Senate File 2137 - Introduced SENATE FILE 2137 BY FEENSTRA , ROZENBOOM , SINCLAIR , SCHULTZ , SEGEBART , GARRETT , KRAAYENBRINK , SHIPLEY , ANDERSON , JOHNSON , ZUMBACH , CHAPMAN , SCHNEIDER , WHITVER , GUTH , COSTELLO , BREITBACH , KAPUCIAN , CHELGREN , BEHN , DIX , BERTRAND , SMITH , and ZAUN A BILL FOR An Act temporarily updating the Code references to the Internal 1 Revenue Code and decoupling from certain federal bonus 2 depreciation provisions, and including effective date and 3 retroactive applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5654XS (3) 86 mm/sc
S.F. 2137 Section 1. INTERNAL REVENUE CODE REFERENCES FOR 1 2015. Notwithstanding the definition of “Internal Revenue 2 Code” in section 15.335, subsection 7, section 422.3, 3 subsection 5, section 422.10, subsection 3, section 422.32, 4 subsection 1, and section 422.33, subsection 5, Code 2016, 5 the following shall apply for the period beginning January 1, 6 2015, and ending December 31, 2015, and for tax years beginning 7 during the 2015 calendar year: 8 1. The definition of “Internal Revenue Code” for purposes 9 of section 15.335, subsection 7, section 422.10, subsection 3, 10 and section 422.33, subsection 5, Code 2016, and for purposes 11 of references in the 2016 Iowa Code and 2016 Iowa Acts to the 12 definition of “Internal Revenue Code” in those sections, shall 13 mean the Internal Revenue Code in effect on January 1, 2016. 14 2. The definition of “Internal Revenue Code” for purposes 15 of sections 422.3 and 422.32, Code 2016, and for purposes of 16 references in the 2016 Iowa Code and 2016 Iowa Acts to the 17 definition of “Internal Revenue Code” in those sections, shall 18 mean the Internal Revenue Code of 1954, prior to the date of 19 its redesignation as the Internal Revenue Code of 1986 by the 20 Tax Reform Act of 1986, or means the Internal Revenue Code of 21 1986 as amended to and including January 1, 2016. 22 Sec. 2. DEDUCTION FOR STATE SALES AND USE TAX FOR 23 2015. Notwithstanding section 422.9, subsection 2, paragraph 24 “i”, Code 2016, the deduction for state sales and use taxes is 25 allowable under section 422.9 for tax years beginning during 26 the 2015 calendar year, but only if the taxpayer elected to 27 deduct the state sales and use taxes in lieu of state income 28 taxes under section 164 of the Internal Revenue Code. The 29 deduction for state sales and use taxes is not allowed if the 30 taxpayer has taken the deduction for state income taxes or 31 claimed the standard deduction under section 63 of the Internal 32 Revenue Code. 33 Sec. 3. BONUS DEPRECIATION FOR 2015. 34 1. Notwithstanding section 1 of this Act, or any other 35 -1- LSB 5654XS (3) 86 mm/sc 1/ 4
S.F. 2137 provision of law to the contrary, the additional first-year 1 depreciation allowance authorized in section 168(k) of the 2 Internal Revenue Code, as enacted by Pub. L. No. 114-113, §143, 3 does not apply in computing net income for state tax purposes 4 for tax years ending on or after January 1, 2015, but before 5 January 1, 2016. If the taxpayer has taken the additional 6 first-year depreciation allowance for purposes of computing 7 federal adjusted gross income or federal taxable income, as 8 the case may be, then the taxpayer, when computing net income 9 for purposes of the individual income tax under section 422.7 10 or the corporation income tax or franchise tax under section 11 422.35, shall make the adjustments described in section 422.7, 12 subsection 39A, paragraphs “a” through “c”, Code 2016, or 13 described in section 422.35, subsection 19A, paragraphs “a” 14 through “c”, Code 2016, as applicable. 15 2. In addition to the requirements of section 422.5, 16 subsection 2, paragraph “b”, subparagraph (1), Code 2016, 17 for purposes of the state alternative minimum taxable income 18 calculation in section 422.5, subsection 2, paragraph “b”, 19 subparagraph (1), to the extent that any preference or 20 adjustment is determined by an individual’s federal adjusted 21 gross income, the individual’s federal adjusted gross income is 22 computed in accordance with subsection 1 of this section for 23 tax years beginning during the 2015 calendar year. 24 3. In addition to the requirements of section 422.9, 25 subsection 2, paragraph “h”, Code 2016, for purposes of 26 calculating the deductions in section 422.9 that are authorized 27 under the Internal Revenue Code, and to the extent that 28 any such deduction is determined by an individual’s federal 29 adjusted gross income, the individual’s federal adjusted gross 30 income is computed in accordance with subsection 1 of this 31 section for tax years beginning during the 2015 calendar year. 32 Sec. 4. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 33 immediate importance, takes effect upon enactment. 34 Sec. 5. RETROACTIVE APPLICABILITY. This Act applies 35 -2- LSB 5654XS (3) 86 mm/sc 2/ 4
S.F. 2137 retroactively to January 1, 2015. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanation’s substance by the members of the general assembly. 4 This bill updates for 2015 the Iowa Code references to the 5 Internal Revenue Code to make federal income tax revisions 6 enacted by Congress in 2015 applicable for a certain period of 7 time, to allow the deduction for state sales and use tax, and 8 to decouple with certain bonus depreciation provisions. 9 INTERNAL REVENUE CODE REFERENCES. The bill provides that 10 notwithstanding several Code provisions as specified in the 11 bill, the definitions of “Internal Revenue Code” in those Code 12 provisions and, by internal reference, in other sections of the 13 Iowa Code and Iowa Acts shall mean the Internal Revenue Code 14 in effect on, or as amended to and including, January 1, 2016. 15 This definition change applies only to the period beginning 16 January 1, 2015, and ending December 31, 2015, and for tax 17 years beginning during the 2015 calendar year. 18 The affected Code provisions include Code sections 422.3 19 and 422.32, general definition sections in the chapter of the 20 Code that governs corporate and individual income tax and the 21 franchise tax, and Code sections 15.335, 422.10, and 422.33, 22 which contain references to the Internal Revenue Code for the 23 state research activities credit for individuals, corporations, 24 and corporations in economic development areas. 25 Code section 422.9 provides individuals a deduction from 26 net income for state sales and use taxes if the individual 27 chose to deduct sales and use tax in lieu of state income taxes 28 or the standard deduction for federal income tax purposes. 29 This deduction was set to expire under both federal and Iowa 30 law for tax years beginning on or after January 1, 2015. The 31 federal Protecting Americans from Tax Hikes Act of 2015 made 32 the federal deduction permanent. The bill allows the Iowa 33 deduction for tax years beginning during the 2015 calendar 34 year. 35 -3- LSB 5654XS (3) 86 mm/sc 3/ 4
S.F. 2137 BONUS DEPRECIATION. The bill decouples, for Iowa income tax 1 purposes for tax years ending on or after January 1, 2015, but 2 before January 1, 2016, from the federal additional first-year 3 depreciation allowance in section 168(k) of the Internal 4 Revenue Code (bonus depreciation) which was modified and 5 extended through 2019 by the federal Protecting Americans from 6 Tax Hikes Act of 2015. Taxpayers who claim bonus depreciation 7 for federal tax purposes are, for the applicable tax year, 8 required to add such depreciation amounts back to Iowa net 9 income, but are then allowed under existing state law to deduct 10 the amount of depreciation that would otherwise be allowable 11 under federal law, without regard to the bonus depreciation 12 allowance. 13 Under current law, taxpayers are in some instances required, 14 when calculating alternative minimum tax under Code section 15 422.5(2) and itemized deductions under Code section 422.9(2), 16 to recompute their federal adjusted gross income to take 17 into account the fact that Iowa has decoupled from bonus 18 depreciation. The bill provides that taxpayers must make those 19 same adjustments to federal adjusted gross income for tax year 20 2015 to account for the fact that Iowa has decoupled from bonus 21 depreciation as described above. 22 The bill takes effect upon enactment and applies 23 retroactively to January 1, 2015. 24 -4- LSB 5654XS (3) 86 mm/sc 4/ 4