House File 19 - Introduced HOUSE FILE 19 BY PETTENGILL and COWNIE A BILL FOR An Act providing tax credits against the income, franchise, 1 premium, and moneys and credits taxes for employers paying 2 part of their employees’ student loans and including a 3 retroactive applicability date provision. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1268YH (5) 84 tw/rj

H.F. 19 Section 1. NEW SECTION . 261.130 Definitions. 1 As used in this division, unless the context otherwise 2 requires: 3 1. “Accredited higher education institution” means an 4 institution of higher education as defined in section 261.92. 5 2. “Commission” means the college student aid commission 6 created in section 261.1. 7 3. “Qualified undergraduate loan” means a federally 8 guaranteed student loan authorized under the federal Higher 9 Education Act of 1965, 20 U.S.C. § 1071 et seq., or a loan 10 originated by banks, savings and loans, or credit unions 11 located in Iowa for purposes of attending an accredited higher 12 education institution. 13 Sec. 2. NEW SECTION . 261.131 Student loan repayment tax 14 credit program. 15 1. The commission shall establish a student loan repayment 16 tax credit program for employers who repay qualified 17 undergraduate loans of students employed in this state by 18 the employer. Under the program eligible employers shall 19 be entitled to a tax credit to be allowed against the taxes 20 imposed under chapter 422, division II, III, or V, or chapter 21 432, or against the moneys and credits tax imposed in section 22 533.329. 23 2. a. An eligible employer shall receive a credit equal 24 to thirty percent of the amount of the qualified undergraduate 25 loan repaid by the employer for an employee in the tax year. 26 However, in computing the amount of the tax credit only the 27 following repayment amount shall be used in the computation: 28 (1) For the first tax year, not more than fifteen percent of 29 the maximum qualified undergraduate loan. 30 (2) For the second tax year, not more than fifteen percent 31 of the maximum qualified undergraduate loan. 32 (3) For the third tax year, not more than fifteen percent of 33 the maximum qualified undergraduate loan. 34 (4) For the fourth tax year, not more than fifteen percent 35 -1- LSB 1268YH (5) 84 tw/rj 1/ 4

H.F. 19 of the maximum qualified undergraduate loan. 1 (5) For the fifth tax year, not more than forty percent of 2 the maximum qualified undergraduate loan. 3 b. For purposes of the computation of the tax credit 4 pursuant to this subsection, the maximum qualified 5 undergraduate loan equals twenty-five thousand dollars. 6 3. To qualify as an eligible employer for purposes of the 7 tax credit under subsection 2, an employer shall meet all of 8 the following: 9 a. Pay the employee for whom the loan repayment is to be 10 made an annualized salary or wage of at least twenty-five 11 thousand dollars. 12 b. Employ the individual primarily in this state. 13 c. Begin repayment of the qualified undergraduate loan 14 within six months of the initial hiring date of the employee. 15 For purposes of this paragraph, an employee who is already 16 employed by the employer as of July 1, 2011, shall be 17 considered to be initially hired as of that date. 18 4. If the employer is a partnership, S corporation, limited 19 liability company, estate, or trust electing to have the income 20 taxed directly to the individual, an individual may claim the 21 tax credit allowed. The amount claimed by the individual shall 22 be based upon the pro rata share of the individual’s earnings 23 of the partnership, S corporation, limited liability company, 24 estate, or trust. 25 5. Any credit in excess of the tax liability for the tax 26 year shall be refunded with interest computed under section 27 422.25. In lieu of claiming a refund, a taxpayer may elect 28 to have the overpayment shown on its final, completed return 29 credited to the tax liability for the following tax year. 30 Sec. 3. NEW SECTION . 261.132 Tax credit certificate 31 procedure. 32 1. An employer seeking the student loan repayment tax 33 credit under this division shall apply to the commission on the 34 form prescribed by the commission, provide verification that 35 -2- LSB 1268YH (5) 84 tw/rj 2/ 4

H.F. 19 the employer is eligible as required under section 261.131, 1 subsection 3, and any other information required by the 2 commission or the department of revenue. 3 2. After verifying the eligibility for the tax credit, the 4 commission, in consultation with the department of revenue, 5 shall issue a student loan repayment tax credit certificate 6 to be attached to the person’s tax return. The tax credit 7 certificate shall contain the taxpayer’s name, address, tax 8 identification number, the dates of loan repayment, the amount 9 of credit, and other information required by the department of 10 revenue. 11 Sec. 4. NEW SECTION . 422.11Y Student loan repayment tax 12 credit. 13 The taxes imposed under this division, less the credits 14 allowed under section 422.12, shall be reduced by a student 15 loan repayment tax credit authorized pursuant to sections 16 261.130 through 261.132. 17 Sec. 5. Section 422.33, Code 2011, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 29. The taxes imposed under this division 20 shall be reduced by a student loan repayment tax credit 21 authorized pursuant to sections 261.130 through 261.132. 22 Sec. 6. Section 422.60, Code 2011, is amended by adding the 23 following new subsection: 24 NEW SUBSECTION . 13. The taxes imposed under this division 25 shall be reduced by a student loan repayment tax credit 26 authorized pursuant to sections 261.130 through 261.132. 27 Sec. 7. NEW SECTION . 432.12M Student loan repayment tax 28 credit. 29 The taxes imposed under this chapter shall be reduced by 30 a student loan repayment tax credit authorized pursuant to 31 sections 261.130 through 261.132. 32 Sec. 8. Section 533.329, subsection 2, Code 2011, is amended 33 by adding the following new paragraph: 34 NEW PARAGRAPH . l. The moneys and credits tax imposed under 35 -3- LSB 1268YH (5) 84 tw/rj 3/ 4

H.F. 19 this section shall be reduced by a student loan repayment tax 1 credit authorized pursuant to sections 261.130 through 261.132. 2 Sec. 9. RETROACTIVE APPLICABILITY. This Act applies 3 retroactively to January 1, 2011, for tax years beginning on 4 or after that date. 5 EXPLANATION 6 This bill provides a tax credit for an employer who repays 7 any portion of an employee’s undergraduate student loan. The 8 tax credits are allowable under the individual and corporate 9 income taxes, franchise tax, insurance premiums tax, and moneys 10 and credits tax of credit unions. 11 To be eligible for the tax credit the employer must pay 12 an annualized salary or wage of at least $25,000, employ the 13 person in this state, and begin repayment of the student loan 14 within six months of the hiring date. However, the bill 15 provides that the hiring date for an employee already employed 16 as of July 1, 2011, shall be considered July 1, 2011. 17 The amount of the tax credit equals 30 percent of the amount 18 of the loan repaid not to exceed a certain percentage of the 19 first $25,000 of the student loan. This percentage may be 20 claimed over a five-year period, 15 percent for each of the 21 first four tax years and 40 percent for the fifth tax year. 22 The bill applies retroactively to January 1, 2011, for tax 23 years beginning on or after that date. 24 -4- LSB 1268YH (5) 84 tw/rj 4/ 4