SF 2163 (LSB 5622XS (1) 85)

SENATE FILE 2163

BY  SODDERS

A BILL FOR

An Act relating to the calculation of the amount of the child and dependent care tax credit, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.12C, subsection 1, unnumbered paragraph 1, Code 2014, is amended to read as follows:

   The taxes imposed under this division, less the amounts of nonrefundable credits allowed under this division, shall be reduced by a child and dependent care credit equal to the following percentages of the federal child and dependent care credit provided in section 21 of the Internal Revenue Code, without regard to whether or not the federal credit was limited by the taxpayer’s federal tax liability:
    Sec. 2.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 3.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2012, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the Iowa child and dependent care tax credit available against the individual income tax. The Iowa child and dependent care tax credit is a refundable credit calculated as a percentage of the nonrefundable federal child and dependent care tax credit, depending on the Iowa net income of the taxpayer. 
   Iowa Administrative Code 701-42.15(1), which governs the computation of the Iowa credit, was amended in 2012 to specify that for taxpayers whose federal credit is limited to their federal tax liability, the Iowa credit shall be computed based on the lesser amount. In other words, the amount of the Iowa credit is limited to a percentage of the federal credit actually claimed against federal tax liability, not a percentage of the total federal credit the taxpayer was eligible to claim against federal tax liability.
   The bill amends Code section 422.12C to provide that the Iowa credit will be calculated as a percentage of the federal credit, whether or not the federal credit was limited by the taxpayer’s federal tax liability.
   The bill takes effect upon enactment and applies retroactively to January 1, 2012, for tax years beginning on or after that date.