House
File
611

Introduced
HOUSE
FILE
611
BY
JACOBY
A
BILL
FOR
An
Act
relating
to
the
individual
income
tax
by
modifying
the
1
income
tax
brackets
and
tax
rates,
and
including
retroactive
2
applicability
provisions.
3
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
4
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Section
1.
Section
422.4,
subsection
1,
Code
2015,
is
1
amended
to
read
as
follows:
2
1.
a.
“Annual
inflation
factor”
means
an
index,
expressed
3
as
a
percentage,
determined
by
the
department
by
October
15
of
4
the
calendar
year
preceding
the
calendar
year
for
which
the
5
factor
is
determined,
which
reflects
the
purchasing
power
of
6
the
dollar
as
a
result
of
inflation
during
the
fiscal
year
7
ending
in
the
calendar
year
preceding
the
calendar
year
for
8
which
the
factor
is
determined.
In
determining
the
annual
9
inflation
factor,
the
department
shall
use
the
annual
percent
10
change,
but
not
less
than
zero
percent,
in
the
gross
domestic
11
product
price
deflator
computed
for
the
second
quarter
of
the
12
calendar
year
by
the
bureau
of
economic
analysis
of
the
United
13
States
department
of
commerce
and
shall
add
all
of
that
percent
14
change
to
one
hundred
percent.
The
annual
inflation
factor
and
15
the
cumulative
inflation
factor
shall
each
be
expressed
as
a
16
percentage
rounded
to
the
nearest
onetenth
of
one
percent.
17
The
annual
inflation
factor
shall
not
be
less
than
one
hundred
18
percent.
19
b.
“Cumulative
inflation
factor”
means
the
product
of
the
20
annual
inflation
factor
for
the
1988
2015
calendar
year
and
21
all
annual
inflation
factors
for
subsequent
calendar
years
22
as
determined
pursuant
to
this
subsection
.
The
cumulative
23
inflation
factor
applies
to
all
tax
years
beginning
on
or
after
24
January
1
of
the
calendar
year
for
which
the
latest
annual
25
inflation
factor
has
been
determined.
26
c.
The
annual
inflation
factor
for
the
1988
2015
calendar
27
year
is
one
hundred
percent.
28
Sec.
2.
Section
422.5,
subsection
1,
Code
2015,
is
amended
29
to
read
as
follows:
30
1.
A
tax
is
imposed
upon
every
resident
and
nonresident
31
of
the
state
which
tax
shall
be
levied,
collected,
and
paid
32
annually
upon
and
with
respect
to
the
entire
taxable
income
as
33
defined
in
this
division
at
rates
as
follows:
34
a.
On
all
taxable
income
from
zero
through
one
thousand
five
35
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hundred
thirtynine
dollars,
thirtysix
thirtyfive
hundredths
1
of
one
percent.
2
b.
On
all
taxable
income
exceeding
one
thousand
five
hundred
3
thirtynine
dollars
but
not
exceeding
two
three
thousand
4
seventyeight
dollars,
seventytwo
hundredths
seventenths
of
5
one
percent.
6
c.
On
all
taxable
income
exceeding
two
three
thousand
7
seventyeight
dollars
but
not
exceeding
four
six
thousand
one
8
hundred
fiftysix
dollars,
two
and
fortythree
thirtysix
9
hundredths
percent.
10
d.
On
all
taxable
income
exceeding
four
six
thousand
one
11
hundred
fiftysix
dollars
but
not
exceeding
nine
thirteen
12
thousand
eight
hundred
fiftyone
dollars,
four
and
onehalf
13
thirtyseven
hundredths
percent.
14
e.
On
all
taxable
income
exceeding
nine
thirteen
thousand
15
eight
hundred
fiftyone
dollars
but
not
exceeding
fifteen
16
twentythree
thousand
eightyfive
dollars,
six
five
and
twelve
17
ninetyfour
hundredths
percent.
18
f.
On
all
taxable
income
exceeding
fifteen
twentythree
19
thousand
eightyfive
dollars
but
not
exceeding
twenty
thirty
20
thousand
seven
hundred
eighty
dollars,
six
and
fortyeight
21
twentynine
hundredths
percent.
22
g.
On
all
taxable
income
exceeding
twenty
thirty
thousand
23
seven
hundred
eighty
dollars
but
not
exceeding
thirty
fortysix
24
thousand
one
hundred
seventy
dollars,
six
and
eighttenths
25
sixtenths
percent.
26
h.
On
all
taxable
income
exceeding
thirty
fortysix
thousand
27
one
hundred
seventy
dollars
but
not
exceeding
fortyfive
28
sixtynine
thousand
two
hundred
fiftyfive
dollars,
seven
and
29
ninetytwo
sixtyeight
hundredths
percent.
30
i.
On
all
taxable
income
exceeding
fortyfive
sixtynine
31
thousand
two
hundred
fiftyfive
dollars
but
not
exceeding
one
32
hundred
thousand
dollars
,
eight
and
ninetyeight
seventyone
33
hundredths
percent.
34
j.
On
all
taxable
income
exceeding
one
hundred
thousand
35
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dollars
but
not
exceeding
two
hundred
fifty
thousand
dollars,
1
eight
and
eighttenths
percent.
2
k.
On
all
taxable
income
exceeding
two
hundred
fifty
3
thousand
dollars,
eight
and
eightynine
hundredths
percent.
4
j.
l.
(1)
The
tax
imposed
upon
the
taxable
income
of
a
5
nonresident
shall
be
computed
by
reducing
the
amount
determined
6
pursuant
to
paragraphs
“a”
through
“i”
“k”
by
the
amounts
of
7
nonrefundable
credits
under
this
division
and
by
multiplying
8
this
resulting
amount
by
a
fraction
of
which
the
nonresident’s
9
net
income
allocated
to
Iowa,
as
determined
in
section
10
422.8,
subsection
2
,
paragraph
“a”
,
is
the
numerator
and
the
11
nonresident’s
total
net
income
computed
under
section
422.7
is
12
the
denominator.
This
provision
also
applies
to
individuals
13
who
are
residents
of
Iowa
for
less
than
the
entire
tax
year.
14
(2)
(a)
The
tax
imposed
upon
the
taxable
income
of
a
15
resident
shareholder
in
an
S
corporation
or
of
an
estate
16
or
trust
with
a
situs
in
Iowa
that
is
a
shareholder
in
an
S
17
corporation,
which
S
corporation
has
in
effect
for
the
tax
18
year
an
election
under
subchapter
S
of
the
Internal
Revenue
19
Code
and
carries
on
business
within
and
without
the
state,
20
may
be
computed
by
reducing
the
amount
determined
pursuant
to
21
paragraphs
“a”
through
“i”
“k”
by
the
amounts
of
nonrefundable
22
credits
under
this
division
and
by
multiplying
this
resulting
23
amount
by
a
fraction
of
which
the
resident’s
or
estate’s
24
or
trust’s
net
income
allocated
to
Iowa,
as
determined
in
25
section
422.8,
subsection
2
,
paragraph
“b”
,
is
the
numerator
26
and
the
resident’s
or
estate’s
or
trust’s
total
net
income
27
computed
under
section
422.7
is
the
denominator.
If
a
resident
28
shareholder,
or
an
estate
or
trust
with
a
situs
in
Iowa
29
that
is
a
shareholder,
has
elected
to
take
advantage
of
this
30
subparagraph
(2),
and
for
the
next
tax
year
elects
not
to
take
31
advantage
of
this
subparagraph,
the
resident
or
estate
or
32
trust
shareholder
shall
not
reelect
to
take
advantage
of
this
33
subparagraph
for
the
three
tax
years
immediately
following
the
34
first
tax
year
for
which
the
shareholder
elected
not
to
take
35
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advantage
of
this
subparagraph,
unless
the
director
consents
to
1
the
reelection.
This
subparagraph
also
applies
to
individuals
2
who
are
residents
of
Iowa
for
less
than
the
entire
tax
year.
3
(b)
This
subparagraph
(2)
shall
not
affect
the
amount
of
4
the
taxpayer’s
checkoffs
under
this
division
,
the
credits
from
5
tax
provided
under
this
division
,
and
the
allocation
of
these
6
credits
between
spouses
if
the
taxpayers
filed
separate
returns
7
or
separately
on
combined
returns.
8
Sec.
3.
Section
422.5,
subsection
2,
paragraph
a,
Code
2015,
9
is
amended
to
read
as
follows:
10
a.
There
is
imposed
upon
every
resident
and
nonresident
11
of
this
state,
including
estates
and
trusts,
the
greater
of
12
the
tax
determined
in
subsection
1
,
paragraphs
“a”
through
“j”
13
“l”
,
or
the
state
alternative
minimum
tax
equal
to
seventyfive
14
percent
of
the
maximum
state
individual
income
tax
rate
for
the
15
tax
year,
rounded
to
the
nearest
onetenth
of
one
percent,
of
16
the
state
alternative
minimum
taxable
income
of
the
taxpayer
as
17
computed
under
this
subsection
.
18
Sec.
4.
Section
422.5,
subsection
6,
Code
2015,
is
amended
19
to
read
as
follows:
20
6.
Upon
determination
of
the
latest
cumulative
inflation
21
factor,
the
director
shall
multiply
each
dollar
amount
set
22
forth
in
subsection
1
,
paragraphs
“a”
through
“i”
“k”
by
this
23
cumulative
inflation
factor,
shall
round
off
the
resulting
24
product
to
the
nearest
one
dollar,
and
shall
incorporate
the
25
result
into
the
income
tax
forms
and
instructions
for
each
tax
26
year.
27
Sec.
5.
Section
422.8,
subsection
2,
paragraph
a,
Code
2015,
28
is
amended
to
read
as
follows:
29
a.
Nonresident’s
net
income
allocated
to
Iowa
is
the
net
30
income,
or
portion
of
net
income,
which
is
derived
from
a
31
business,
trade,
profession,
or
occupation
carried
on
within
32
this
state
or
income
from
any
property,
trust,
estate,
or
33
other
source
within
Iowa.
However,
income
derived
from
a
34
business,
trade,
profession,
or
occupation
carried
on
within
35
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this
state
and
income
from
any
property,
trust,
estate,
or
1
other
source
within
Iowa
shall
not
include
distributions
from
2
pensions,
including
defined
benefit
or
defined
contribution
3
plans,
annuities,
individual
retirement
accounts,
and
deferred
4
compensation
plans
or
any
earnings
attributable
thereto
so
long
5
as
the
distribution
is
directly
related
to
an
individual’s
6
documented
retirement
and
received
while
the
individual
is
a
7
nonresident
of
this
state.
If
a
business,
trade,
profession,
8
or
occupation
is
carried
on
partly
within
and
partly
without
9
the
state,
only
the
portion
of
the
net
income
which
is
fairly
10
and
equitably
attributable
to
that
part
of
the
business,
11
trade,
profession,
or
occupation
carried
on
within
the
state
12
is
allocated
to
Iowa
for
purposes
of
section
422.5,
subsection
13
1
,
paragraph
“j”
“l”
,
and
section
422.13
and
income
from
any
14
property,
trust,
estate,
or
other
source
partly
within
and
15
partly
without
the
state
is
allocated
to
Iowa
in
the
same
16
manner,
except
that
annuities,
interest
on
bank
deposits
and
17
interestbearing
obligations,
and
dividends
are
allocated
18
to
Iowa
only
to
the
extent
to
which
they
are
derived
from
a
19
business,
trade,
profession,
or
occupation
carried
on
within
20
the
state.
21
Sec.
6.
Section
422.11B,
Code
2015,
is
amended
to
read
as
22
follows:
23
422.11B
Minimum
tax
credit.
24
1.
a.
There
is
allowed
as
a
credit
against
the
tax
25
determined
in
section
422.5,
subsection
1
,
paragraphs
“a”
26
through
“j”
“l”
for
a
tax
year
an
amount
equal
to
the
minimum
27
tax
credit
for
that
tax
year.
28
b.
The
minimum
tax
credit
for
a
tax
year
is
the
excess,
29
if
any,
of
the
net
minimum
tax
imposed
for
all
prior
tax
30
years
beginning
on
or
after
January
1,
1987,
over
the
amount
31
allowable
as
a
credit
under
this
section
for
those
prior
tax
32
years.
33
2.
a.
The
allowable
credit
under
subsection
1
for
a
tax
34
year
shall
not
exceed
the
excess,
if
any,
of
the
tax
determined
35
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in
section
422.5,
subsection
1
,
paragraphs
“a”
through
“j”
“l”
1
over
the
state
alternative
minimum
tax
as
determined
in
section
2
422.5,
subsection
2
.
3
b.
The
net
minimum
tax
for
a
tax
year
is
the
excess,
if
any,
4
of
the
tax
determined
in
section
422.5,
subsection
2
,
for
the
5
tax
year
over
the
tax
determined
in
section
422.5,
subsection
6
1
,
paragraphs
“a”
through
“j”
“l”
for
the
tax
year.
7
Sec.
7.
Section
425.23,
subsection
4,
paragraph
b,
Code
8
2015,
is
amended
to
read
as
follows:
9
b.
The
annual
adjustment
factor
for
the
1998
base
year
10
is
one
hundred
percent.
For
each
subsequent
base
year,
the
11
annual
adjustment
factor
equals
the
annual
inflation
factor
for
12
the
calendar
year,
in
which
the
base
year
begins,
as
computed
13
in
section
422.4
for
purposes
of
the
individual
income
tax
,
14
without
regard
to
subsection
1,
paragraph
“c”
,
of
that
section
.
15
Sec.
8.
RETROACTIVE
APPLICABILITY.
This
Act
applies
16
retroactively
to
January
1,
2015,
for
tax
years
beginning
on
17
or
after
that
date.
18
EXPLANATION
19
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
20
the
explanation’s
substance
by
the
members
of
the
general
assembly.
21
This
bill
amends
the
individual
income
tax
brackets
and
tax
22
rates.
Under
current
law
for
tax
year
2015,
the
individual
23
income
tax
is
computed
using
nine
progressive
tax
brackets
24
and
tax
rates
ranging
from
a
low
of
0.36
percent
on
the
first
25
$1,539
of
taxable
income
to
a
high
of
8.98
percent
on
all
26
taxable
income
in
excess
of
$69,255.
The
taxable
income
27
amounts
in
each
of
these
nine
tax
brackets
are
adjusted
for
28
inflation
each
year
by
the
department
of
revenue
under
current
29
law,
and
the
bill
updates
those
taxable
income
amounts
to
30
reflect
the
amounts
set
for
the
2015
tax
year.
31
The
bill
adds
two
new
tax
brackets
and
tax
rates
for
taxable
32
income
greater
than
$100,000
but
less
than
$250,000,
and
for
33
taxable
income
in
excess
of
$250,000.
The
tax
rates
for
the
34
two
new
tax
brackets
are
set
at
rates
that
are
approximately
35
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2
percent
and
1
percent,
respectively,
lower
than
the
current
1
top
tax
rate
of
8.98
percent.
The
bill
also
reduces
each
of
the
2
existing
nine
tax
rates
by
approximately
3
percent.
The
new
3
tax
brackets
and
tax
rates
are
as
follows:
4
1.
From
$0
to
$1,539,
0.35
percent.
5
2.
From
$1,540
to
$3,078,
0.70
percent.
6
3.
From
$3,079
to
$6,156,
2.36
percent.
7
4.
From
$6,157
to
$13,851,
4.37
percent.
8
5.
From
$13,852
to
$23,085,
5.94
percent.
9
6.
From
$23,086
to
$30,780,
6.29
percent.
10
7.
From
$30,781
to
$46,170,
6.60
percent.
11
8.
From
$46,171
to
$69,255,
7.68
percent.
12
9.
From
$69,256
to
$100,000,
8.71
percent.
13
10.
From
$100,001
to
$250,000,
8.80
percent.
14
11.
From
$250,001
and
over,
8.89
percent.
15
The
bill
makes
several
conforming
amendments
to
update
16
references
to
the
tax
brackets
and
tax
rates
in
other
parts
of
17
the
Code.
18
The
bill
applies
retroactively
to
tax
years
beginning
on
or
19
after
January
1,
2015.
20
7
LSB
1924YH
(7)
86
mm/sc
7/
7