SSB 1255 (LSB 2543XC (2) 85)

SENATE FILE _____

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM)

A BILL FOR

An Act relating to revenue and taxation by increasing the sales and use tax rates, establishing transfers to the natural resources and outdoor recreation trust fund, modifying the requirement to file a state individual income tax return, reducing individual income tax rates, and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

INDIVIDUAL INCOME TAXES
    Section 1.  Section 422.5, subsection 1, paragraphs a through c, Code 2013, are amended by striking the paragraphs.
    Sec. 2.  Section 422.5, subsection 1, paragraph d, Code 2013, is amended to read as follows:
   d.  On all taxable income exceeding four thousand dollars but not exceeding nine thousand dollars, four and one-half twenty-eight hundredths percent.
    Sec. 3.  Section 422.5, subsection 3, Code 2013, is amended to read as follows:
   3.  a.  The tax shall not be imposed on a resident or nonresident whose net income, as defined in section 422.7, is thirteen sixteen thousand five hundred dollars or less in the case of married persons filing jointly or filing separately on a combined return, heads of household, and surviving spouses or nine eleven thousand dollars or less in the case of all other persons; but in the event that the payment of tax under this division would reduce the net income to less than thirteen sixteen thousand five hundred dollars or nine eleven thousand dollars as applicable, then the tax shall be reduced to that amount which would result in allowing the taxpayer to retain a net income of thirteen sixteen thousand five hundred dollars or nine eleven thousand dollars as applicable. The preceding sentence does not apply to estates or trusts. For the purpose of this subsection, the entire net income, including any part of the net income not allocated to Iowa, shall be taken into account. For purposes of this subsection, net income includes all amounts of pensions or other retirement income received from any source which is not taxable under this division as a result of the government pension exclusions in section 422.7, or any other state law. If the combined net income of a husband and wife exceeds thirteen sixteen thousand five hundred dollars, neither of them shall receive the benefit of this subsection, and it is immaterial whether they file a joint return or separate returns. However, if a husband and wife file separate returns and have a combined net income of thirteen sixteen thousand five hundred dollars or less, neither spouse shall receive the benefit of this paragraph, if one spouse has a net operating loss and elects to carry back or carry forward the loss as provided in section 422.9, subsection 3. A person who is claimed as a dependent by another person as defined in section 422.12 shall not receive the benefit of this subsection if the person claiming the dependent has net income exceeding thirteen sixteen thousand five hundred dollars or nine eleven thousand dollars, as applicable, or the person claiming the dependent and the person’s spouse have combined net income exceeding thirteen sixteen thousand five hundred dollars or nine eleven thousand dollars, as applicable.
   b.  In lieu of the computation in subsection 1 or 2, or in paragraph “a” of this subsection, if the married persons’, filing jointly or filing separately on a combined return, head of household’s, or surviving spouse’s net income exceeds thirteen sixteen thousand five hundred dollars, the regular tax imposed under this division shall be the lesser of the maximum state individual income tax rate times the portion of the net income in excess of thirteen sixteen thousand five hundred dollars or the regular tax liability computed without regard to this sentence. Taxpayers electing to file separately shall compute the alternate tax described in this paragraph using the total net income of the husband and wife. The alternate tax described in this paragraph does not apply if one spouse elects to carry back or carry forward the loss as provided in section 422.9, subsection 3.
    Sec. 4.  Section 422.13, subsection 1, paragraph a, Code 2013, is amended to read as follows:
   a.  The individual has net income of more than nine eleven thousand dollars for the tax year from sources taxable under this division.
    Sec. 5.  EFFECTIVE DATE.  This division of this Act takes effect January 1, 2014.
    Sec. 6.  APPLICABILITY.  This division of this Act applies to tax years beginning on or after January 1, 2014.

DIVISION II

SALES AND USE TAX AND NATURAL RESOURCES AND OUTDOOR RECREATION TRUST FUND
    Sec. 7.  Section 423.2, subsection 1, unnumbered paragraph 1, Code 2013, is amended to read as follows:

   There is imposed a tax of six and three-eighths percent upon the sales price of all sales of tangible personal property, consisting of goods, wares, or merchandise, sold at retail in the state to consumers or users except as otherwise provided in this subchapter.
    Sec. 8.  Section 423.2, subsections 2 and 3, Code 2013, are amended to read as follows:
   2.  A tax of six and three-eighths percent is imposed upon the sales price of the sale or furnishing of gas, electricity, water, heat, pay television service, and communication service, including the sales price from such sales by any municipal corporation or joint water utility furnishing gas, electricity, water, heat, pay television service, and communication service to the public in its proprietary capacity, except as otherwise provided in this subchapter, when sold at retail in the state to consumers or users.
   3.  A tax of six and three-eighths percent is imposed upon the sales price of all sales of tickets or admissions to places of amusement, fairs, and athletic events except those of elementary and secondary educational institutions. A tax of six and three-eighths percent is imposed on the sales price of an entry fee or like charge imposed solely for the privilege of participating in an activity at a place of amusement, fair, or athletic event unless the sales price of tickets or admissions charges for observing the same activity are taxable under this subchapter. A tax of six and three-eighths percent is imposed upon that part of private club membership fees or charges paid for the privilege of participating in any athletic sports provided club members.
    Sec. 9.  Section 423.2, subsection 4, paragraph a, Code 2013, is amended to read as follows:
   a.  A tax of six and three-eighths percent is imposed upon the sales price derived from the operation of all forms of amusement devices and games of skill, games of chance, raffles, and bingo games as defined in chapter 99B, and card game tournaments conducted under section 99B.7B, that are operated or conducted within the state, the tax to be collected from the operator in the same manner as for the collection of taxes upon the sales price of tickets or admission as provided in this section. Nothing in this subsection shall legalize any games of skill or chance or slot-operated devices which are now prohibited by law.
    Sec. 10.  Section 423.2, subsection 5, Code 2013, is amended to read as follows:
   5.  There is imposed a tax of six and three-eighths percent upon the sales price from the furnishing of services as defined in section 423.1.
    Sec. 11.  Section 423.2, subsection 7, paragraph a, unnumbered paragraph 1, Code 2013, is amended to read as follows:

   A tax of six and three-eighths percent is imposed upon the sales price from the sales, furnishing, or service of solid waste collection and disposal service.
    Sec. 12.  Section 423.2, subsection 8, paragraph a, Code 2013, is amended to read as follows:
   a.  A tax of six and three-eighths percent is imposed on the sales price from sales of bundled transactions. For the purposes of this subsection, a “bundled transaction” is the retail sale of two or more distinct and identifiable products, except real property and services to real property, which are sold for one nonitemized price. A “bundled transaction” does not include the sale of any products in which the sales price varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.
    Sec. 13.  Section 423.2, subsection 9, Code 2013, is amended to read as follows:
   9.  A tax of six and three-eighths percent is imposed upon the sales price from any mobile telecommunications service, including all paging services, that this state is allowed to tax pursuant to the provisions of the federal Mobile Telecommunications Sourcing Act, Pub. L. No. 106-252, 4 U.S.C. § 116 et seq. For purposes of this subsection, taxes on mobile telecommunications service, as defined under the federal Mobile Telecommunications Sourcing Act that are deemed to be provided by the customer’s home service provider, shall be paid to the taxing jurisdiction whose territorial limits encompass the customer’s place of primary use, regardless of where the mobile telecommunications service originates, terminates, or passes through and shall in all other respects be taxed in conformity with the federal Mobile Telecommunications Sourcing Act. All other provisions of the federal Mobile Telecommunications Sourcing Act are adopted by the state of Iowa and incorporated into this subsection by reference. With respect to mobile telecommunications service under the federal Mobile Telecommunications Sourcing Act, the director shall, if requested, enter into agreements consistent with the provisions of the federal Act.
    Sec. 14.  Section 423.2, subsection 11, paragraph b, subparagraph (2), Code 2013, is amended to read as follows:
   (2)  Transfer from the remaining revenues the amounts required under Article VII, section 10, of the Constitution of the State of Iowa to the natural resources and outdoor recreation trust fund created in section 461.31, if applicable.
    Sec. 15.  Section 423.2, subsection 13, Code 2013, is amended to read as follows:
   13.  The sales tax rate of six and three-eighths percent is reduced to five and three-eighths percent on January 1, 2030.
    Sec. 16.  Section 423.5, unnumbered paragraph 1, Code 2013, is amended to read as follows:

   Except as provided in subsection 3, an excise tax at the rate of six and three-eighths percent of the purchase price or installed purchase price is imposed on the following:
    Sec. 17.  Section 423.5, subsection 9, Code 2013, is amended to read as follows:
   9.  The use tax rate of six and three-eighths percent is reduced to five and three-eighths percent on January 1, 2030.
    Sec. 18.  PURPOSE.  The purpose of this Act is to provide for the implementation of Article VII, section 10, of the Constitution of the State of Iowa by fully funding the natural resources and outdoor recreation trust fund as created in section 461.31, pursuant to Article VII, section 10, of the Constitution of the State of Iowa.
    Sec. 19.  EFFECTIVE DATE.  This division of this Act takes effect July 1, 2014.
EXPLANATION
   This bill increases the sales and use tax rates, establishes transfers to the natural resources and outdoor recreation trust fund, modifies the requirement to file a state individual income tax return, and reduces individual income tax rates.
   Division I of the bill relates to individual income taxes. The division eliminates the bottom three individual income tax brackets, which are those with rates of 0.36 percent, 0.72 percent, and 2.43 percent. The tax rate in the fourth tax bracket is reduced from 4.5 percent to 4.28 percent. The remaining five tax brackets, those with rates of 6.12 percent, 6.48 percent, 6.80 percent, 7.92 percent, and 8.98 percent, remain unchanged.
   The division amends the net income threshold at which an individual income tax return is required to be filed. Under current law, a resident or nonresident who is younger than 65 will not be subject to the individual income tax and will not be required to file a state individual income tax return if the person’s net income is $13,500 or less in the case of married taxpayers, heads of household, and surviving spouses, or $9,000 or less in the case of all other persons. The bill increases these amounts to $16,500 and $11,000, respectively.
   The division takes effect January 1, 2014, and applies to tax years beginning on or after that date.
   Division II relates to the sales tax imposed on the sale of tangible personal property and the furnishing of enumerated services and to an amendment to the Constitution of the State of Iowa ratified on November 2, 2010, dedicating a portion of state revenue for purposes of benefiting natural resources, outdoor recreation, and soil conservation (Article VII, section 10). The amendment authorizes the general assembly to implement its provisions.
   The constitutional amendment creates a natural resources and outdoor recreation trust fund (trust fund) within the state treasury. The trust fund and allocations from the fund are codified in Code chapter 461. Moneys in the trust fund cannot be used for any purpose other than protecting and enhancing water quality and natural areas in this state including parks, trails, and fish and wildlife habitat, and conserving agricultural soils in this state. No revenue is credited to the trust fund until the sales tax rate is increased. Whenever the rate is increased, the amount generated by the increase is credited to the fund, but the amount credited cannot exceed the amount that a rate of 3/8 of 1 percent would generate.
   Currently, the tax on sales and services in Iowa is imposed at the rate of 6 percent. The division provides for an increase in the rate to 6 and 3/8 percent, and the transfer of these moneys into the trust fund. In 2012, the 84th General Assembly enacted SF 2329 (2012 Iowa Acts, chapter 1098) which provided for the transfer of sales tax revenues deposited into the general fund of the state (general fund) into the trust fund when applicable. The division provides for the same tax rate increase to the use tax.
   The division does not affect the 5 percent rate imposed on vehicles subject to the issuance of a certificate of title, the use of manufactured housing, or the use of certain leased vehicles.
   The division takes effect on July 1, 2014.