House File 41 



                                      HOUSE FILE       
                                      BY  VAN FOSSEN

    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 1752YH 82
  6 mg/je/5

PAG LIN



  1  1    Section 1.  Section 422.7, Code 2007, is amended by adding
  1  2 the following new subsection:
  1  3    NEW SUBSECTION.  50.  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 422.11F, 422.11G, or 422.11Q.
  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 2007, is amended by adding
  1 28 the following new subsection:
  1 29    NEW SUBSECTION.  23.  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 422.33, subsection 12, 13, or 21.
  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 2007, 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 the business
  2 14 if certain requirements are met.  These requirements are that
  2 15 the 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, 2007, for tax years ending
  2 20 after that date.
  2 21 LSB 1752YH 82
  2 22 mg:nh/je/5