Senate File 2044 - Introduced SENATE FILE 2044 BY JOHNSON A BILL FOR An Act relating to taxation by providing for the protection 1 from disallowance of tax benefits to private nonprofit 2 educational institutions because of certain religious 3 beliefs and moral convictions, and including effective date 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5029XS (2) 86 mm/sc
S.F. 2044 Section 1. FINDINGS. The general assembly finds all of the 1 following: 2 1. Private nonprofit educational institutions play a vital 3 role in providing formal education in society, and the United 4 States and Iowa support and recognize these institutions in 5 part by providing important and necessary tax benefits. 6 2. The United States and Iowa have a long, honorable history 7 of accommodating religious exercise and establishing conscience 8 protections based on religious and moral convictions. 9 3. Protecting the tax benefits available to private 10 nonprofit educational institutions from being denied based 11 on religious or moral convictions is a state interest of the 12 highest order. The state is obligated to take measures that 13 advance this interest by remedying, deterring, and preventing 14 government interference with religious exercise in a way that 15 complements the protections mandated by the Constitution of the 16 State of Iowa and the Constitution of the United States. 17 4. In 2015, during the course of oral argument at the United 18 States Supreme Court, in Obergefell v. Hodges, 135 S. Ct. 19 2584 (2015), when Justice Alito asked whether an institution 20 could lose its tax-exempt status for maintaining the view that 21 marriage is the union of one man and one woman, the solicitor 22 general of the United States admitted it was “going to be an 23 issue”. 24 5. In the Obergefell v. Hodges opinion, the United States 25 Supreme Court held same-sex couples have a right to marry, but 26 also noted, “Many who deem same-sex marriage to be wrong reach 27 that conclusion based on decent and honorable religious or 28 philosophical premises, and neither they nor their beliefs are 29 disparaged here”. 30 6. In the wake of the Obergefell v. Hodges decision, leading 31 legal scholars concur that conflict between same-sex marriage 32 and religious liberty are inevitable and, therefore, should be 33 addressed through legislation. 34 7. The state of Iowa has an obligation to refrain from 35 -1- LSB 5029XS (2) 86 mm/sc 1/ 7
S.F. 2044 discriminating against those who maintain a belief that 1 marriage is the union of one man and one woman based on 2 religious and moral convictions. 3 8. Laws that protect important and necessary tax benefits 4 from being denied because of the free exercise of religious 5 beliefs and moral convictions about marriage will encourage 6 private citizens and institutions to demonstrate tolerance for 7 those beliefs and convictions and therefore contribute to a 8 more respectful, diverse, and peaceful society. 9 Sec. 2. NEW SECTION . 421.62 Private educational institution 10 tax benefits —— protection of the free exercise of religious 11 beliefs and moral convictions. 12 1. For purposes of this section, unless otherwise required 13 by the context: 14 a. “Private educational institution” includes a private 15 elementary or secondary school in the state, or a private 16 postsecondary educational institution in the state. 17 b. “Tax benefit” means an exclusion from the operation 18 or collection of a tax imposed in this state, including tax 19 credits, exemptions, deductions, rebates, and refunds. 20 2. Notwithstanding any other provision of state law to 21 the contrary, if a provision of the Code grants a tax benefit 22 that applies to, or is dependent upon, a private educational 23 institution that is recognized as nonprofit, or exempt from 24 federal taxation under section 501(a) of the Internal Revenue 25 Code, such tax benefit shall not be disallowed on or after the 26 effective date of this Act because the private educational 27 institution believes, acts, or teaches in accordance with a 28 religious belief or moral conviction that marriage is or should 29 be recognized as the union of one man and one woman, or that 30 sexual relations are properly reserved to such marriage, or 31 because the private educational institution was disallowed a 32 tax exemption under section 501(a) of the Internal Revenue Code 33 on the basis of those beliefs, acts, or teachings. 34 3. The protection of tax benefits provided in this section 35 -2- LSB 5029XS (2) 86 mm/sc 2/ 7
S.F. 2044 applies to but is not limited to the following provisions: 1 a. The redevelopment tax credits under sections 15.291 2 through 15.295. 3 b. The workforce housing tax incentives under sections 4 15.351 through 15.356. 5 c. The exemption from the fee for new registration under 6 section 321.105A, subsection 2, paragraph “c” , subparagraphs 7 (1) and (21), and subsection 3, paragraph “f” . 8 d. The historic preservation and cultural and entertainment 9 district tax credit under chapter 404A. 10 e. The charitable contribution deduction in section 422.9, 11 subsection 2. The amount of contributions that would have been 12 deductible as a charitable contribution under section 170 of 13 the Internal Revenue Code but for the fact that the private 14 educational institution that was the recipient or beneficiary 15 of the contribution was disallowed a tax exemption under 16 section 501(a) of the Internal Revenue Code for the reason 17 described in subsection 2 of this section, shall be allowed 18 as a deductible charitable contribution under section 422.9, 19 subsection 2. 20 f. The school tuition organization tax credit under section 21 422.11S. 22 g. The charitable conservation contribution tax credit under 23 sections 422.11W and 422.33, subsection 25. 24 h. The tuition tax credit under section 422.12, subsection 25 2, paragraph “b” . 26 i. The exemption from corporate income tax under section 27 422.34, subsection 2. 28 j. The charitable contribution deduction in determining 29 federal taxable income of a corporation or financial 30 institution for purposes of the net income computation under 31 section 422.35 or 422.61, as applicable. A corporation or 32 financial institution is allowed an additional subtraction 33 in computing net income equal to the amount of contributions 34 that would have been deductible as a charitable contribution 35 -3- LSB 5029XS (2) 86 mm/sc 3/ 7
S.F. 2044 under section 170 of the Internal Revenue Code for purposes 1 of computing federal taxable income but for the fact that the 2 private educational institution that was the recipient or 3 beneficiary of the contribution was disallowed a tax exemption 4 under section 501(a) of the Internal Revenue Code for the 5 reason described in subsection 2 of this section. 6 k. The sales tax exemptions in section 423.3, subsections 7 17, 78, 80, and 89. 8 l. The sales tax refunds in section 423.4, subsections 1 9 and 6. 10 m. The property tax exemptions in section 427.1, subsections 11 7 and 8. 12 n. The inheritance tax exemption in section 450.4, 13 subsection 2. Property that passes for a purpose that would 14 have qualified as a charitable, educational, or religious 15 purpose as defined in sections 170(c) and 2055 of the Internal 16 Revenue Code but for the fact that the private educational 17 institution that was the recipient or beneficiary of the 18 property was disallowed a tax exemption under section 501(a) 19 of the Internal Revenue Code for the reason described in 20 subsection 2 of this section shall be considered exempt from 21 inheritance tax under section 450.4, subsection 2. 22 4. This section shall be construed in favor of a broad 23 protection of free exercise of religious beliefs and moral 24 convictions, to the maximum extent permitted by the terms of 25 this section and the Constitution of the State of Iowa and the 26 Constitution of the United States. 27 5. The protection of free exercise of religious beliefs 28 and moral convictions afforded by this section are in addition 29 to the protections provided under federal law, state law, and 30 the Constitution of the State of Iowa and the Constitution of 31 the United States. This section shall not be construed to 32 preempt or repeal any state or local law that is equally or 33 more protective of free exercise of religious beliefs or moral 34 convictions, and this section shall not be construed to narrow 35 -4- LSB 5029XS (2) 86 mm/sc 4/ 7
S.F. 2044 the meaning or application of any state or local law protecting 1 free exercise of religious beliefs or moral convictions. 2 6. If any provision of this section or the application 3 thereof to any person or circumstances is held invalid, the 4 invalidity shall not affect other provisions or applications 5 of this section which can be given effect without the invalid 6 provisions or application and, to this end, the provisions of 7 this section are severable. 8 Sec. 3. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 9 immediate importance, takes effect upon enactment. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill protects tax benefits of private nonprofit 14 educational institutions from being disallowed because of 15 certain religious beliefs and moral convictions. The bill also 16 makes several findings, including but not limited to findings 17 related to the state interest in protecting tax benefits of 18 private nonprofit educational institutions, and in protecting 19 and promoting the free exercise of religious beliefs and moral 20 convictions about marriage. 21 The bill provides that notwithstanding any other provision 22 of state law to the contrary, if a tax benefit is available 23 under Iowa law that applies to, or is dependent upon, a private 24 educational institution that is recognized as nonprofit, or 25 exempt from federal taxation under Internal Revenue Code (IRC) 26 §501(a), such tax benefit shall not be disallowed on or after 27 the effective date of the bill because the private educational 28 institution believes, acts, or teaches in accordance with a 29 religious belief or moral conviction that marriage is or should 30 be recognized as the union of one man and one woman, or that 31 sexual relations are properly reserved to such marriage, or 32 because the private educational institution was disallowed a 33 tax exemption under IRC §501(a) on the basis of those beliefs, 34 acts, or teachings. “Private educational institution” and “tax 35 -5- LSB 5029XS (2) 86 mm/sc 5/ 7
S.F. 2044 benefit” are both defined in the bill. 1 The bill provides a nonexhaustive list of tax benefits to 2 which the protection from disallowance applies and in certain 3 cases provides for how those tax benefits shall be administered 4 when the protection from disallowance becomes applicable. 5 The nonexhaustive list includes the redevelopment tax 6 credits, the workforce housing tax incentives, several 7 exemptions from the fee for new registration, the historic 8 preservation and cultural and entertainment district tax 9 credit, the school tuition organization tax credit, the 10 charitable conservation contribution tax credit, the tuition 11 tax credit, the exemption from the corporate income tax, 12 several sales tax exemptions and refunds, several property tax 13 exemptions, the charitable contribution deductions under the 14 individual and corporate income tax and franchise tax, and the 15 charitable contribution exemption under the inheritance tax. 16 With regard to charitable contributions, the bill provides 17 that contributions or bequests that would have qualified as 18 tax-deductible charitable contributions under the IRC but for 19 the fact that the private educational institution that was the 20 recipient or beneficiary of the property was disallowed a tax 21 exemption under IRC §501(a) for believing, acting, or teaching 22 in a way described in the bill, shall be considered deductible 23 contributions under the individual and corporate income tax 24 and franchise tax, and shall be considered exempt under the 25 inheritance tax. 26 The bill is to be construed in favor of a broad protection 27 of free exercise of religious beliefs and moral convictions, 28 to the maximum extent permitted by the terms of the bill and 29 the Constitutions of the State of Iowa and of the United 30 States. The protection of free exercise of religious beliefs 31 and moral convictions afforded by the bill are in addition to 32 the protections provided under federal law, state law, and the 33 Constitutions of the State of Iowa and of the United States, 34 and the bill is not to be construed to preempt or repeal any 35 -6- LSB 5029XS (2) 86 mm/sc 6/ 7
S.F. 2044 state or local law that is equally or more protective of free 1 exercise of religious beliefs or moral convictions or to narrow 2 the meaning or application of any state or local law protecting 3 free exercise of religious beliefs or moral convictions. 4 The provisions of the bill are severable. The bill takes 5 effect upon enactment. 6 -7- LSB 5029XS (2) 86 mm/sc 7/ 7