Senate File 211 - Introduced
SENATE FILE
BY KREIMAN
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to certain business taxes by requiring combined
2 corporate tax returns for unitary businesses, providing
3 property tax relief for small businesses, and including
4 retroactive applicability and other applicability date
5 provisions.
6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN
1 1 Section 1. Section 422.37, Code 2009, is amended by
1 2 striking the section and inserting in lieu thereof the
1 3 following:
1 4 422.37 COMBINED RETURNS.
1 5 An affiliated group of corporations shall, under rules
1 6 prescribed by the director, file a combined return showing the
1 7 net income of all corporations engaged in a unitary business,
1 8 subject to the following:
1 9 1. The affiliated group filing under this section shall
1 10 meet the requirements to file a consolidated return for
1 11 federal income tax purposes under the Internal Revenue Code
1 12 for the same taxable year.
1 13 2. All members of the affiliated group shall join in the
1 14 filing of an Iowa combined return to the extent they are
1 15 engaged in a unitary business.
1 16 3. Members of the affiliated group exempt from taxation by
1 17 section 422.34 shall not be included in a combined return.
1 18 4. All members of the affiliated group shall use the
1 19 statutory method of allocation and apportionment unless the
1 20 director has granted permission to all members to use an
1 21 alternative method of allocation and apportionment.
1 22 5. The computation of federal taxable income before the
1 23 net operating loss deduction on a combined return for members
1 24 of an affiliated group shall be made in the same manner and
1 25 under the same procedures, including all intercompany
1 26 adjustments and eliminations, as are required for
1 27 consolidating the incomes of affiliated corporations for the
1 28 taxable year for federal income tax purposes in accordance
1 29 with the Internal Revenue Code.
1 30 6. The combined income approach reflects the federal
1 31 taxable income of the unitary members of the Iowa affiliated
1 32 group as a single economic unit, with the application of the
1 33 adjustments in section 422.35, and the affiliated group shall
1 34 only file one income tax return. Any nonunitary members of
1 35 the federal affiliated group subject to tax imposed by section
2 1 422.33 must each file its own separate corporate income tax
2 2 return. The net income of an affiliated group is determined
2 3 by applying the apportionment formula against the combined
2 4 income of the affiliated group.
2 5 7. Only the sales of those corporations in the affiliated
2 6 group subject to the tax imposed by section 422.33 are
2 7 included in the numerator of the apportionment formula.
2 8 8. Only those corporations in the affiliated group subject
2 9 to the tax imposed by section 422.33 are jointly and severally
2 10 liable for the Iowa tax of the combined group.
2 11 9. a. The department shall annually compute the amount of
2 12 moneys collected from the corporate income tax when affiliated
2 13 groups of corporations are required to file combined returns
2 14 pursuant to this section in excess, if any, of the amount of
2 15 moneys that would have been collected from the corporate
2 16 income tax if affiliated groups of corporations were required
2 17 to file consolidated returns pursuant to section 422.37, Code
2 18 2009.
2 19 b. There is appropriated each fiscal year to the
2 20 department from the general fund of the state for deposit in
2 21 the small business property tax relief fund created in section
2 22 426C.2 an amount equal to the excess amount, if any, computed
2 23 by the department pursuant to paragraph "a".
2 24 Sec. 2. NEW SECTION. 426C.1 DEFINITIONS.
2 25 For purposes of this chapter, unless the context otherwise
2 26 requires:
2 27 1. "Department" means the department of revenue.
2 28 2. "Eligible business" means a business meeting the
2 29 requirements for eligibility described in section 426C.3.
2 30 3. "Fund" means the small business property tax relief
2 31 fund created in section 426C.2.
2 32 Sec. 3. NEW SECTION. 426C.2 SMALL BUSINESS PROPERTY TAX
2 33 RELIEF FUND.
2 34 1. A small business property tax relief fund is created in
2 35 the state treasury. The fund shall consist of moneys
3 1 appropriated to the department of revenue for deposit into the
3 2 fund pursuant to section 422.37, subsection 9.
3 3 2. Notwithstanding section 12C.7, subsection 2, interest
3 4 or earnings on moneys deposited in the small business property
3 5 tax relief fund shall be credited to the small business
3 6 property tax relief fund. Notwithstanding section 8.33,
3 7 moneys remaining in the small business property tax relief
3 8 fund at the end of a fiscal year shall not revert to the
3 9 general fund of the state.
3 10 Sec. 4. NEW SECTION. 426C.3 ELIGIBILITY.
3 11 1. A business meeting all of the following conditions
3 12 shall be eligible for a credit toward property taxes due in an
3 13 amount not to exceed the business's annual property tax
3 14 liability:
3 15 a. The business shall be physically located in the state
3 16 and have property used in the operation of the business that
3 17 is subject to property tax in the state.
3 18 b. The business shall employ twenty or fewer full=time
3 19 equivalent employees. For purposes of this paragraph "b",
3 20 "full=time equivalent employee" means a non=part=time position
3 21 for the number of hours or days per week considered to be
3 22 full=time work for the kind of service or work performed for
3 23 an employer. Typically, a full=time equivalent position
3 24 requires two thousand eighty hours of work in a calendar year,
3 25 including all paid holidays, vacations, sick time, and other
3 26 paid leave.
3 27 c. The business shall have a net operating profit that is
3 28 less than or equal to one million dollars for the tax year
3 29 ending in the calendar year preceding the year in which the
3 30 claim is filed.
3 31 2. The business shall annually file a claim for the
3 32 credit. The claim shall be filed not later than March 1
3 33 immediately preceding the fiscal year during which the
3 34 property taxes are due.
3 35 Sec. 5. NEW SECTION. 426C.4 COMPUTATION OF TAX LIABILITY
4 1 == CERTIFICATION TO THE DEPARTMENT.
4 2 On or before April 1 each year, the county auditor shall
4 3 compute the total amount of property taxes to be levied on, or
4 4 estimated to be levied on, all businesses eligible for a
4 5 credit pursuant to this chapter which are due and payable in
4 6 the ensuing fiscal year, and on or before April 1 the county
4 7 auditor shall certify the total amount to the department of
4 8 revenue.
4 9 Sec. 6. NEW SECTION. 426C.5 APPORTIONMENT OF FUND MONEYS
4 10 == ISSUANCE OF WARRANTS.
4 11 1. The moneys in the fund shall be apportioned each year
4 12 to provide property tax relief to eligible small businesses as
4 13 follows:
4 14 a. If the moneys in the fund equal or exceed the combined
4 15 property tax liability of all the eligible businesses, an
4 16 eligible business shall receive a credit in an amount equal to
4 17 the business's property tax liability.
4 18 b. If the moneys in the fund are insufficient to cover the
4 19 combined property tax liability of the eligible businesses,
4 20 the moneys in the fund shall be apportioned in a pro rata
4 21 amount to each eligible business. The department shall notify
4 22 the county auditors of the pro rata percentage on or before
4 23 June 15.
4 24 2. After receiving the certified amounts from the county
4 25 auditors pursuant to section 426C.4, the director of revenue
4 26 shall authorize the department of administrative services to
4 27 issue warrants on the fund payable to the county treasurers in
4 28 the amount certified by the county auditor of each county or
4 29 the pro rata amount, as applicable. The department of
4 30 administrative services shall mail the warrants to the county
4 31 auditors on July 15 of each year.
4 32 3. Upon receipt of the warrant from the director of
4 33 revenue, the county auditor shall determine the amount to be
4 34 credited to each eligible business and shall enter the amount
4 35 upon the tax lists as a credit against the tax levied on each
5 1 eligible business on which there has been made an allowance of
5 2 credit before delivering the tax lists to the county
5 3 treasurer.
5 4 4. The county treasurer shall show on each tax statement
5 5 the amount of tax credit for each eligible business.
5 6 Sec. 7. NEW SECTION. 426C.6 RULES.
5 7 The director of revenue shall prescribe forms and adopt
5 8 rules as necessary to carry out the purposes of this chapter.
5 9 Sec. 8. APPLICABILITY DATES.
5 10 1. The section of this Act amending section 422.37 applies
5 11 retroactively to January 1, 2009, for tax years beginning on
5 12 or after that date.
5 13 2. The sections of this Act enacting sections 426C.1
5 14 through 426C.6 apply to property taxes due and payable in
5 15 fiscal years beginning on or after July 1, 2010.
5 16 EXPLANATION
5 17 This bill makes changes to certain business taxes.
5 18 The bill requires that the net income of affiliated groups
5 19 of corporations engaged in a unitary business be computed on a
5 20 combined return basis for corporate tax purposes if the group
5 21 meets the requirements for filing a consolidated return for
5 22 federal tax purposes. The affiliated group would include
5 23 corporations with common ownership whereby one or more
5 24 corporations own 80 percent or more of another corporation.
5 25 The bill would require that one Iowa corporate income tax
5 26 return be filed that would include all unitary members of an
5 27 affiliated group. Any nonunitary member that is subject to
5 28 Iowa tax would file its own separate corporate return. Only
5 29 Iowa sales of those corporations doing business in Iowa would
5 30 be included in the numerator of the Iowa sales ratio. The
5 31 bill also provides that only those corporations doing business
5 32 in Iowa are jointly and severally liable for the tax of the
5 33 combined return.
5 34 The section of the bill requiring combined returns applies
5 35 retroactively to January 1, 2009, for tax years beginning on
6 1 or after that date.
6 2 The bill directs the department of revenue to compute the
6 3 amount of the difference each year between the moneys
6 4 collected from combined reporting and the moneys that would
6 5 have been collected in the absence of a combined reporting
6 6 requirement and that amount is appropriated for deposit in the
6 7 small business property tax relief fund created in the bill.
6 8 The moneys in the small business property tax relief fund are
6 9 to be distributed to eligible small businesses who file a
6 10 claim for credit against their property tax liability. A
6 11 business physically located in the state, employing 20 or
6 12 fewer full=time equivalent employees, and making $1 million or
6 13 less in profit is eligible to file a claim for credit against
6 14 its property tax liability.
6 15 The bill provides that on or before April 1 each year, the
6 16 county auditors must provide to the department of revenue a
6 17 report containing a list of the businesses eligible for a
6 18 credit and a certified amount of property tax due from each
6 19 business. The department determines whether there are
6 20 sufficient moneys in the fund to cover the combined tax
6 21 liability of all the eligible businesses and apportions the
6 22 moneys accordingly. If the moneys in the fund are sufficient,
6 23 each eligible business receives an amount equal to its tax
6 24 liability. If the moneys in the fund are not sufficient, each
6 25 eligible business receives a pro rata share of the moneys in
6 26 the fund.
6 27 The bill directs the director of revenue to authorize the
6 28 department of administrative services to issue warrants on the
6 29 fund payable to the county treasurers in the amount certified
6 30 as the amount of credits to which businesses in that county
6 31 are entitled. The county auditor determines the amount to be
6 32 credited to each eligible business and enters the amount upon
6 33 the tax lists as a credit against the tax levied on each
6 34 eligible business on which there has been made an allowance of
6 35 credit before delivering the tax lists to the county
7 1 treasurer. The county treasurer must show on the tax
7 2 statement the amount of tax credit for the eligible business.
7 3 The sections of the bill relating to property tax credits
7 4 for eligible small businesses apply to property taxes due and
7 5 payable in fiscal years beginning on or after July 1, 2010.
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