House File 428 - Introduced HOUSE FILE BY ALONS, KAUFMANN, WATTS, LUKAN, KURTENBACH, TOMENGA, LALK, SODERBERG, EICHHORN, JACOBS, UPMEYER, STRUYK, and HUSEMAN Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the deduction of the capital gain from the 2 sale of capital investments made in or by certain businesses 3 and including an applicability date provision. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2502YH 81 6 mg/pj/5 PAG LIN 1 1 Section 1. Section 422.7, Code 2005, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 44. Subtract the capital gain from the 1 4 following: 1 5 a. The sale of an equity investment in a business if all 1 6 of the following requirements are met: 1 7 (1) The equity investment is held for a period of thirty= 1 8 six months or more from the date of acquisition. 1 9 (2) A credit is not claimed on the investment under 1 10 section 15E.66, 422.11F, or 422.11G. 1 11 (3) The deduction under this paragraph "a" is in lieu of 1 12 any deduction under section 1202 of the Internal Revenue Code. 1 13 b. If the adjusted gross income computed for federal 1 14 income tax purposes includes income or loss from a business 1 15 operated by the taxpayer, the sale of a building, land, or 1 16 machinery and equipment used in the operation of the business 1 17 if the building, land, or machinery and equipment are held for 1 18 a period of thirty=six months or more from the date of 1 19 acquisition. 1 20 An individual may claim the capital gain deduction of a 1 21 partnership, S corporation, limited liability company, estate, 1 22 or trust electing to have the income taxed directly to the 1 23 individual. The amount claimed by the individual shall be 1 24 based upon the pro rata share of the individual's earnings of 1 25 a partnership, S corporation, limited liability company, 1 26 estate, or trust. 1 27 Sec. 2. Section 422.35, Code 2005, is amended by adding 1 28 the following new subsection: 1 29 NEW SUBSECTION. 20. Subtract the capital gain from the 1 30 following: 1 31 a. The sale of an equity investment in a business if all 1 32 of the following requirements are met: 1 33 (1) The equity investment is held for a period of thirty= 1 34 six months or more from the date of acquisition. 1 35 (2) A credit is not claimed on the investment under 2 1 section 15E.66 or section 422.33, subsection 12 or 13. 2 2 b. The sale of a building, land, or machinery and 2 3 equipment used in the operation of the business if the 2 4 building, land, or machinery and equipment are held for a 2 5 period of thirty=six months or more from the date of 2 6 acquisition. 2 7 Sec. 3. APPLICABILITY DATE. This Act applies to capital 2 8 investments made in or by businesses on or after January 1, 2 9 2005, for tax years ending after that date. 2 10 EXPLANATION 2 11 This bill provides for the deduction of capital gains from 2 12 the sale of equity investments in businesses and from the sale 2 13 of buildings, land, or machinery and equipment of business if 2 14 certain requirements are met. These requirements are that the 2 15 equity investment or the building, land, or machinery and 2 16 equipment are held for at least three years; and no credit or 2 17 other deduction for the capital investment or gain is allowed. 2 18 The bill applies to capital investments made in or by 2 19 businesses on or after January 1, 2005, for tax years ending 2 20 after that date. 2 21 LSB 2502YH 81 2 22 mg:nh/pj/5