Senate Study Bill 3047 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM) A BILL FOR An Act relating to the amount of net income for which state 1 individual income tax is not imposed and for which a return 2 is not required to be filed and including retroactive 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5362XC (5) 84 mm/sc

S.F. _____ Section 1. Section 422.5, subsection 3, Code Supplement 1 2011, is amended by striking the subsection and inserting in 2 lieu thereof the following: 3 3. a. The tax shall not be imposed on a resident or 4 nonresident whose net income, as defined in section 422.7, does 5 not exceed the following amounts in the case of married persons 6 filing jointly or filing separately on a combined return, heads 7 of household, and surviving spouses: 8 (1) For tax years beginning on or after January 1, 2012, 9 and before December 31, 2012, seventeen thousand two hundred 10 dollars. 11 (2) For tax years beginning on or after January 1, 2013, and 12 before December 31, 2013, twenty thousand nine hundred dollars. 13 (3) For tax years beginning on or after January 1, 2014, 14 and before December 31, 2014, twenty-four thousand six hundred 15 dollars. 16 (4) For tax years beginning on or after January 1, 2015, and 17 before December 31, 2015, twenty-eight thousand three hundred 18 dollars. 19 (5) For tax years beginning on or after January 1, 2016, 20 thirty-two thousand dollars. 21 b. The tax shall not be imposed on a resident or nonresident 22 whose net income, as defined in section 422.7, does not exceed 23 the following amounts in the case of all other persons for 24 which paragraph “a” does not apply: 25 (1) For tax years beginning on or after January 1, 2012, and 26 before December 31, 2012, twelve thousand dollars. 27 (2) For tax years beginning on or after January 1, 2013, and 28 before December 31, 2013, fifteen thousand dollars. 29 (3) For tax years beginning on or after January 1, 2014, and 30 before December 31, 2014, eighteen thousand dollars. 31 (4) For tax years beginning on or after January 1, 2015, and 32 before December 31, 2015, twenty-one thousand dollars. 33 (5) For tax years beginning on or after January 1, 2016, 34 twenty-four thousand dollars. 35 -1- LSB 5362XC (5) 84 mm/sc 1/ 4

S.F. _____ c. In the event the payment of tax under this division would 1 reduce the net income to less than the applicable amount in 2 paragraph “a” or “b” , then the tax shall be reduced to that 3 amount which would result in allowing the taxpayer to retain 4 that applicable amount of net income. This paragraph does not 5 apply to estates or trusts. 6 d. For the purpose of this subsection, the entire net 7 income, including any part of the net income not allocated 8 to Iowa, shall be taken into account. For purposes of this 9 subsection, net income includes all amounts of pensions or 10 other retirement income received from any source which is not 11 taxable under this division as a result of the government 12 pension exclusions in section 422.7, or any other state law. 13 e. If the combined net income of a husband and wife exceeds 14 the applicable amount in paragraph “a” , neither of them shall 15 receive the benefit of this subsection, and it is immaterial 16 whether they file a joint return or separate returns. However, 17 if a husband and wife file separate returns and have a combined 18 net income which does not exceed the applicable amount in 19 paragraph “a” , neither spouse shall receive the benefit of this 20 subsection, if one spouse has a net operating loss and elects 21 to carry back or carry forward the loss as provided in section 22 422.9, subsection 3. A person who is claimed as a dependent by 23 another person as defined in section 422.12 shall not receive 24 the benefit of this subsection if the person claiming the 25 dependent has net income exceeding the applicable amount in 26 paragraph “a” or “b” , or the person claiming the dependent and 27 the person’s spouse have combined net income exceeding the 28 applicable amount in paragraph “a” or “b” . 29 f. In lieu of the computation in subsection 1 or 2, or 30 paragraph “a” of this subsection, if the married persons’, 31 filing jointly or filing separately on a combined return, head 32 of household’s, or surviving spouse’s net income exceeds the 33 applicable amount in paragraph “a” , the regular tax imposed 34 under this division shall be the lesser of the maximum state 35 -2- LSB 5362XC (5) 84 mm/sc 2/ 4

S.F. _____ individual income tax rate times the portion of the net income 1 in excess of the applicable amount in paragraph “a” or the 2 regular tax liability computed without regard to this sentence. 3 Taxpayers electing to file separately shall compute the 4 alternate tax described in this paragraph using the total net 5 income of the husband and wife. The alternate tax described 6 in this paragraph does not apply if one spouse elects to carry 7 back or carry forward the loss as provided in section 422.9, 8 subsection 3. 9 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 10 retroactively to January 1, 2012, for tax years beginning on 11 or after that date. 12 EXPLANATION 13 This bill changes the net income amounts for which state 14 individual income tax is not imposed and for which a return is 15 not required to be filed. 16 Under current law, the state individual income tax is 17 not imposed upon married taxpayers filing jointly or filing 18 separately on a combined return, heads of household, and 19 surviving spouses whose net income is $13,500 or less. The 20 bill increases this net income amount evenly over a five-year 21 period. The new amounts are $17,200 for tax years beginning 22 during 2012, $20,900 for tax years beginning during 2013, 23 $24,600 for tax years beginning during 2014, $28,300 for 24 tax years beginning during 2015, and $32,000 for tax years 25 beginning during 2016 and for every year thereafter. 26 Under current law, the state individual income tax is not 27 imposed upon all other taxpayers whose net income is $9,000 or 28 less. The bill increases this net income amount evenly over a 29 five-year period. The new amounts are $12,000 for tax years 30 beginning during 2012, $15,000 for tax years beginning during 31 2013, $18,000 for tax years beginning during 2014, $21,000 for 32 tax years beginning during 2015, and $24,000 for tax years 33 beginning during 2016 and for every year thereafter. 34 As a result of these changes, and pursuant to Code section 35 -3- LSB 5362XC (5) 84 mm/sc 3/ 4

S.F. _____ 422.13, a resident whose net income is equal to or less than 1 the appropriate dollar amounts, as increased in the bill, is 2 not required to make and file an income tax return, and a 3 nonresident is not required to make and file an income tax 4 return if the person’s net income is equal to or less than the 5 appropriate dollar amounts, as increased in the bill, after 6 applying the allocation computation in Code section 422.5. 7 The bill applies retroactively to January 1, 2012, for tax 8 years beginning on or after that date. 9 -4- LSB 5362XC (5) 84 mm/sc 4/ 4