Senate File 106 - Introduced SENATE FILE 106 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 1071) A BILL FOR An Act updating the Code references to the Internal Revenue 1 Code and decoupling from certain federal bonus depreciation 2 provisions, providing certain taxpayers additional time to 3 file a claim for refund or credit of individual income tax, 4 and including effective date and retroactive applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1257SV (1) 85 mm/sc

S.F. 106 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 1257SV (1) 85 mm/sc 1/ 5

S.F. 106 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 1257SV (1) 85 mm/sc 2/ 5

S.F. 106 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 EXPLANATION 34 This bill updates the Iowa Code references to the Internal 35 -3- LSB 1257SV (1) 85 mm/sc 3/ 5

S.F. 106 Revenue Code to make federal income tax revisions enacted by 1 Congress in 2012, and by the American Taxpayer Relief Act of 2 2012, Pub. L. No. 112-240, applicable for Iowa income tax 3 purposes, decouples with certain bonus depreciation provisions, 4 and provides certain taxpayers additional time to file a claim 5 for refund or credit of individual income tax paid. 6 DIVISION I —— INTERNAL REVENUE CODE REFERENCES. The 7 division amends Code sections 422.3 and 422.32, general 8 definition sections in the chapter of the Code that governs 9 corporate and individual income tax and the franchise tax 10 on financial institutions, to update the references to the 11 Internal Revenue Code. 12 The division amends Code sections 15.335, 422.10, and 422.33 13 to update the references to the Internal Revenue Code for the 14 state research activities credit for individuals, corporations, 15 and corporations in economic development areas to include the 16 federal changes to the research activities credit and the 17 alternative simplified research activities credit. 18 Code section 422.9 provides individuals a deduction from net 19 income for state sales and use taxes if the individual chose 20 to deduct sales and use tax in lieu of state income taxes or 21 the standard deduction for federal income tax purposes. This 22 deduction was set to expire under both federal and Iowa law for 23 tax years beginning on or after January 1, 2012. The American 24 Taxpayer Relief Act of 2012 extended the federal deduction for 25 the 2012 and 2013 tax years. This division extends the Iowa 26 deduction for the 2012 and 2013 tax years. 27 Division I takes effect upon enactment and applies 28 retroactively to January 1, 2012, for tax years beginning on 29 or after that date. 30 DIVISION II —— BONUS DEPRECIATION. The division decouples, 31 for Iowa income tax purposes, from the federal additional 32 first-year depreciation allowance in section 168(k) of the 33 Internal Revenue Code which was extended by the American 34 Taxpayer Relief Act of 2012. 35 -4- LSB 1257SV (1) 85 mm/sc 4/ 5

S.F. 106 Division II takes effect upon enactment and applies 1 retroactively to January 1, 2013, for tax years ending on or 2 after that date. 3 DIVISION III —— FILING OF CLAIMS. The division amends 4 Code section 422.73, relating to the period of limitation to 5 claim a tax refund or credit, to provide additional time for 6 taxpayers affected by the FAA Modernization and Reform Act of 7 2012, Pub. L. No. 112-95, to request a refund or credit of Iowa 8 individual income tax paid. The federal law allows a qualified 9 airline employee who received a settlement payment from an 10 airline company in bankruptcy to roll over that amount into a 11 traditional individual retirement account (IRA) and exclude 12 that amount from adjusted gross income in the year in which it 13 was received. The federal law allowed additional time, until 14 April 15, 2013, for a refund to be requested for federal income 15 tax purposes provided the rollover occurred within 180 days of 16 February 14, 2012. Iowa taxpayers whose federal adjusted gross 17 income was reduced due to this federal law have until June 30, 18 2013, to request a refund or credit for Iowa individual income 19 tax paid. 20 Division III takes effect upon enactment and applies 21 retroactively to January 1, 2012, for refund or credit claims 22 filed on or after that date. 23 -5- LSB 1257SV (1) 85 mm/sc 5/ 5