House File 2366 - Introduced HOUSE FILE 2366 BY LUKAN A BILL FOR An Act relating to state income taxes by authorizing taxpayers 1 to elect to take an additional first-year depreciation 2 allowance for purposes of the individual and corporate 3 income tax and franchise tax, and including effective date 4 and retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5331YH (1) 84 mm/sc

H.F. 2366 Section 1. Section 422.5, subsection 2, paragraph b, 1 subparagraph (1), Code Supplement 2011, is amended to read as 2 follows: 3 (1) Add items of tax preference included in federal 4 alternative minimum taxable income under section 57, except 5 subsections (a)(1), (a)(2), and (a)(5), of the Internal Revenue 6 Code, make the adjustments included in federal alternative 7 minimum taxable income under section 56, except subsections 8 (a)(4), (b)(1)(C)(iii), and (d), of the Internal Revenue Code, 9 and add losses as required by section 58 of the Internal 10 Revenue Code. To the extent that any preference or adjustment 11 is determined by an individual’s federal adjusted gross income, 12 the individual’s federal adjusted gross income is computed 13 in accordance with section 422.7, subsections 39, 39A, 39B, 14 39C, and 53 . In the case of an estate or trust, the items of 15 tax preference, adjustments, and losses shall be apportioned 16 between the estate or trust and the beneficiaries in accordance 17 with rules prescribed by the director. 18 Sec. 2. Section 422.7, subsection 39A, unnumbered paragraph 19 1, Code Supplement 2011, is amended to read as follows: 20 The In the case of qualified property placed in service 21 before January 1, 2012, the additional first-year depreciation 22 allowance authorized in section 168(k) of the Internal Revenue 23 Code, as enacted by Pub. L. No. 110-185, § 103, Pub. L. No. 24 111-5, § 1201, Pub. L. No. 111-240, § 2022, and Pub. L. No. 25 111-312, § 401, does not apply in computing net income for 26 state tax purposes. If the taxpayer has taken the additional 27 first-year depreciation allowance for purposes of computing 28 federal adjusted gross income, then the taxpayer shall make the 29 following adjustments to federal adjusted gross income when 30 computing net income for state tax purposes: 31 Sec. 3. Section 422.7, Code Supplement 2011, is amended by 32 adding the following new subsection: 33 NEW SUBSECTION . 39C. a. Notwithstanding any provision 34 of law to the contrary, a taxpayer may elect to apply the 35 -1- LSB 5331YH (1) 84 mm/sc 1/ 5

H.F. 2366 additional first-year depreciation allowance authorized in 1 section 168(k), excluding subparagraph (5), of the Internal 2 Revenue Code, as amended by Pub. L. No. 111-312, § 401, 3 excluding paragraph (b), for qualified property placed 4 in service on or after January 1, 2012. The additional 5 depreciation allowance shall be allowed for qualified property 6 placed in service any time on or after January 1, 2012, and 7 that otherwise meets the requirements of section 168(k) of 8 the Internal Revenue Code, regardless of any acquisition 9 or placed-in-service date restriction to the contrary in 10 that section. If the taxpayer elects to take the additional 11 first-year depreciation allowance authorized in section 12 168(k) of the Internal Revenue Code for state tax purposes, 13 the deduction may be taken on amended state tax returns, 14 if necessary. If the taxpayer does not elect to take the 15 additional first-year depreciation allowance authorized in 16 section 168(k) of the Internal Revenue Code for state tax 17 purposes, the following adjustment shall be made: 18 (1) Add the total amount of depreciation taken under section 19 168(k) of the Internal Revenue Code for the tax year. 20 (2) Subtract the amount of depreciation allowable under the 21 modified accelerated cost recovery system described in section 22 168 of the Internal Revenue Code and calculated without regard 23 to section 168(k). 24 (3) Any other adjustments to gains or losses necessary 25 to reflect the adjustments made in subparagraphs (1) or (2). 26 The director shall adopt rules for the administration of this 27 paragraph. 28 b. For purposes of this subsection, “Internal Revenue Code” 29 means the Internal Revenue Code in effect on January 1, 2012. 30 Sec. 4. Section 422.9, subsection 2, paragraph h, Code 31 Supplement 2011, is amended to read as follows: 32 h. For purposes of calculating the deductions in this 33 subsection that are authorized under the Internal Revenue Code, 34 and to the extent that any of such deductions is determined by 35 -2- LSB 5331YH (1) 84 mm/sc 2/ 5

H.F. 2366 an individual’s federal adjusted gross income, the individual’s 1 federal adjusted gross income is computed in accordance with 2 section 422.7, subsections 39, 39A, 39B, 39C, and 53 . 3 Sec. 5. Section 422.35, subsection 19A, unnumbered 4 paragraph 1, Code Supplement 2011, is amended to read as 5 follows: 6 The In the case of qualified property placed in service 7 before January 1, 2012, the additional first-year depreciation 8 allowance authorized in section 168(k) of the Internal Revenue 9 Code, as enacted by Pub. L. No. 110-185, § 103, Pub. L. No. 10 111-5, § 1201, Pub. L. No. 111-240, § 2022, and Pub. L. No. 11 111-312, § 401, does not apply in computing net income for 12 state tax purposes. If the taxpayer has taken the additional 13 first-year depreciation allowance for purposes of computing 14 federal taxable income, then the taxpayer shall make the 15 following adjustments to federal taxable income when computing 16 net income for state tax purposes: 17 Sec. 6. Section 422.35, Code Supplement 2011, is amended by 18 adding the following new subsection: 19 NEW SUBSECTION . 19C. a. Notwithstanding any provision 20 of law to the contrary, a taxpayer may elect to apply the 21 additional first-year depreciation allowance authorized in 22 section 168(k), excluding subparagraph (5), of the Internal 23 Revenue Code, as amended by Pub. L. No. 111-312, § 401, 24 excluding paragraph (b), for qualified property placed 25 in service on or after January 1, 2012. The additional 26 depreciation allowance shall be allowed for qualified property 27 placed in service any time on or after January 1, 2012, and 28 that otherwise meets the requirements of section 168(k) of 29 the Internal Revenue Code, regardless of any acquisition 30 or placed-in-service date restriction to the contrary in 31 that section. If the taxpayer elects to take the additional 32 first-year depreciation allowance authorized in section 33 168(k) of the Internal Revenue Code for state tax purposes, 34 the deduction may be taken on amended state tax returns, 35 -3- LSB 5331YH (1) 84 mm/sc 3/ 5

H.F. 2366 if necessary. If the taxpayer does not elect to take the 1 additional first-year depreciation allowance authorized in 2 section 168(k) of the Internal Revenue Code for state tax 3 purposes, the following adjustment shall be made: 4 (1) Add the total amount of depreciation taken under section 5 168(k) of the Internal Revenue Code for the tax year. 6 (2) Subtract the amount of depreciation allowable under the 7 modified accelerated cost recovery system described in section 8 168 of the Internal Revenue Code and calculated without regard 9 to section 168(k). 10 (3) Any other adjustments to gains or losses necessary 11 to reflect the adjustments made in subparagraphs (1) or (2). 12 The director shall adopt rules for the administration of this 13 paragraph. 14 b. For purposes of this subsection, “Internal Revenue Code” 15 means the Internal Revenue Code in effect on January 1, 2012. 16 Sec. 7. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 17 immediate importance, takes effect upon enactment. 18 Sec. 8. RETROACTIVE APPLICABILITY. This Act applies 19 retroactively to January 1, 2012, for tax years beginning on 20 or after that date. 21 EXPLANATION 22 This bill allows a taxpayer to elect to take an additional 23 first-year depreciation allowance in computing the individual, 24 corporate, and franchise taxes and specifies the adjustments 25 to be made in determining net income if such election is not 26 made. The additional first-year depreciation allowance is 27 permanent and available for any qualified property placed in 28 service by the taxpayer on or after January 1, 2012, and that 29 otherwise meets the requirements of section 168(k) of the 30 Internal Revenue Code as it is presently enacted, regardless of 31 any acquisition or placed-in-service date restriction to the 32 contrary in that section. The additional allowance is equal to 33 50 percent of the adjusted basis of the qualified property. 34 The bill also makes conforming amendments to Code sections 35 -4- LSB 5331YH (1) 84 mm/sc 4/ 5

H.F. 2366 422.5 and 422.9 to include the additional first-year 1 depreciation allowance in the computation of federal adjusted 2 gross income for purposes of calculating alternative minimum 3 taxable income and certain deductions for the state individual 4 income tax. 5 The bill takes effect upon enactment and applies 6 retroactively to January 1, 2012, for tax years beginning on 7 or after that date. 8 -5- LSB 5331YH (1) 84 mm/sc 5/ 5