House File 191 - Introduced HOUSE FILE 191 BY WESSEL-KROESCHELL A BILL FOR An Act providing an individual income tax credit equal to a 1 percentage of the federal American opportunity tax credit 2 and including retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1577YH (2) 86 mm/sc
H.F. 191 Section 1. NEW SECTION . 422.10A American opportunity tax 1 credit. 2 1. The taxes imposed under this division, less the credits 3 allowed under section 422.12, shall be reduced by an American 4 opportunity tax credit equal to twenty-five percent of the 5 federal American opportunity tax credit provided in section 6 25A(i) of the Internal Revenue Code. Any credit in excess of 7 the tax liability is refundable. 8 2. Married taxpayers electing to file separate returns or 9 filing separately on a combined return may avail themselves of 10 the American opportunity tax credit by allocating the American 11 opportunity tax credit to each spouse in the proportion that 12 each spouse’s respective net income bears to the total combined 13 net income. Taxpayers affected by the allocation provisions 14 of section 422.8 shall be permitted a deduction for the credit 15 only in the amount fairly and equitably allocable to Iowa under 16 rules prescribed by the director. 17 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 18 retroactively to January 1, 2015, for tax years beginning on 19 or after that date. 20 EXPLANATION 21 The inclusion of this explanation does not constitute agreement with 22 the explanation’s substance by the members of the general assembly. 23 This bill provides a state individual income tax credit 24 equal to 25 percent of the federal American opportunity tax 25 credit provided in section 25A(i) of the Internal Revenue 26 Code (IRC). In general, the federal American opportunity 27 tax credit, which is a modified version of the federal hope 28 scholarship tax credit described in IRC §25A(b), is an 29 education credit equal to a certain percentage of the tuition, 30 fees, and course materials of attending a postsecondary 31 educational institution for a taxpayer or the taxpayer’s spouse 32 or dependent. The maximum credit is $2,500 per student, per 33 tax year. The credit is available for the first four years 34 of postsecondary education and is gradually phased out for 35 -1- LSB 1577YH (2) 86 mm/sc 1/ 2
H.F. 191 taxpayers with incomes between $80,000 and $90,000 for a 1 single taxpayer and between $160,000 and $180,000 for married 2 taxpayers. The Iowa American opportunity tax credit will be 3 available through tax year 2017, which is when the federal 4 tax credit is set to expire. Any credit in excess of the tax 5 liability is refundable. 6 Although married taxpayers must file a joint return to 7 receive the federal tax credit, married taxpayers electing to 8 file separate returns or separately on a combined return may 9 claim the Iowa American opportunity tax credit by allocating 10 the credit according to each spouse’s respective net income. 11 The bill applies retroactively to tax years beginning on or 12 after January 1, 2015. 13 -2- LSB 1577YH (2) 86 mm/sc 2/ 2