House File 2114 - Introduced HOUSE FILE 2114 BY PETTENGILL , SCHULTZ , WINDSCHITL , S. OLSON , DEYOE , DE BOEF , UPMEYER , SANDS , SODERBERG , ALONS , and SCHULTE A BILL FOR An Act updating the Code references to the Internal Revenue 1 Code and including effective date and retroactive 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5279YH (6) 83 tw/sc

H.F. 2114 Section 1. Section 422.3, subsection 5, Code 2009, is 1 amended to read as follows: 2 5. “Internal Revenue Code” means the Internal Revenue Code 3 of 1954, prior to the date of its redesignation as the Internal 4 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 5 the Internal Revenue Code of 1986 as amended to and including 6 January 1, 2008 2009 . 7 Sec. 2. Section 422.7, subsection 53, Code Supplement 2009, 8 is amended by striking the subsection. 9 Sec. 3. Section 422.9, subsection 2, paragraph i, Code 10 Supplement 2009, is amended to read as follows: 11 i. The deduction for state sales and use taxes is allowable 12 only if the taxpayer elected to deduct the state sales and use 13 taxes in lieu of state income taxes under section 164 of the 14 Internal Revenue Code. A deduction for state sales and use 15 taxes is not allowed if the taxpayer has taken the deduction 16 for state income taxes or claimed the standard deduction under 17 section 63 of the Internal Revenue Code. This paragraph 18 applies to taxable years beginning after December 31, 2003, and 19 before January 1, 2006 2010 . 20 Sec. 4. Section 422.9, subsection 3, paragraph b, Code 21 Supplement 2009, is amended to read as follows: 22 b. The Iowa net operating loss remaining after being carried 23 back as required in paragraph “a” , or “d” , or “e” , or if not 24 required to be carried back shall be carried forward twenty 25 taxable years. 26 Sec. 5. Section 422.9, subsection 3, Code Supplement 2009, 27 is amended by adding the following new paragraph: 28 NEW PARAGRAPH . e. Notwithstanding paragraph “a” , for 29 a taxpayer who has a qualified disaster loss as defined in 30 section 172(b)(1)(J) of the Internal Revenue Code, including 31 modifications prescribed by rule by the director, the Iowa 32 qualified disaster loss is a net operating loss which may be 33 carried back five taxable years prior to the taxable year of 34 the loss. 35 -1- LSB 5279YH (6) 83 tw/sc 1/ 4

H.F. 2114 Sec. 6. Section 422.9, Code Supplement 2009, is amended by 1 adding the following new subsection: 2 NEW SUBSECTION . 9. In determining the amount of deduction 3 for federal income tax under subsection 1 or subsection 2, 4 paragraph “b” , for tax years beginning in the 2009 calendar 5 year, if a refund is attributable to the receipt of an advance 6 refund pursuant to the federal Recovery Rebates and Economic 7 Stimulus for the American People Act of 2008, Pub. L. No. 8 110-185, the amount of the deduction for the tax year shall not 9 be adjusted by the amount of the advance refund, and the amount 10 of the advance refund shall not be taxable under this division. 11 Sec. 7. Section 422.32, subsection 7, Code Supplement 2009, 12 is amended to read as follows: 13 7. “Internal Revenue Code” means the Internal Revenue Code 14 of 1954, prior to the date of its redesignation as the Internal 15 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 16 the Internal Revenue Code of 1986 as amended to and including 17 January 1, 2008 2009 . 18 Sec. 8. Section 422.35, subsection 11, paragraph b, Code 19 Supplement 2009, is amended to read as follows: 20 b. An Iowa net operating loss for a tax year beginning on or 21 after January 1, 2009, or an Iowa net operating loss remaining 22 after being carried back as required in paragraph “a” , or “f” , 23 or “h” shall be carried forward twenty taxable years. 24 Sec. 9. Section 422.35, subsection 11, Code Supplement 25 2009, is amended by adding the following new paragraph: 26 NEW PARAGRAPH . h. Notwithstanding paragraph “a” , for 27 a taxpayer who has a qualified disaster loss as defined in 28 section 172(b)(1)(J) of the Internal Revenue Code, including 29 modifications prescribed by rule by the director, the Iowa 30 qualified disaster loss is a net operating loss which may be 31 carried back five taxable years prior to the taxable year of 32 the loss. 33 Sec. 10. Section 422.35, subsection 24, Code Supplement 34 2009, is amended by striking the subsection. 35 -2- LSB 5279YH (6) 83 tw/sc 2/ 4

H.F. 2114 Sec. 11. RETROACTIVE APPLICABILITY. 1 1. The sections of this Act amending Code sections 422.3, 2 422.9, subsection 3, 422.32, and 422.35, subsection 11, apply 3 retroactively to January 1, 2008, for tax years beginning on 4 or after that date. 5 2. The sections of this Act amending Code sections 422.7, 6 subsection 53, 422.9, subsection 2, and 422.35, subsection 24, 7 apply retroactively to December 31, 2007, for tax years ending 8 after that date. 9 3. The section of this Act enacting section 422.9, 10 subsection 9, applies retroactively to January 1, 2009, for tax 11 years beginning in the 2009 calendar year. 12 Sec. 12. EFFECTIVE DATE. This Act, being deemed of 13 immediate importance, takes effect upon enactment. 14 EXPLANATION 15 This bill updates references in Code sections 422.3 and 16 422.32 to the Internal Revenue Code, making certain federal 17 income tax revisions enacted by Congress in 2008 applicable for 18 purposes of the corporate and individual income taxes and the 19 franchise tax. 20 The bill amends certain sections of the individual and 21 corporate income taxes relating to the computation of net 22 income. Current law specifically provides deductions for the 23 increased expensing allowances allowed under section 179 of the 24 Internal Revenue Code. Because the bill couples Iowa law with 25 federal law for purposes of individual and corporate income 26 taxes, these deductions are no longer necessary. 27 In certain circumstances, current law provides an itemized 28 deduction from net income for state sales and use taxes in 29 lieu of a deduction for income taxes. This deduction was only 30 available for taxable years beginning after December 31, 2003, 31 and before January 1, 2006. The bill extends this deduction to 32 taxable years beginning before January 1, 2010. 33 The bill provides that advance refunds provided under the 34 federal Economic Stimulus Act of 2008, but not received until 35 -3- LSB 5279YH (6) 83 tw/sc 3/ 4

H.F. 2114 2009, are not subject to tax and do not reduce the amount 1 of federal tax liability deductible for purposes of the Iowa 2 individual income tax. 3 The bill contains a number of retroactive applicability 4 provisions: (1) the section of the bill relating to advance 5 refunds under the federal Economic Stimulus Act of 2008 applies 6 retroactively to January 1, 2009, for tax years beginning in 7 the 2009 calendar year; (2) the sections of the bill relating 8 to the increased expensing allowance and the continued itemized 9 deduction for state sales and use taxes apply retroactively to 10 December 31, 2007, for tax years ending after that date; (3) 11 all other sections of the bill apply retroactively to January 12 1, 2008, for tax years beginning on or after that date. 13 The bill takes effect upon enactment. 14 -4- LSB 5279YH (6) 83 tw/sc 4/ 4