Senate File 2374 - Introduced SENATE FILE 2374 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 3234) A BILL FOR An Act relating to the policy administration of the tax 1 and related laws by the department of revenue, including 2 administration of income taxes, sales and use taxes, motor 3 fuel taxes, property taxes, and inheritance taxes, providing 4 for taxpayer information exchanges with the department of 5 workforce development, making penalties applicable, and 6 including effective date and applicability provisions. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 6247SV (3) 83 tw/sc

S.F. 2374 DIVISION I 1 WITHHOLDING TAX CREDITS 2 Section 1. WITHHOLDING CREDIT PROGRAM REPORT AND PLAN. 3 1. It is the intent of the general assembly that the 4 withholding credit provisions of the industrial new jobs 5 training program in chapter 260E, the accelerated career 6 education program in chapter 260G, and the targeted jobs 7 withholding credit program in section 403.19A be implemented 8 and administered in an accurate and transparent way. 9 2. The department of revenue shall, in conjunction with 10 the community colleges, the pilot project cities, and the 11 department of economic development, engage in a comprehensive 12 review and evaluation of the programs described in subsection 13 1. 14 3. After conducting the review and evaluation under 15 subsection 2, the department of revenue, in conjunction with 16 the community colleges, the pilot project cities, and the 17 department of economic development, shall develop a plan under 18 which the withholding credits provided for in the programs 19 described in subsection 1 are remitted first to the department 20 of revenue and then transferred to the community colleges 21 and pilot project cities only after the proper amount of 22 such credits has been verified by the department of revenue. 23 The plan shall provide for implementation of changes to the 24 programs as of July 1, 2011. 25 4. The department of revenue shall submit a report 26 containing the results of the program review conducted under 27 subsection 2 and the plan developed under subsection 3 to the 28 governor and the general assembly by December 15, 2010. 29 DIVISION II 30 PROPERTY TAXES 31 Sec. 2. Section 427B.4, Code 2009, is amended to read as 32 follows: 33 427B.4 Application for exemption by property owner. 34 1. a. An application shall be filed for each project 35 -1- LSB 6247SV (3) 83 tw/sc 1/ 11

S.F. 2374 resulting in actual value added for which an exemption is 1 claimed. The first application for exemption shall be filed 2 by the owner of the property with the local assessor governing 3 body of the city or county in which the property is located by 4 February 1 of the assessment year in which the value added is 5 first assessed for taxation for which the exemption is first 6 claimed, but not later than the year in which all improvements 7 included in the project are first assessed for taxation, or the 8 following two assessment years . 9 b. Applications for exemption shall be made on forms 10 prescribed by the director of revenue and shall contain 11 information pertaining to the nature of the improvement, its 12 cost, the estimated or actual date of completion, whether 13 the exemption schedule described in section 427B.3 or an 14 alternate schedule adopted pursuant to section 427B.1 will be 15 elected, and any other information deemed necessary by the 16 director of revenue. 17 2. a. A person may submit a proposal to the city council 18 of the city or the board of supervisors of a county to receive 19 prior approval for eligibility for a tax exemption on new 20 construction. The city council or the board of supervisors, by 21 ordinance, may give its prior approval of a tax exemption for 22 new construction if the new construction is in conformance with 23 the zoning plans for the city or county. The prior approval 24 shall also be subject to the hearing requirements of section 25 427B.1. 26 b. Prior approval received under this subsection does not 27 entitle the owner to exemption from taxation until the new 28 construction has been completed and found to be qualified real 29 estate. However, if the tax exemption for new construction is 30 not approved, the person may submit an amended proposal to the 31 city council or board of supervisors to approve or reject. 32 DIVISION III 33 IDENTIFICATION OF WORKER MISCLASSIFICATION 34 Sec. 3. Section 421.17, Code 2009, is amended by adding the 35 -2- LSB 6247SV (3) 83 tw/sc 2/ 11

S.F. 2374 following new subsection: 1 NEW SUBSECTION . 31. If the director has reason to believe, 2 as a result of an investigation or audit, that a taxpayer may 3 have misclassified workers, then to assist the department of 4 workforce development, the director is authorized to provide 5 to the department of workforce development the following 6 confidential information with respect to such a taxpayer: 7 a. Withholding and payroll tax information. 8 b. The taxpayer’s identity, including taxpayer 9 identification number and date of birth. 10 c. The results or most recent status of the audit or 11 investigation. 12 Sec. 4. Section 422.20, subsection 3, paragraph a, Code 13 2009, is amended to read as follows: 14 a. Unless otherwise expressly permitted by section 8A.504, 15 section 96.11, subsection 6, section 421.17, subsections 22, 16 23, and 26, and 31, sections 252B.9, 321.120, 421.19, 421.28, 17 422.72, and 452A.63, and this section, a tax return, return 18 information, or investigative or audit information shall not 19 be divulged to any person or entity, other than the taxpayer, 20 the department, or internal revenue service for use in a matter 21 unrelated to tax administration. 22 Sec. 5. Section 422.72, subsection 3, paragraph a, Code 23 2009, is amended to read as follows: 24 a. Unless otherwise expressly permitted by section 8A.504, 25 section 96.11, subsection 6, section 421.17, subsections 22, 26 23, and 26, and 31, sections 252B.9, 321.120, 421.19, 421.28, 27 422.20, and 452A.63, and this section, a tax return, return 28 information, or investigative or audit information shall not 29 be divulged to any person or entity, other than the taxpayer, 30 the department, or internal revenue service for use in a matter 31 unrelated to tax administration. 32 Sec. 6. EFFECTIVE UPON ENACTMENT. This division of this 33 Act, being deemed of immediate importance, takes effect upon 34 enactment. 35 -3- LSB 6247SV (3) 83 tw/sc 3/ 11

S.F. 2374 DIVISION IV 1 FALSE CLAIMS FOR CREDIT 2 Sec. 7. Section 421.27, subsection 6, Code 2009, is amended 3 to read as follows: 4 6. Improper receipt of refund or credit. A person who makes 5 an erroneous application for refund or credit shall be liable 6 for any overpayment received or tax liability reduced plus 7 interest at the rate in effect under section 421.7. In 8 addition, a person who willfully makes a false or frivolous 9 application for refund or credit with intent to evade tax 10 or with intent to receive a refund or credit to which the 11 person is not entitled is guilty of a fraudulent practice 12 and is liable for a penalty equal to seventy-five percent of 13 the refund or credit being claimed. Repayments Payments , 14 penalties, and interest due under this subsection may be 15 collected and enforced in the same manner as the tax imposed. 16 DIVISION V 17 REFUND INTEREST ACCRUAL 18 Sec. 8. Section 421.60, subsection 2, paragraph e, Code 19 2009, is amended to read as follows: 20 e. Unless otherwise provided by law, all Iowa taxes which 21 are administered by the department and which result in a refund 22 shall accrue interest at the rate in effect under section 421.7 23 from the first day of the second third calendar month following 24 the date of payment or the date the return was due to be filed 25 or was filed, whichever is the latest. 26 Sec. 9. Section 422.16, subsection 9, Code 2009, is amended 27 to read as follows: 28 9. a. The amount of any overpayment of the individual 29 income tax liability of the employee taxpayer, nonresident, 30 or other person which may result from the withholding and 31 payment of withheld tax by the employer or withholding agent 32 to the department under subsections 1 and 12, as compared to 33 the individual income tax liability of the employee taxpayer, 34 nonresident, or other person properly and correctly determined 35 -4- LSB 6247SV (3) 83 tw/sc 4/ 11

S.F. 2374 under the provisions of section 422.4, to and including section 1 422.25, may be credited against any income tax or installment 2 thereof then due the state of Iowa and any balance of one 3 dollar or more shall be refunded to the employee taxpayer, 4 nonresident or other person with interest at the rate in 5 effect under section 421.7 for each month or fraction of a 6 month, the interest to begin to accrue on the first day of the 7 second third calendar month following the date the return was 8 due to be filed or was filed, whichever is the later date. 9 b. Amounts of less than one dollar shall be refunded to 10 the taxpayer, nonresident, or other person only upon written 11 application, in accordance with section 422.73, and only if 12 the application is filed within twelve months after the due 13 date of the return. Refunds in the amount of one dollar 14 or more provided for by this subsection shall be paid by 15 the treasurer of state by warrants drawn by the director of 16 the department of administrative services, or an authorized 17 employee of the department, and the taxpayer’s return of 18 income shall constitute a claim for refund for this purpose, 19 except in respect to amounts of less than one dollar. There 20 is appropriated, out of any funds in the state treasury not 21 otherwise appropriated, a sum sufficient to carry out the 22 provisions of this subsection. 23 Sec. 10. Section 422.25, subsection 3, Code 2009, is amended 24 to read as follows: 25 3. If the amount of the tax as determined by the department 26 is less than the amount paid, the excess shall be refunded with 27 interest, the interest to begin to accrue on the first day of 28 the second third calendar month following the date of payment 29 or the date the return was due to be filed, or the extended due 30 date by which the return was due to be filed if ninety percent 31 of the tax was paid by the original due date, or was filed, 32 whichever is the latest, at the rate in effect under section 33 421.7 counting each fraction of a month as an entire month 34 under the rules prescribed by the director. If an overpayment 35 -5- LSB 6247SV (3) 83 tw/sc 5/ 11

S.F. 2374 of tax results from a net operating loss or net capital loss 1 which is carried back to a prior year, the overpayment, for 2 purposes of computing interest on refunds, shall be considered 3 as having been made on the date a claim for refund or amended 4 return carrying back the net operating loss or net capital 5 loss is filed with the department or on the first day of the 6 second third calendar month following the date of the actual 7 payment of the tax, whichever is later. However, when the net 8 operating loss or net capital loss carryback to a prior year 9 eliminates or reduces an underpayment of tax due for an earlier 10 year, the full amount of the underpayment of tax shall bear 11 interest at the rate in effect under section 421.7 for each 12 month counting each fraction of a month as an entire month from 13 the due date of the tax for the earlier year to the last day of 14 the taxable year in which the net operating loss or net capital 15 loss occurred. 16 Sec. 11. Section 422.28, Code 2009, is amended to read as 17 follows: 18 422.28 Revision of tax. 19 A taxpayer may appeal to the director for revision of 20 the tax, interest, or penalties assessed at any time within 21 sixty days from the date of the notice of the assessment of 22 tax, additional tax, interest, or penalties. The director 23 shall grant a hearing and if, upon the hearing, the director 24 determines that the tax, interest, or penalties are excessive 25 or incorrect, the director shall revise them according to 26 the law and the facts and adjust the computation of the tax, 27 interest, or penalties accordingly. The director shall notify 28 the taxpayer by mail of the result of the hearing and shall 29 refund to the taxpayer the amount, if any, paid in excess 30 of the tax, interest, or penalties found by the director to 31 be due, with interest after sixty days accruing from the 32 date first day of the third calendar month following the 33 date of payment by the taxpayer at the rate in effect under 34 section 421.7 for each month or a fraction of a month. 35 -6- LSB 6247SV (3) 83 tw/sc 6/ 11

S.F. 2374 Sec. 12. Section 422.91, Code 2009, is amended to read as 1 follows: 2 422.91 Credit for estimated tax —— accrual of interest . 3 1. a. Any amount of estimated tax paid is a credit against 4 the amount of tax due on a final, completed return, and any 5 overpayment of five dollars or more shall be refunded to the 6 taxpayer with interest, the interest to begin to accrue on the 7 first day of the second third calendar month following the date 8 of payment or the date the return was due to be filed or was 9 filed, whichever is the latest, at the rate established under 10 section 421.7, and the return constitutes a claim for refund 11 for this purpose. 12 b. Amounts of less than five dollars shall be refunded to 13 the taxpayer only upon written application in accordance with 14 section 422.73, and only if the application is filed within 15 twelve months after the due date for the return. 16 2. In lieu of claiming a refund, the taxpayer may elect 17 to have the overpayment shown on its final, completed return 18 for the taxable year credited to the tax liability for the 19 following taxable year. 20 Sec. 13. Section 423.3, subsection 47A, paragraph c, Code 21 Supplement 2009, is amended to read as follows: 22 c. For sales or rentals occurring on or after July 1, 2006, 23 through June 30, 2012, a refund of the tax paid as provided in 24 paragraph “b” , subparagraph (1), (2), (3), (4), (5), or (6), 25 must be applied for, not later than six months after the month 26 in which the sale or rental occurred, in the manner and on the 27 forms provided by the department. Refunds shall only be of the 28 state tax collected. Refunds authorized shall accrue interest 29 at the rate in effect under section 421.7 from the first day of 30 the second third calendar month following the date the refund 31 claim is received by the department. 32 Sec. 14. Section 423.4, subsection 1, paragraph c, Code 33 Supplement 2009, is amended to read as follows: 34 c. Refunds authorized under this subsection shall accrue 35 -7- LSB 6247SV (3) 83 tw/sc 7/ 11

S.F. 2374 interest at the rate in effect under section 421.7 from the 1 first day of the second third calendar month following the date 2 the refund claim is received by the department. 3 Sec. 15. Section 423.4, subsection 6, paragraph c, Code 4 Supplement 2009, is amended to read as follows: 5 c. (1) The owner of the collaborative educational facility 6 shall, not more than one year after the final settlement has 7 been made, make application to the department for any refund of 8 the amount of the sales or use tax which shall have been paid 9 upon any goods, wares, or merchandise, or services furnished, 10 the application to be made in the manner and upon forms 11 to be provided by the department, and the department shall 12 forthwith promptly audit the claim and, if approved, issue a 13 warrant to the owner of the collaborative educational facility 14 in the amount of the sales or use tax which has been paid to the 15 state of Iowa under the contract. 16 (2) Refunds authorized under this subsection shall accrue 17 interest at the rate in effect under section 421.7 from the 18 first day of the second third calendar month following the date 19 the refund claim is received by the department. 20 Sec. 16. Section 450.94, subsection 3, Code 2009, is amended 21 to read as follows: 22 3. If the amount paid is greater than the correct tax, 23 penalty, and interest due, the department shall refund the 24 excess with interest. Interest shall be computed at the rate 25 in effect under section 421.7, under the rules prescribed by 26 the director counting each fraction of a month as an entire 27 month and the interest shall begin to accrue on the first 28 day of the second third calendar month following the date 29 of payment or on the date the return was due to be filed or 30 was filed, whichever is the latest. However, the director 31 shall not allow a claim for refund or credit that has not been 32 filed with the department within three years after the tax 33 payment upon which a refund or credit is claimed became due, 34 or one year after the tax payment was made, whichever time is 35 -8- LSB 6247SV (3) 83 tw/sc 8/ 11

S.F. 2374 later. A determination by the department of the amount of 1 tax, penalty, and interest due, or the amount of refund for 2 excess tax paid, is final unless the person aggrieved by the 3 determination appeals to the director for a revision of the 4 determination within sixty days from the date of the notice 5 of determination of tax, penalty, and interest due or refund 6 owing or unless the taxpayer contests the determination by 7 paying the tax, interest, and penalty and timely filing a claim 8 for refund. The director shall grant a hearing, and upon the 9 hearing the director shall determine the correct tax, penalty, 10 and interest or refund due, and notify the appellant of the 11 decision by mail. The decision of the director is final unless 12 the appellant seeks judicial review of the director’s decision 13 under section 450.59 within sixty days after the date of the 14 notice of the director’s decision. 15 Sec. 17. Section 452A.65, Code 2009, is amended to read as 16 follows: 17 452A.65 Failure to promptly pay fuel taxes —— refunds —— 18 interest and penalties —— successor liability. 19 1. In addition to the tax or additional tax, the taxpayer 20 shall pay a penalty as provided in section 421.27. The 21 taxpayer shall also pay interest on the tax or additional 22 tax at the rate in effect under section 421.7 counting each 23 fraction of a month as an entire month, computed from the 24 date the return was required to be filed. If the amount of 25 the tax as determined by the appropriate state agency is 26 less than the amount paid, the excess shall be refunded with 27 interest, the interest to begin to accrue on the first day of 28 the second third calendar month following the date of payment 29 or the date the return was due to be filed or was filed, 30 whichever is the latest, at the rate in effect under section 31 421.7 counting each fraction of a month as an entire month 32 under the rules prescribed by the appropriate state agency. 33 Claims for refund filed under sections 452A.17 and 452A.21 34 shall accrue interest beginning with the first day of the 35 -9- LSB 6247SV (3) 83 tw/sc 9/ 11

S.F. 2374 second third calendar month following the date the refund claim 1 is received by the department. 2 2. A report required of licensees or persons operating under 3 division III, upon which no tax is due, is subject to a penalty 4 of ten dollars if the report is not timely filed with the state 5 department of transportation. 6 3. If a licensee or other person sells the licensee’s 7 or other person’s business or stock of goods or quits the 8 business, the licensee or other person shall prepare a final 9 return and pay all tax due within the time required by law. 10 The immediate successor to the licensee or other person, if 11 any, shall withhold sufficient of the purchase price, in money 12 or money’s worth, to pay the amount of any delinquent tax, 13 interest or penalty due and unpaid. If the immediate successor 14 of the business or stock of goods intentionally fails to 15 withhold any amount due from the purchase price as provided in 16 this paragraph, the immediate successor is personally liable 17 for the payment of the taxes, interest and penalty accrued 18 and unpaid on account of the operation of the business by the 19 immediate former licensee or other person, except when the 20 purchase is made in good faith as provided in section 421.28. 21 However, a person foreclosing on a valid security interest or 22 retaking possession of premises under a valid lease is not 23 an “immediate successor” for purposes of this paragraph. The 24 department may waive the liability of the immediate successor 25 under this paragraph if the immediate successor exercised good 26 faith in establishing the amount of the previous liability. 27 Sec. 18. EFFECTIVE UPON ENACTMENT AND APPLICABILITY. This 28 division of this Act, being deemed of immediate importance, 29 takes effect upon enactment and applies to tax returns due on 30 or after April 30, 2010. 31 EXPLANATION 32 This bill relates to the policy administration of the tax and 33 related laws by the department of revenue. 34 Division I of the bill directs the department of revenue, 35 -10- LSB 6247SV (3) 83 tw/sc 10/ 11

S.F. 2374 in conjunction with the community colleges, the pilot project 1 cities, and the department of economic development, to engage 2 in a review of certain withholding credit programs. After 3 conducting the review, the department is required to develop 4 a plan under which the withholding credits are remitted first 5 to the department before being transferred to the community 6 colleges or the pilot project cities under the various 7 withholding credit programs. The department must submit a 8 report containing the results of the review and the plan to the 9 general assembly and the governor by December 15, 2010. 10 Division II amends Code section 427B.4 to extend by two years 11 the period for claiming the industrial real estate or cattle 12 facilities property tax exemptions. Currently, a taxpayer 13 cannot claim one of these exemptions unless it is claimed in 14 the first year the property is eligible for the exemption. 15 Division III allows the department to share certain taxpayer 16 information with the department of workforce development for 17 purposes of assisting in the identification of misclassified 18 workers. The division is effective upon enactment. 19 Division IV relates to penalties for the filing of false or 20 frivolous claims for tax credit. Code section 421.27 currently 21 provides a penalty for the filing of false or frivolous refund 22 claims. Division IV extends this penalty to false or frivolous 23 claims for credits as well. 24 Division V relates to the accrual of interest on tax refunds. 25 Currently, there are many references in the Code to the date on 26 which interest begins to accrue on tax refunds. That date is 27 typically the first day of the second calendar month following 28 the date the return was due to be filed. Division V amends all 29 such Code sections to specify that interest begins to accrue on 30 the first day of the third calendar month following the date 31 the return was due to be filed. The division is effective upon 32 enactment and applies to returns due on or after April 30, 33 2010. 34 -11- LSB 6247SV (3) 83 tw/sc 11/ 11