax under chapter 422, division II.
1 24 b. Corporate income tax under chapter 422, division III.
1 25 c. Franchise tax on financial institutions under chapter
1 26 422, division V.
1 27 3. Gross premiums tax on insurance companies or
1 28 associations under chapters 432, 432A, 518, and 518A are not
1 29 business activity taxes to which this division applies.
1 30 Sec. 3. NEW SECTION. 422.127 APPLICATION OF PUBLIC LAW
1 31 86=272.
1 32 The principal behind Pub. L. No. 86=272, 15 U.S.C. } 381 et
1 33 seq., relating to the ability of states to impose a net income
1 34 tax on income derived from interstate commerce, shall apply to
1 35 the authority of Iowa to impose a business activity tax with
2 1 respect to all sales and not solely to sales of tangible
2 2 property.
2 3 Sec. 4. NEW SECTION. 422.128 STANDARD FOR BUSINESS
2 4 ACTIVITY TAXES.
2 5 1. IN GENERAL. Except as otherwise provided in this
2 6 division, a person shall not be subject to a business activity
2 7 tax imposed by this state unless that person has a physical
2 8 presence in this state during the taxable period with respect
2 9 to which the tax is imposed.
2 10 2. REQUIREMENTS FOR PHYSICAL PRESENCE. Except as
2 11 otherwise provided in this division, for the purposes of
2 12 subsection 1, a person has a physical presence in this state
2 13 only if that person's business activities within this state
2 14 include any of the following:
2 15 a. Being an individual physically located within this
2 16 state, or assigning one or more employees to be in this state,
2 17 on more than twenty=one days. However, the following shall be
2 18 disregarded in determining whether this twenty=one=day maximum
2 19 time limit has been exceeded:
2 20 (1) Activities in connection with a possible purchase of
2 21 goods or services for the business.
2 22 (2) Gathering news and covering events for print,
2 23 broadcast, or other distribution through the media.
2 24 (3) Meeting government officials for purposes other than
2 25 selling goods or services.
2 26 (4) Participation in educational or training conferences,
2 27 seminars, or other similar functions.
2 28 (5) Participating in charitable activities.
2 29 b. Using the services of another person, except an
2 30 employee, in this state on more than twenty=one days to
2 31 establish or maintain the market in this state, unless that
2 32 other person performs similar functions on behalf of at least
2 33 one additional business entity during the taxable year.
2 34 c. The leasing or owning of tangible personal property or
2 35 real property in this state on more than twenty=one days.
3 1 However, the following shall be disregarded in determining
3 2 whether the twenty=one=day maximum time limit has been
3 3 exceeded:
3 4 (1) Tangible property located in this state for purposes
3 5 of being assembled, manufactured, processed, or tested by
3 6 another person for the benefit of the owner or lessee, or used
3 7 to furnish a service to the owner or lessee by another person.
3 8 (2) Marketing or promotional materials distributed in this
3 9 state using mail or a common carrier, or as inserts in or
3 10 components of publications.
3 11 (3) Any property to the extent used ancillary to an
3 12 activity excluded from the computation of the twenty=one=day
3 13 maximum time period under paragraph "a" or "b".
3 14 3. TAXABLE PERIODS NOT A YEAR. If the taxable period of
3 15 the taxpayer for which the tax is imposed is not a year, then
3 16 any requirements expressed in days in subsection 2 for
3 17 establishing physical presence under this division shall be
3 18 adjusted proportionately to reflect the actual taxable period.
3 19 4. EXCEPTIONS. The following are exceptions to the
3 20 provisions of subsection 1 or 2, as specified:
3 21 a. PERSONS DOMICILED IN THE STATE. Subsection 1 does not
3 22 apply with respect to either of the following:
3 23 (1) A person, other than an individual, who is
3 24 incorporated or formed under the laws of this state or
3 25 commercially domiciled in this state.
3 26 (2) An individual who is domiciled in this state.
3 27 b. EXCEPTION RELATING TO CERTAIN EVENTS. With respect to
3 28 the taxation of any of the following, subsection 2 shall be
3 29 read to require a physical presence of only one day in this
3 30 state in any of the following circumstances:
3 31 (1) A live performance in this state before a live
3 32 audience of more than one hundred individuals.
3 33 (2) A live sporting event in this state before more than
3 34 one hundred spectators present at the event.
3 35 (3) The sale within this state of tangible personal
4 1 property, where delivery of the property originates and is
4 2 completed within the state.
4 3 (4) The performance of services to real property within
4 4 the state.
4 5 c. TAXATION OF PARTNERS AND SIMILAR PERSONS. If this
4 6 state is not prohibited by this section from taxing an entity
4 7 that is a partnership, S corporation, limited liability
4 8 company, trust, or an estate, or other similar entity, this
4 9 state is also not prohibited by this section from taxing the
4 10 owners or beneficiaries of such entity.
4 11 Sec. 5. APPLICABILITY DATE. This Act applies to taxable
4 12 years beginning on or after January 1, 2005.
4 13 EXPLANATION
4 14 This bill provides that beginning January 1, 2005, no
4 15 person shall be subject to a business activity tax imposed by
4 16 Iowa unless such person has a physical presence in the state
4 17 of more than 21 days, unless the person is an entertainer or
4 18 sports participant who attends a one=day event in Iowa where
4 19 the audience totals at least 100 people. The 21=day maximum
4 20 period also does not apply to sales of property originated and
4 21 completed in this state or the performance of services to real
4 22 property within this state. In counting the 21=day maximum
4 23 period, activities that involve possible purchase of goods,
4 24 gathering or covering of media events, meeting government
4 25 officials, or participating in educational or training
4 26 seminars or charitable events are not counted. The physical
4 27 presence requirement does not apply if the business is
4 28 incorporated or formed under Iowa laws or is commercially
4 29 domiciled in Iowa or the individual is domiciled in Iowa.
4 30 A business activity tax is a net income tax, gross receipts
4 31 or profits tax, business license tax, franchise tax, business
4 32 and occupation tax, single business tax, capital stock tax, or
4 33 other tax on the right to do business in Iowa or a tax
4 34 measured on business activity conducted in Iowa. This tax
4 35 would include, but it not limited to, Iowa's individual income
5 1 tax, corporate income tax, and franchise tax on financial
5 2 institutions. The gross insurance premiums tax would not be
5 3 considered a business activity tax.
5 4 The bill applies to taxable years beginning on or after
5 5 January 1, 2005.
5 6 LSB 6896HC 80
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