Senate Study Bill 1354 



                                       SENATE FILE       
                                       BY  (PROPOSED COMMITTEE ON WAYS
                                            AND MEANS BILL BY
                                            CHAIRPERSON BOLKCOM)


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

                                      A BILL FOR

  1 An Act relating to the state earned income tax credit by
  2    increasing the amount of the tax credit and making the tax
  3    credit refundable and including effective and retroactive
  4    applicability date provisions.
  5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  6 TLSB 2247XC 82
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PAG LIN



  1  1    Section 1.  Section 422.12B, subsection 1, Code 2007, is
  1  2 amended to read as follows:
  1  3    1.  The taxes imposed under this division less the credits
  1  4 allowed under section 422.12 shall be reduced by an earned
  1  5 income credit equal to six and one=half seven percent of the
  1  6 federal earned income credit provided in section 32 of the
  1  7 Internal Revenue Code.  Any credit in excess of the tax
  1  8 liability is nonrefundable refundable.
  1  9                     COORDINATING AMENDMENTS
  1 10    Sec. 2.  Section 422.11, Code 2007, is amended to read as
  1 11 follows:
  1 12    422.11  FRANCHISE TAX CREDIT.
  1 13    The taxes imposed under this division, less the credits
  1 14 allowed under sections section 422.12 and 422.12B, shall be
  1 15 reduced by a franchise tax credit.  A taxpayer who is a
  1 16 shareholder in a financial institution, as defined in section
  1 17 581 of the Internal Revenue Code, which has in effect for the
  1 18 tax year an election under subchapter S of the Internal
  1 19 Revenue Code, or is a member of a financial institution
  1 20 organized as a limited liability company under chapter 524
  1 21 that is taxed as a partnership for federal income tax
  1 22 purposes, shall compute the amount of the tax credit by
  1 23 recomputing the amount of tax under this division by reducing
  1 24 the taxable income of the taxpayer by the taxpayer's pro rata
  1 25 share of the items of income and expense of the financial
  1 26 institution and subtracting the credits allowed under sections
  1 27 section 422.12 and 422.12B.  This recomputed tax shall be
  1 28 subtracted from the amount of tax computed under this division
  1 29 after the deduction for credits allowed under sections section
  1 30 422.12 and 422.12B.  The resulting amount, which shall not
  1 31 exceed the taxpayer's pro rata share of the franchise tax paid
  1 32 by the financial institution, is the amount of the franchise
  1 33 tax credit allowed.
  1 34    Sec. 3.  Section 422.11A, Code 2007, is amended to read as
  1 35 follows:
  2  1    422.11A  NEW JOBS TAX CREDIT.
  2  2    The taxes imposed under this division, less the credits
  2  3 allowed under sections section 422.12 and 422.12B, shall be
  2  4 reduced by a new jobs tax credit.  An industry which has
  2  5 entered into an agreement under chapter 260E and which has
  2  6 increased its base employment level by at least ten percent
  2  7 within the time set in the agreement or, in the case of an
  2  8 industry without a base employment level, adds new jobs within
  2  9 the time set in the agreement is entitled to this new jobs tax
  2 10 credit for the tax year selected by the industry.  In
  2 11 determining if the industry has increased its base employment
  2 12 level by ten percent or added new jobs, only those new jobs
  2 13 directly resulting from the project covered by the agreement
  2 14 and those directly related to those new jobs shall be counted.
  2 15 The amount of this credit is equal to the product of six
  2 16 percent of the taxable wages upon which an employer is
  2 17 required to contribute to the state unemployment compensation
  2 18 fund, as defined in section 96.19, subsection 37, times the
  2 19 number of new jobs existing in the tax year that directly
  2 20 result from the project covered by the agreement or new jobs
  2 21 that directly result from those new jobs.  The tax year chosen
  2 22 by the industry shall either begin or end during the period
  2 23 beginning with the date of the agreement and ending with the
  2 24 date by which the project is to be completed under the
  2 25 agreement.  An individual may claim the new jobs tax credit
  2 26 allowed a partnership, subchapter S corporation, or estate or
  2 27 trust electing to have the income taxed directly to the
  2 28 individual.  The amount claimed by the individual shall be
  2 29 based upon the pro rata share of the individual's earnings of
  2 30 the partnership, subchapter S corporation, or estate or trust.
  2 31 Any credit in excess of the tax liability for the tax year may
  2 32 be credited to the tax liability for the following ten tax
  2 33 years or until depleted, whichever is the earlier.  For
  2 34 purposes of this section, "agreement", "industry", "new job",
  2 35 and "project" mean the same as defined in section 260E.2 and
  3  1 "base employment level" means the number of full=time jobs an
  3  2 industry employs at the plant site which is covered by an
  3  3 agreement under chapter 260E on the date of that agreement.
  3  4    Sec. 4.  Section 422.11C, subsection 2, unnumbered
  3  5 paragraph 1, Code 2007, is amended to read as follows:
  3  6    The taxes imposed under this division, less the credits
  3  7 allowed under sections section 422.12 and 422.12B, shall be
  3  8 reduced by an ethanol blended gasoline tax credit for each tax
  3  9 year that the taxpayer is eligible to claim the tax credit
  3 10 under this section.  In order to be eligible, all of the
  3 11 following must apply:
  3 12    Sec. 5.  Section 422.11D, subsection 1, Code 2007, is
  3 13 amended to read as follows:
  3 14    1.  The taxes imposed under this division, less the credits
  3 15 allowed under sections section 422.12 and 422.12B, shall be
  3 16 reduced by a historic preservation and cultural and
  3 17 entertainment district tax credit equal to the amount as
  3 18 computed under chapter 404A for rehabilitating eligible
  3 19 property.  Any credit in excess of the tax liability shall be
  3 20 refunded as provided in section 404A.4, subsection 3.
  3 21    Sec. 6.  Section 422.11E, subsection 1, Code 2007, is
  3 22 amended to read as follows:
  3 23    1.  The taxes imposed under this division, less the credits
  3 24 allowed under sections section 422.12 and 422.12B, shall be
  3 25 reduced by an assistive device tax credit.  A small business
  3 26 purchasing, renting, or modifying an assistive device or
  3 27 making workplace modifications for an individual with a
  3 28 disability who is employed or will be employed by the small
  3 29 business is eligible, subject to availability of credits, to
  3 30 receive this assistive device tax credit which is equal to
  3 31 fifty percent of the first five thousand dollars paid during
  3 32 the tax year for the purchase, rental, or modification of the
  3 33 assistive device or for making the workplace modifications.
  3 34 Any credit in excess of the tax liability shall be refunded
  3 35 with interest computed under section 422.25.  In lieu of
  4  1 claiming a refund, a taxpayer may elect to have the
  4  2 overpayment shown on the taxpayer's final, completed return
  4  3 credited to the tax liability for the following tax year.  If
  4  4 the small business elects to take the assistive device tax
  4  5 credit, the small business shall not deduct for Iowa tax
  4  6 purposes any amount of the cost of an assistive device or
  4  7 workplace modifications which is deductible for federal tax
  4  8 purposes.
  4  9    Sec. 7.  Section 422.11F, Code 2007, is amended to read as
  4 10 follows:
  4 11    422.11F  INVESTMENT TAX CREDITS.
  4 12    1.  The taxes imposed under this division, less the credits
  4 13 allowed under sections section 422.12 and 422.12B, shall be
  4 14 reduced by an investment tax credit authorized pursuant to
  4 15 section 15E.43 for an investment in a qualifying business or a
  4 16 community=based seed capital fund.
  4 17    2.  The taxes imposed under this division, less the credits
  4 18 allowed under sections section 422.12 and 422.12B, shall be
  4 19 reduced by investment tax credits authorized pursuant to
  4 20 sections 15.333 and 15E.193B, subsection 6.
  4 21    Sec. 8.  Section 422.11G, Code 2007, is amended to read as
  4 22 follows:
  4 23    422.11G  VENTURE CAPITAL FUND INVESTMENT TAX CREDIT.
  4 24    The tax imposed under this division, less the credits
  4 25 allowed under sections section 422.12 and 422.12B, shall be
  4 26 reduced by a venture capital fund investment tax credit
  4 27 authorized pursuant to section 15E.51.
  4 28    Sec. 9.  Section 422.11H, Code 2007, is amended to read as
  4 29 follows:
  4 30    422.11H  ENDOW IOWA TAX CREDIT.
  4 31    The tax imposed under this division, less the credits
  4 32 allowed under sections section 422.12 and 422.12B, shall be
  4 33 reduced by an endow Iowa tax credit authorized pursuant to
  4 34 section 15E.305.
  4 35    Sec. 10.  Section 422.11I, subsection 1, unnumbered
  5  1 paragraph 1, Code 2007, is amended to read as follows:
  5  2    The taxes imposed under this division, less the credits
  5  3 allowed under sections section 422.12 and 422.12B, shall be
  5  4 reduced by a soy=based cutting tool oil tax credit.  A
  5  5 manufacturer, as defined in section 428.20, is eligible to
  5  6 receive a soy=based cutting tool oil tax credit which is equal
  5  7 to the costs incurred by the manufacturer during the tax year
  5  8 for the purchase and replacement costs relating to the
  5  9 transition from using nonsoy=based cutting tool oil to using
  5 10 soy=based cutting tool oil.  The costs eligible for the credit
  5 11 are limited to those costs meeting all of the following
  5 12 requirements:
  5 13    Sec. 11.  Section 422.11J, Code 2007, is amended to read as
  5 14 follows:
  5 15    422.11J  TAX CREDITS FOR WIND ENERGY PRODUCTION AND
  5 16 RENEWABLE ENERGY.
  5 17    The taxes imposed under this division, less the credits
  5 18 allowed under sections section 422.12 and 422.12B, shall be
  5 19 reduced by tax credits for wind energy production allowed
  5 20 under chapter 476B and for renewable energy allowed under
  5 21 chapter 476C.
  5 22    Sec. 12.  Section 422.11K, Code 2007, is amended to read as
  5 23 follows:
  5 24    422.11K  ECONOMIC DEVELOPMENT REGION REVOLVING FUND
  5 25 CONTRIBUTION TAX CREDIT.
  5 26    The taxes imposed under this division, less the credits
  5 27 allowed under sections section 422.12 and 422.12B, shall be
  5 28 reduced by an economic development region revolving fund
  5 29 contribution tax credit authorized pursuant to section
  5 30 15E.232.
  5 31    Sec. 13.  Section 422.11L, Code 2007, is amended to read as
  5 32 follows:
  5 33    422.11L  WAGE=BENEFITS TAX CREDIT.
  5 34    The taxes imposed under this division, less the credits
  5 35 allowed under sections section 422.12 and 422.12B, shall be
  6  1 reduced by a wage=benefits tax credit authorized pursuant to
  6  2 section 15I.2.
  6  3    Sec. 14.  Section 422.11M, Code 2007, is amended to read as
  6  4 follows:
  6  5    422.11M  AGRICULTURAL ASSETS TRANSFERRED TO BEGINNING
  6  6 FARMERS.
  6  7    The taxes imposed under this division, less the credits
  6  8 allowed under sections section 422.12 and 422.12B, shall be
  6  9 reduced by an agricultural assets transfer tax credit as
  6 10 allowed under section 175.37.
  6 11    Sec. 15.  Section 422.11N, subsection 3, unnumbered
  6 12 paragraph 1, Code 2007, is amended to read as follows:
  6 13    The taxes imposed under this division, less the credits
  6 14 allowed under sections section 422.12 and 422.12B, shall be
  6 15 reduced by an ethanol promotion tax credit for each tax year
  6 16 that the taxpayer is eligible to claim the tax credit under
  6 17 this section.  In order to be eligible, all of the following
  6 18 must apply:
  6 19    Sec. 16.  Section 422.11O, subsection 2, unnumbered
  6 20 paragraph 1, Code 2007, is amended to read as follows:
  6 21    The taxes imposed under this division, less the credits
  6 22 allowed under sections section 422.12 and 422.12B, shall be
  6 23 reduced by an E=85 gasoline promotion tax credit for each tax
  6 24 year that the taxpayer is eligible to claim the tax credit
  6 25 under this subsection.  In order to be eligible, all of the
  6 26 following must apply:
  6 27    Sec. 17.  Section 422.11P, subsection 2, unnumbered
  6 28 paragraph 1, Code 2007, is amended to read as follows:
  6 29    The taxes imposed under this division, less the credits
  6 30 allowed under sections section 422.12 and 422.12B, shall be
  6 31 reduced by the amount of the biodiesel blended fuel tax credit
  6 32 for each tax year that the taxpayer is eligible to claim a tax
  6 33 credit under this subsection.
  6 34    Sec. 18.  Section 422.11Q, Code 2007, is amended to read as
  6 35 follows:
  7  1    422.11Q  IOWA FUND OF FUNDS TAX CREDIT.
  7  2    The taxes imposed under this division, less the credits
  7  3 allowed under sections section 422.12 and 422.12B, shall be
  7  4 reduced by a tax credit authorized pursuant to section 15E.66,
  7  5 if redeemed, for investments in the Iowa fund of funds.
  7  6    Sec. 19.  Section 422.11R, Code 2007, is amended to read as
  7  7 follows:
  7  8    422.11R  SOY=BASED TRANSFORMER FLUID TAX CREDIT.
  7  9    The taxes imposed under this division, less the credits
  7 10 allowed under sections section 422.12 and 422.12B, shall be
  7 11 reduced by a soy=based transformer fluid tax credit allowed
  7 12 under chapter 476D.
  7 13    This section is repealed December 31, 2008.
  7 14    Sec. 20.  Section 422.11S, subsection 1, Code 2007, is
  7 15 amended to read as follows:
  7 16    1.  The taxes imposed under this division, less the credits
  7 17 allowed under sections section 422.12 and 422.12B, shall be
  7 18 reduced by a school tuition organization tax credit equal to
  7 19 sixty=five percent of the amount of the voluntary cash
  7 20 contributions made by the taxpayer during the tax year to a
  7 21 school tuition organization, subject to the total dollar value
  7 22 of the organization's tax credit certificates as computed in
  7 23 subsection 7.  The tax credit shall be claimed by use of a tax
  7 24 credit certificate as provided in subsection 6.
  7 25    Sec. 21.  Section 422.12, subsection 2, unnumbered
  7 26 paragraph 1, Code 2007, is amended to read as follows:
  7 27    A tuition credit equal to twenty=five percent of the first
  7 28 one thousand dollars which the taxpayer has paid to others for
  7 29 each dependent in grades kindergarten through twelve, for
  7 30 tuition and textbooks of each dependent in attending an
  7 31 elementary or secondary school situated in Iowa, which school
  7 32 is accredited or approved under section 256.11, which is not
  7 33 operated for profit, and which adheres to the provisions of
  7 34 the federal Civil Rights Act of 1964 and chapter 216.  As used
  7 35 in this subsection, "textbooks" means books and other
  8  1 instructional materials and equipment used in elementary and
  8  2 secondary schools in teaching only those subjects legally and
  8  3 commonly taught in public elementary and secondary schools in
  8  4 this state and does not include instructional books and
  8  5 materials used in the teaching of religious tenets, doctrines,
  8  6 or worship, the purpose of which is to inculcate those tenets,
  8  7 doctrines, or worship.  "Textbooks" includes books or
  8  8 materials used for extracurricular activities including
  8  9 sporting events, musical or dramatic events, speech
  8 10 activities, driver's education, or programs of a similar
  8 11 nature.  Notwithstanding any other provision, all other
  8 12 credits allowed under this section and section 422.12B shall
  8 13 be deducted before the tuition credit under this subsection.
  8 14 The department, when conducting an audit of a taxpayer's
  8 15 return, shall also audit the tuition tax credit portion of the
  8 16 tax return.
  8 17    Sec. 22.  EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
  8 18 This Act, being deemed of immediate importance, takes effect
  8 19 upon enactment and applies retroactively to January 1, 2007,
  8 20 for tax years beginning on or after that date.
  8 21                           EXPLANATION
  8 22    This bill increases the state earned income tax credit from
  8 23 6.5 percent to 7 percent of the federal tax credit and makes
  8 24 the state earned income tax credit refundable like the federal
  8 25 earned income tax credit.
  8 26    Because the bill makes the state tax credit refundable,
  8 27 numerous coordinating amendments are made to other tax credits
  8 28 that specify that the earned income tax credit is to be taken
  8 29 before those other tax credits.
  8 30    The bill takes effect upon enactment and applies
  8 31 retroactively to January 1, 2007, for tax years beginning on
  8 32 or after that date.
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