House File 110 - Introduced HOUSE FILE 110 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 38) A BILL FOR An Act relating to taxation by updating the Code references 1 to the Internal Revenue Code and decoupling from certain 2 federal bonus depreciation provisions, providing certain 3 taxpayers additional time to file a claim for refund or 4 credit of individual income tax, extending the property 5 assessment appeal board, and including effective date and 6 retroactive applicability provisions. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 1257HV (2) 85 mm/sc

H.F. 110 DIVISION I 1 INTERNAL REVENUE CODE REFERENCES 2 Section 1. Section 15.335, subsection 7, paragraph b, Code 3 2013, is amended to read as follows: 4 b. For purposes of this section , “Internal Revenue Code” 5 means the Internal Revenue Code in effect on January 1, 2012 6 2013, and as amended by the American Taxpayer Relief Act of 7 2012, Pub. L. No. 112-240 . 8 Sec. 2. Section 422.3, subsection 5, Code 2013, is amended 9 to read as follows: 10 5. “Internal Revenue Code” means the Internal Revenue Code 11 of 1954, prior to the date of its redesignation as the Internal 12 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 13 the Internal Revenue Code of 1986 as amended to and including 14 January 1, 2012 2013, and as amended by the American Taxpayer 15 Relief Act of 2012, Pub. L. No. 112-240 . 16 Sec. 3. Section 422.9, subsection 2, paragraph i, Code 2013, 17 is amended to read as follows: 18 i. The deduction for state sales and use taxes is allowable 19 only if the taxpayer elected to deduct the state sales and use 20 taxes in lieu of state income taxes under section 164 of the 21 Internal Revenue Code. A deduction for state sales and use 22 taxes is not allowed if the taxpayer has taken the deduction 23 for state income taxes or claimed the standard deduction under 24 section 63 of the Internal Revenue Code. This paragraph 25 applies to taxable years beginning after December 31, 2003, and 26 before January 1, 2008, and to taxable years beginning after 27 December 31, 2009, and before January 1, 2012 2014 . 28 Sec. 4. Section 422.10, subsection 3, paragraph b, Code 29 2013, is amended to read as follows: 30 b. For purposes of this section , “Internal Revenue Code” 31 means the Internal Revenue Code in effect on January 1, 2012 32 2013, and as amended by the American Taxpayer Relief Act of 33 2012, Pub. L. No. 112-240 . 34 Sec. 5. Section 422.32, subsection 1, paragraph g, Code 35 -1- LSB 1257HV (2) 85 mm/sc 1/ 6

H.F. 110 2013, is amended to read as follows: 1 g. “Internal Revenue Code” means the Internal Revenue Code 2 of 1954, prior to the date of its redesignation as the Internal 3 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 4 the Internal Revenue Code of 1986 as amended to and including 5 January 1, 2012 2013, and as amended by the American Taxpayer 6 Relief Act of 2012, Pub. L. No. 112-240 . 7 Sec. 6. Section 422.33, subsection 5, paragraph d, 8 subparagraph (2), Code 2013, is amended to read as follows: 9 (2) For purposes of this subsection , “Internal Revenue Code” 10 means the Internal Revenue Code in effect on January 1, 2012 11 2013, and as amended by the American Taxpayer Relief Act of 12 2012, Pub. L. No. 112-240 . 13 Sec. 7. EFFECTIVE UPON ENACTMENT. This division of this 14 Act, being deemed of immediate importance, takes effect upon 15 enactment. 16 Sec. 8. RETROACTIVE APPLICABILITY. This division of this 17 Act applies retroactively to January 1, 2012, for tax years 18 beginning on or after that date. 19 DIVISION II 20 BONUS DEPRECIATION 21 Sec. 9. Section 422.7, subsection 39A, unnumbered paragraph 22 1, Code 2013, is amended to read as follows: 23 The additional first-year depreciation allowance authorized 24 in section 168(k) of the Internal Revenue Code, as enacted by 25 Pub. L. No. 110-185, § 103, Pub. L. No. 111-5, § 1201, Pub. L. 26 No. 111-240, § 2022, and Pub. L. No. 111-312, § 401, and Pub. L. 27 No. 112-240, § 331, does not apply in computing net income for 28 state tax purposes. If the taxpayer has taken the additional 29 first-year depreciation allowance for purposes of computing 30 federal adjusted gross income, then the taxpayer shall make the 31 following adjustments to federal adjusted gross income when 32 computing net income for state tax purposes: 33 Sec. 10. Section 422.35, subsection 19A, unnumbered 34 paragraph 1, Code 2013, is amended to read as follows: 35 -2- LSB 1257HV (2) 85 mm/sc 2/ 6

H.F. 110 The additional first-year depreciation allowance authorized 1 in section 168(k) of the Internal Revenue Code, as enacted by 2 Pub. L. No. 110-185, § 103, Pub. L. No. 111-5, § 1201, Pub. L. 3 No. 111-240, § 2022, and Pub. L. No. 111-312, § 401, and Pub. L. 4 No. 112-240, § 331, does not apply in computing net income for 5 state tax purposes. If the taxpayer has taken the additional 6 first-year depreciation allowance for purposes of computing 7 federal taxable income, then the taxpayer shall make the 8 following adjustments to federal taxable income when computing 9 net income for state tax purposes: 10 Sec. 11. EFFECTIVE UPON ENACTMENT. This division of this 11 Act, being deemed of immediate importance, takes effect upon 12 enactment. 13 Sec. 12. RETROACTIVE APPLICABILITY. This division of this 14 Act applies retroactively to January 1, 2013, for tax years 15 ending on or after that date. 16 DIVISION III 17 FILING OF CLAIMS 18 Sec. 13. Section 422.73, Code 2013, is amended by adding the 19 following new subsection: 20 NEW SUBSECTION . 1A. Notwithstanding subsection 1, a claim 21 for refund or credit of the individual income tax paid which 22 resulted from a reduction in a person’s federal adjusted gross 23 income due to section 1106 of the FAA Modernization and Reform 24 Act of 2012, Pub. L. No. 112-95, shall be considered timely if 25 the claim is filed with the department on or before June 30, 26 2013. 27 Sec. 14. EFFECTIVE UPON ENACTMENT. This division of this 28 Act, being deemed of immediate importance, takes effect upon 29 enactment. 30 Sec. 15. RETROACTIVE APPLICABILITY. This division of this 31 Act applies retroactively to January 1, 2012, for refund or 32 credit claims filed on or after that date. 33 DIVISION IV 34 PROPERTY ASSESSMENT APPEAL BOARD 35 -3- LSB 1257HV (2) 85 mm/sc 3/ 6

H.F. 110 Sec. 16. Section 421.1A, subsection 6, Code 2013, is amended 1 to read as follows: 2 6. The members of the property assessment appeal board 3 shall receive compensation from the state commensurate with 4 the salary of a district judge through December 31, 2013 . The 5 members of the board shall be considered state employees for 6 purposes of salary and benefits. The members of the board and 7 any employees of the board, when required to travel in the 8 discharge of official duties, shall be paid their actual and 9 necessary expenses incurred in the performance of duties. 10 Sec. 17. Section 421.1A, subsection 7, Code 2013, is amended 11 by striking the subsection. 12 Sec. 18. REPEAL. 2005 Iowa Acts, chapter 150, section 134, 13 is repealed. 14 Sec. 19. EFFECTIVE UPON ENACTMENT. This division of this 15 Act, being deemed of immediate importance, takes effect upon 16 enactment. 17 EXPLANATION 18 This bill updates the Iowa Code references to the Internal 19 Revenue Code to make federal income tax revisions enacted by 20 Congress in 2012, and by the American Taxpayer Relief Act of 21 2012, Pub. L. No. 112-240, applicable for Iowa income tax 22 purposes, decouples with certain bonus depreciation provisions, 23 provides certain taxpayers additional time to file a claim for 24 refund or credit of individual income tax paid, and extends the 25 property assessment appeal board. 26 DIVISION I —— INTERNAL REVENUE CODE REFERENCES. The 27 division amends Code sections 422.3 and 422.32, general 28 definition sections in the chapter of the Code that governs 29 corporate and individual income tax and the franchise tax 30 on financial institutions, to update the references to the 31 Internal Revenue Code. 32 The division amends Code sections 15.335, 422.10, and 422.33 33 to update the references to the Internal Revenue Code for the 34 state research activities credit for individuals, corporations, 35 -4- LSB 1257HV (2) 85 mm/sc 4/ 6

H.F. 110 and corporations in economic development areas to include the 1 federal changes to the research activities credit and the 2 alternative simplified research activities credit. 3 Code section 422.9 provides individuals a deduction from net 4 income for state sales and use taxes if the individual chose 5 to deduct sales and use tax in lieu of state income taxes or 6 the standard deduction for federal income tax purposes. This 7 deduction was set to expire under both federal and Iowa law for 8 tax years beginning on or after January 1, 2012. The American 9 Taxpayer Relief Act of 2012 extended the federal deduction for 10 the 2012 and 2013 tax years. This division extends the Iowa 11 deduction for the 2012 and 2013 tax years. 12 Division I takes effect upon enactment and applies 13 retroactively to January 1, 2012, for tax years beginning on 14 or after that date. 15 DIVISION II —— BONUS DEPRECIATION. The division decouples, 16 for Iowa income tax purposes, from the federal additional 17 first-year depreciation allowance in section 168(k) of the 18 Internal Revenue Code which was extended by the American 19 Taxpayer Relief Act of 2012. 20 Division II takes effect upon enactment and applies 21 retroactively to January 1, 2013, for tax years ending on or 22 after that date. 23 DIVISION III —— FILING OF CLAIMS. The division amends 24 Code section 422.73, relating to the period of limitation to 25 claim a tax refund or credit, to provide additional time for 26 taxpayers affected by the FAA Modernization and Reform Act of 27 2012, Pub. L. No. 112-95, to request a refund or credit of Iowa 28 individual income tax paid. The federal law allows a qualified 29 airline employee who received a settlement payment from an 30 airline company in bankruptcy to roll over that amount into a 31 traditional individual retirement account (IRA) and exclude 32 that amount from adjusted gross income in the year in which it 33 was received. The federal law allowed additional time, until 34 April 15, 2013, for a refund to be requested for federal income 35 -5- LSB 1257HV (2) 85 mm/sc 5/ 6

H.F. 110 tax purposes provided the rollover occurred within 180 days of 1 February 14, 2012. Iowa taxpayers whose federal adjusted gross 2 income was reduced due to this federal law have until June 30, 3 2013, to request a refund or credit for Iowa individual income 4 tax paid. 5 Division III takes effect upon enactment and applies 6 retroactively to January 1, 2012, for refund or credit claims 7 filed on or after that date. 8 DIVISION IV —— PROPERTY ASSESSMENT APPEAL BOARD. Division 9 IV of the bill relates to the property assessment appeal 10 board created under Code section 421.1A. 2005 Iowa Acts, 11 chapter 150, section 134, provides that the board is repealed 12 effective July 1, 2013. The bill repeals 2005 Iowa Acts, 13 chapter 150, section 134, strikes provisions relating to the 14 property assessment appeal board review committee, and makes 15 corresponding changes related to the extension of the board. 16 Division IV takes effect upon enactment. 17 -6- LSB 1257HV (2) 85 mm/sc 6/ 6