S.F. 481 DIVISION I 1 REPEAL OF THE INDIVIDUAL INCOME TAX 2 Section 1. Section 15.293A, subsection 1, paragraph a, Code 3 2015, is amended to read as follows: 4 a. A redevelopment tax credit shall be allowed against 5 the taxes imposed in chapter 422, divisions II, III , and V , 6 and in chapter 432 , and against the moneys and credits tax 7 imposed in section 533.329 , for a portion of a taxpayer’s 8 equity investment, as provided in subsection 3 , in a qualifying 9 redevelopment project. 10 Sec. 2. Section 15.293A, subsection 1, paragraph b, Code 11 2015, is amended by striking the paragraph. 12 Sec. 3. Section 15.293A, subsection 2, paragraphs c and f, 13 Code 2015, are amended to read as follows: 14 c. The tax credit certificate, unless rescinded by the 15 authority, shall be accepted by the department of revenue as 16 payment for taxes imposed pursuant to chapter 422, divisions 17 II, III , and V , and in chapter 432 , and for the moneys and 18 credits tax imposed in section 533.329 , subject to any 19 conditions or restrictions placed by the authority upon 20 the face of the tax credit certificate and subject to the 21 limitations of this section . 22 f. A tax credit shall not be claimed by a transferee 23 under this section until a replacement tax credit certificate 24 identifying the transferee as the proper holder has been 25 issued. The transferee may use the amount of the tax credit 26 transferred against the taxes imposed in chapter 422, divisions 27 II, III , and V , and in chapter 432 , and against the moneys and 28 credits tax imposed in section 533.329 , for any tax year the 29 original transferor could have claimed the tax credit. Any 30 consideration received for the transfer of the tax credit shall 31 not be included as income under chapter 422, divisions II, III , 32 and V . Any consideration paid for the transfer of the tax 33 credit shall not be deducted from income under chapter 422, 34 divisions II, III , and V . 35 -1- LSB 1746XS (5) 86 mm/sc 1/ 34

S.F. 481 Sec. 4. Section 15.293A, subsection 4, Code 2015, is amended 1 to read as follows: 2 4. For purposes of individual and corporate income taxes and 3 the franchise tax, the increase in the basis of the redeveloped 4 property that would otherwise result from the qualified 5 redevelopment costs shall be reduced by the amount of the 6 credit computed under this part. 7 Sec. 5. Section 15.333, subsection 1, Code 2015, is amended 8 to read as follows: 9 1. An eligible business may claim a tax credit equal to a 10 percentage of the new investment directly related to new jobs 11 created or retained by the project. The tax credit shall be 12 amortized equally over five calendar years. The tax credit 13 shall be allowed against taxes imposed under chapter 422, 14 division II, III , or V , and against the moneys and credits tax 15 imposed in section 533.329 . If the business is a partnership, 16 S corporation, limited liability company, cooperative organized 17 under chapter 501 and filing as a partnership for federal tax 18 purposes, or estate or trust electing to have the income taxed 19 directly to the individual, an individual may claim the tax 20 credit allowed. The amount claimed by the individual shall 21 be based upon the pro rata share of the individual’s earnings 22 of the partnership, S corporation, limited liability company, 23 cooperative organized under chapter 501 and filing as a 24 partnership for federal tax purposes, or estate or trust. The 25 percentage shall be determined as provided in section 15.335A . 26 Any tax credit in excess of the tax liability for the tax year 27 may be credited to the tax liability for the following seven 28 years or until depleted, whichever occurs first. 29 Sec. 6. Section 15.335, subsection 6, Code 2015, is amended 30 by striking the subsection. 31 Sec. 7. Section 15.355, subsection 3, paragraph b, Code 32 2015, is amended to read as follows: 33 b. The tax credit shall be allowed against the taxes imposed 34 in chapter 422, divisions II, III , and V , and in chapter 432 , 35 -2- LSB 1746XS (5) 86 mm/sc 2/ 34

S.F. 481 and against the moneys and credits tax imposed in section 1 533.329 . 2 Sec. 8. Section 15.355, subsection 3, paragraph c, Code 3 2015, is amended by striking the paragraph. 4 Sec. 9. Section 15.355, subsection 3, paragraph e, 5 subparagraphs (3) and (6), Code 2015, are amended to read as 6 follows: 7 (3) The tax credit certificate, unless rescinded by the 8 authority, shall be accepted by the department of revenue as 9 payment for taxes imposed pursuant to chapter 422, divisions 10 II, III , and V , and in chapter 432 , and for the moneys and 11 credits tax imposed in section 533.329 , subject to any 12 conditions or restrictions placed by the authority upon 13 the face of the tax credit certificate and subject to the 14 limitations of this program. 15 (6) A tax credit shall not be claimed by a transferee 16 under this section until a replacement tax credit certificate 17 identifying the transferee as the proper holder has been 18 issued. The transferee may use the amount of the tax credit 19 transferred against the taxes imposed in chapter 422, divisions 20 II, III , and V , and in chapter 432 , and against the moneys and 21 credits tax imposed in section 533.329 , for any tax year the 22 original transferor could have claimed the tax credit. Any 23 consideration received for the transfer of the tax credit shall 24 not be included as income under chapter 422, divisions II, III , 25 and V . Any consideration paid for the transfer of the tax 26 credit shall not be deducted from income under chapter 422, 27 divisions II, III , and V . 28 Sec. 10. Section 15.355, subsection 3, paragraph f, Code 29 2015, is amended to read as follows: 30 f. For purposes of the individual and corporate income 31 taxes and the franchise tax, the increase in the basis of the 32 property that would otherwise result from the qualifying new 33 investment shall be reduced by the amount of the tax credit 34 computed under this subsection . 35 -3- LSB 1746XS (5) 86 mm/sc 3/ 34

S.F. 481 Sec. 11. Section 15E.43, subsection 1, paragraph a, Code 1 2015, is amended to read as follows: 2 a. For tax years beginning on or after January 1, 2002, 3 a tax credit shall be allowed against the taxes imposed in 4 chapter 422, divisions II, III , and V , and in chapter 432 , and 5 against the moneys and credits tax imposed in section 533.329 , 6 for a portion of a taxpayer’s equity investment, as provided 7 in subsection 2 , in a qualifying business or a community-based 8 seed capital fund. An individual may claim a tax credit 9 under this paragraph of a partnership, limited liability 10 company, S corporation, estate, or trust electing to have 11 income taxed directly to the individual. The amount claimed 12 by the individual shall be based upon the pro rata share of the 13 individual’s earnings from the partnership, limited liability 14 company, S corporation, estate, or trust. 15 Sec. 12. Section 15E.43, subsection 1, paragraph c, Code 16 2015, is amended by striking the paragraph. 17 Sec. 13. Section 15E.44, subsection 4, Code 2015, is amended 18 to read as follows: 19 4. After verifying the eligibility of a qualifying 20 business, the authority shall issue a tax credit certificate 21 to be included with the equity investor’s tax return. The tax 22 credit certificate shall contain the taxpayer’s name, address, 23 tax identification number, the amount of credit, the name of 24 the qualifying business, and other information required by the 25 department of revenue. The tax credit certificate, unless 26 rescinded by the authority, shall be accepted by the department 27 of revenue as payment for taxes imposed pursuant to chapter 28 422, divisions II , III , and V , and in chapter 432 , and for the 29 moneys and credits tax imposed in section 533.329 , subject to 30 any conditions or restrictions placed by the authority upon 31 the face of the tax credit certificate and subject to the 32 limitations of section 15E.43 . 33 Sec. 14. Section 15E.45, subsection 4, Code 2015, is amended 34 to read as follows: 35 -4- LSB 1746XS (5) 86 mm/sc 4/ 34

S.F. 481 4. After verifying the eligibility of the community-based 1 seed capital fund, the authority shall issue a tax credit 2 certificate to be included with the taxpayer’s tax return. 3 The tax credit certificate shall contain the taxpayer’s name, 4 address, tax identification number, the amount of the tax 5 credit, the name of the community-based seed capital fund, and 6 other information required by the department of revenue. The 7 tax credit certificate, unless rescinded by the authority, 8 shall be accepted by the department of revenue or a local 9 taxing district, as applicable, as payment for taxes imposed 10 pursuant to chapter 422, divisions II, III , and V , and chapter 11 432 , and as payment for the moneys and credits tax imposed 12 pursuant to section 533.329 , subject to any conditions or 13 restrictions placed by the authority on the face of the tax 14 credit certificate and subject to the limitations of section 15 15E.43 . 16 Sec. 15. Section 15E.52, subsection 2, paragraph a, Code 17 2015, is amended to read as follows: 18 a. A tax credit shall be allowed against the taxes imposed 19 in chapter 422, divisions II, III , and V , and in chapter 432 , 20 and against the moneys and credits tax imposed in section 21 533.329 , for a portion of a taxpayer’s equity investment in the 22 form of cash in an innovation fund. 23 Sec. 16. Section 15E.52, subsection 2, paragraph b, Code 24 2015, is amended by striking the paragraph. 25 Sec. 17. Section 15E.62, subsection 8, Code 2015, is amended 26 to read as follows: 27 8. “Tax credit” means a contingent tax credit issued 28 pursuant to section 15E.66 that is available against tax 29 liabilities imposed by chapter 422, divisions II, III , and 30 V , and by chapter 432 and against the moneys and credits tax 31 imposed by section 533.329 . 32 Sec. 18. Section 15E.66, subsection 1, Code 2015, is amended 33 to read as follows: 34 1. The board may issue certificates and related tax credits 35 -5- LSB 1746XS (5) 86 mm/sc 5/ 34

S.F. 481 to designated investors which, if redeemed for the maximum 1 possible amount, shall not exceed a total aggregate of sixty 2 million dollars of tax credits. The certificates shall be 3 issued contemporaneously with a commitment to invest in the 4 Iowa fund of funds by a designated investor. A certificate 5 issued by the board shall have a specific maturity date or 6 dates designated by the board and shall be redeemable only in 7 accordance with the contingencies reflected on the certificate 8 or incorporated therein by reference. A certificate and the 9 related tax credit shall be transferable by the designated 10 investor. A tax credit shall not be claimed or redeemed except 11 by a designated investor or transferee in accordance with the 12 terms of a certificate from the board. A tax credit shall not 13 be claimed for a tax year that begins earlier than the maturity 14 date or dates stated on the certificate. An individual may 15 claim the credit of a partnership, limited liability company, 16 S corporation, estate, or trust electing to have the income 17 taxed directly to the individual. The amount claimed by the 18 individual shall be based upon the pro rata share of the 19 individual’s earnings from the partnership, limited liability 20 company, S corporation, estate, or trust. Any tax credit in 21 excess of the taxpayer’s tax liability for the tax year may be 22 credited to the tax liability for the following seven years, or 23 until depleted, whichever is earlier. 24 Sec. 19. Section 15E.305, subsection 1, Code 2015, is 25 amended to read as follows: 26 1. For tax years beginning on or after January 1, 2003, 27 a tax credit shall be allowed against the taxes imposed in 28 chapter 422, divisions II, III , and V , and in chapter 432 , and 29 against the moneys and credits tax imposed in section 533.329 30 equal to twenty-five percent of a taxpayer’s endowment gift to 31 an endow Iowa qualified community foundation. An individual 32 may claim a tax credit under this section of a partnership, 33 limited liability company, S corporation, estate, or trust 34 electing to have income taxed directly to the individual. The 35 -6- LSB 1746XS (5) 86 mm/sc 6/ 34

S.F. 481 amount claimed by the individual shall be based upon the pro 1 rata share of the individual’s earnings from the partnership, 2 limited liability company, S corporation, estate, or trust. A 3 tax credit shall be allowed only for an endowment gift made to 4 an endow Iowa qualified community foundation for a permanent 5 endowment fund established to benefit a charitable cause in 6 this state. The amount of the endowment gift for which the 7 tax credit is claimed shall not be deductible in determining 8 taxable income for state income tax purposes. Any tax credit 9 in excess of the taxpayer’s tax liability for the tax year may 10 be credited to the tax liability for the following five years 11 or until depleted, whichever occurs first. A tax credit shall 12 not be carried back to a tax year prior to the tax year in which 13 the taxpayer claims the tax credit. 14 Sec. 20. Section 16.64, subsection 2, Code 2015, is amended 15 to read as follows: 16 2. Bonds and notes issued by the authority for purposes of 17 financing the beginning farmer loan program provided in section 18 16.75 are exempt from taxation by the state, and interest 19 earned on the bonds and notes is deductible in determining 20 net income for purposes of the state individual and corporate 21 income tax under divisions II and division III of chapter 422 . 22 Sec. 21. Section 16.80, subsection 1, Code 2015, is amended 23 to read as follows: 24 1. An agricultural assets transfer tax credit is allowed 25 under this section . The tax credit is allowed against the 26 taxes imposed in chapter 422, division II, as provided in 27 section 422.11M , and in chapter 422, division III, as provided 28 in section 422.33 , to facilitate the transfer of agricultural 29 assets from a taxpayer to a qualified beginning farmer. 30 Sec. 22. Section 16.80, subsection 3, Code 2015, is amended 31 by striking the subsection. 32 Sec. 23. Section 16.80, subsection 6, Code 2015, is amended 33 to read as follows: 34 6. A tax credit in excess of the taxpayer’s liability 35 -7- LSB 1746XS (5) 86 mm/sc 7/ 34

S.F. 481 for the tax year may be credited to the tax liability for 1 the following ten tax years or until depleted, whichever is 2 earlier. A tax credit shall not be carried back to a tax year 3 prior to the tax year in which the taxpayer redeems the tax 4 credit. A tax credit shall not be transferable to any other 5 person other than the taxpayer’s estate or trust upon the 6 taxpayer’s death. 7 Sec. 24. Section 16.81, subsection 1, Code 2015, is amended 8 to read as follows: 9 1. A custom farming contract tax credit is allowed under 10 this section . The tax credit is allowed against the taxes 11 imposed in chapter 422, division II, as provided in section 12 422.11M , and in chapter 422, division III, as provided in 13 section 422.33 , to encourage taxpayers who are considering 14 custom farming agricultural land located in this state to 15 negotiate with qualified beginning farmers. 16 Sec. 25. Section 16.81, subsection 3, Code 2015, is amended 17 by striking the subsection. 18 Sec. 26. Section 16.81, subsection 9, Code 2015, is amended 19 to read as follows: 20 9. A custom farming contract tax credit in excess of the 21 taxpayer’s liability for the tax year may be credited to 22 the tax liability for the following ten tax years or until 23 depleted, whichever is earlier. A tax credit shall not be 24 carried back to a tax year prior to the tax year in which the 25 taxpayer redeems the tax credit. A tax credit shall not be 26 transferable to any other person other than the taxpayer’s 27 estate or trust upon the taxpayer’s death. 28 Sec. 27. Section 28A.24, Code 2015, is amended to read as 29 follows: 30 28A.24 Exemption from taxation. 31 Since an authority is performing essential governmental 32 functions, an authority is not required to pay any taxes or 33 assessments of any kind or nature upon any property required 34 or used by it for its purposes, or any rates, fees, rentals, 35 -8- LSB 1746XS (5) 86 mm/sc 8/ 34

S.F. 481 receipts, or incomes at any time received by it, and the 1 bonds issued by an authority, their transfer, and the income, 2 including any profits made on the sale of the bonds, is 3 deductible in determining net income for the purposes of the 4 state individual and corporate income tax under chapter 422, 5 divisions II and division III , and shall not be taxed by any 6 political subdivision of this state. 7 Sec. 28. Section 35A.13, subsection 2, paragraph b, Code 8 2015, is amended to read as follows: 9 b. Moneys credited to the fund pursuant to an income tax 10 checkoff provided in chapter 422, division II , Code 2015, if 11 applicable. 12 Sec. 29. Section 68A.102, subsection 21, Code 2015, is 13 amended by striking the subsection. 14 Sec. 30. Section 85.61, subsection 6, paragraph b, Code 15 2015, is amended by striking the paragraph. 16 Sec. 31. Section 100B.13, subsection 2, paragraph a, Code 17 2015, is amended to read as follows: 18 a. Moneys credited to the fund pursuant to an income tax 19 checkoff provided in chapter 422, division II , Code 2015, if 20 applicable. 21 Sec. 32. Section 190B.103, Code 2015, is amended to read as 22 follows: 23 190B.103 From farm to food donation tax credit. 24 A from farm to food donation tax credit is allowed against 25 the taxes imposed in chapter 422, divisions II and division 26 III, as provided in this chapter . 27 Sec. 33. Section 235A.2, subsection 1, Code 2015, is amended 28 to read as follows: 29 1. A child abuse prevention program fund is created in 30 the state treasury under the control of the department of 31 human services. The fund is composed of moneys appropriated 32 or available to and obtained or accepted by the treasurer of 33 state for deposit in the fund. The fund shall include moneys 34 transferred to the fund pursuant to an income tax checkoff 35 -9- LSB 1746XS (5) 86 mm/sc 9/ 34

S.F. 481 provided in chapter 422, division II , Code 2015, if applicable. 1 All interest earned on moneys in the fund shall be credited to 2 and remain in the fund. Section 8.33 does not apply to moneys 3 in the fund. 4 Sec. 34. Section 257.19, Code 2015, is amended to read as 5 follows: 6 257.19 Instructional support funding. 7 1. The additional funding for the instructional support 8 program for a budget year is limited to an amount not exceeding 9 ten percent of the total of regular program district cost 10 for the budget year and moneys received under section 257.14 11 as a budget adjustment for the budget year. Moneys received 12 by a district for the instructional support program are 13 miscellaneous income and may be used for any general fund 14 purpose. However, moneys received by a district for the 15 instructional support program shall not be used as, or in a 16 manner which has the effect of, supplanting funds authorized to 17 be received under sections 257.41 , 257.46 , 298.2 , and 298.4 , 18 or to cover any deficiencies in funding for special education 19 instructional services resulting from the application of the 20 special education weighting plan under section 256B.9 . 21 2. Certification of a board’s intent to participate for 22 a budget year, the method of funding, and the amount to be 23 raised shall be made to the department of management not later 24 than April 15 of the base year. Funding for the instructional 25 support program shall be obtained from instructional support 26 state aid and from local funding using either an instructional 27 support property tax or a combination of an instructional 28 support property tax and an instructional support income 29 surtax . 30 The board of directors shall determine whether the 31 instructional support property tax or the combination of the 32 instructional support property tax and instructional support 33 income surtax shall be used for the local funding. Subject to 34 the limitation specified in section 298.14 , if the board elects 35 -10- LSB 1746XS (5) 86 mm/sc 10/ 34

S.F. 481 to use the combination of the instructional support property 1 tax and instructional support income surtax, for each budget 2 year the board shall determine the percent of income surtax 3 that will be imposed, expressed as full percentage points, not 4 to exceed twenty percent. 5 Sec. 35. Section 257.21, Code 2015, is amended to read as 6 follows: 7 257.21 Computation of instructional support amount. 8 1. The department of management shall establish the amount 9 of instructional support property tax to be levied and the 10 amount of instructional support income surtax to be imposed 11 by a district in accordance with the decision of the board 12 under section 257.19 for each school year for which the 13 instructional support program is authorized. The department 14 of management shall determine these amounts based upon the 15 most recent figures available for the district’s valuation of 16 taxable property , individual state income tax paid, and budget 17 enrollment in the district, and shall certify to the district’s 18 county auditor the amount of instructional support property 19 tax , and to the director of revenue the amount of instructional 20 support income surtax to be imposed if an instructional support 21 income surtax is to be imposed levied . 22 2. The instructional support income surtax shall be imposed 23 on the state individual income tax for the calendar year during 24 which the school’s budget year begins, or for a taxpayer’s 25 fiscal year ending during the second half of that calendar year 26 and after the date the board adopts a resolution to participate 27 in the program or the first half of the succeeding calendar 28 year, and shall be imposed on all individuals residing in the 29 school district on the last day of the applicable tax year. 30 As used in this section , “state individual income tax” means 31 the taxes computed under section 422.5 , less the amounts of 32 nonrefundable credits allowed under chapter 422, division II , 33 except for the Iowa taxpayers trust fund tax credit allowed 34 under section 422.11E . 35 -11- LSB 1746XS (5) 86 mm/sc 11/ 34

S.F. 481 Sec. 36. Section 257.29, subsections 3 and 4, Code 2015, are 1 amended to read as follows: 2 3. The educational improvement program shall be funded 3 by either an educational improvement property tax or by a 4 combination of an educational improvement property tax and an 5 educational improvement income surtax . The method of raising 6 the educational improvement moneys shall be determined by the 7 board. Subject to the limitation in section 298.14 , if the 8 board uses a combination of an educational improvement property 9 tax and an educational improvement income surtax, the board 10 shall determine the percent of income surtax to be imposed, 11 expressed as full percentage points, not to exceed twenty 12 percent. 13 4. The department of management shall establish the amount 14 of the educational improvement property tax to be levied or 15 the amount of the combination of the educational improvement 16 property tax to be levied and the amount of the school district 17 income surtax to be imposed for each school year that the 18 educational improvement amount is authorized. The educational 19 improvement property tax and income surtax, if an income 20 surtax is imposed, shall be levied and imposed , collected, 21 and paid to the school district in the manner provided for 22 the instructional support program in sections section 257.21 23 through 257.26 . Moneys received by a school district under the 24 educational improvement program are miscellaneous income. 25 Sec. 37. Section 279.63, subsection 2, paragraph a, Code 26 2015, is amended to read as follows: 27 a. All property tax levies , income surtaxes, and local 28 option sales taxes in place in the school district, listed by 29 type of levy, rate, amount, duration, and notification of the 30 maximum rate and amount limitations permitted by statute. 31 Sec. 38. Section 298.2, subsections 1 and 4, Code 2015, are 32 amended to read as follows: 33 1. A physical plant and equipment levy of not exceeding 34 one dollar and sixty-seven cents per thousand dollars of 35 -12- LSB 1746XS (5) 86 mm/sc 12/ 34

S.F. 481 assessed valuation in the district is established except as 1 otherwise provided in this subsection . The physical plant 2 and equipment levy consists of the regular physical plant 3 and equipment levy of not exceeding thirty-three cents per 4 thousand dollars of assessed valuation in the district and 5 a voter-approved physical plant and equipment levy of not 6 exceeding one dollar and thirty-four cents per thousand 7 dollars of assessed valuation in the district. However, the 8 voter-approved physical plant and equipment levy may consist 9 of a combination of a physical plant and equipment property 10 tax levy and a physical plant and equipment income surtax as 11 provided in subsection 4 with the maximum amount levied and 12 imposed limited to an amount that could be raised by a one 13 dollar and thirty-four cent property tax levy. 14 4. a. The board may on its own motion, and upon the 15 written request of not less than one hundred eligible electors 16 or thirty percent of the number of eligible electors voting 17 at the last regular school election, whichever is greater, 18 shall, direct the county commissioner of elections to provide 19 for submitting the proposition of levying the voter-approved 20 physical plant and equipment levy for a period of time 21 authorized by the voters at the election, not to exceed ten 22 years. The election shall be held on a date specified in 23 section 39.2, subsection 4 , paragraph “c” . The proposition is 24 adopted if a majority of those voting on the proposition at the 25 election approves it. The voter-approved physical plant and 26 equipment levy shall be funded either by a physical plant and 27 equipment property tax or by a combination of a physical plant 28 and equipment property tax and a physical plant and equipment 29 income surtax, as determined by the board . However, if the 30 board intends to enter into a rental or lease arrangement under 31 section 279.26 , or intends to enter into a loan agreement under 32 section 297.36 , only a property tax shall be levied for those 33 purposes. Subject to the limitations of section 298.14 , if 34 the board uses a combination of a physical plant and equipment 35 -13- LSB 1746XS (5) 86 mm/sc 13/ 34

S.F. 481 property tax and a physical plant and equipment surtax, for 1 each fiscal year the board shall determine the percent of 2 income surtax to be imposed expressed as full percentage 3 points, not to exceed twenty percent. 4 b. If a combination of a property tax and income surtax 5 is used, by April 15 of the previous school year, the board 6 shall certify the percent of the income surtax to be imposed 7 and the amount to be raised to the department of management 8 and the department of management shall establish the rate of 9 the property tax and income surtax for the school year. The 10 physical plant and equipment property tax and income surtax 11 shall be levied or imposed , collected, and paid to the school 12 district in the manner provided for the instructional support 13 program in sections section 257.21 through 257.26 . 14 Sec. 39. Section 404A.2, subsection 2, Code 2015, is amended 15 to read as follows: 16 2. The tax credit shall be allowed against the taxes imposed 17 in chapter 422, divisions II, III , and V , and in chapter 18 432 . An individual may claim a tax credit under this section 19 of a partnership, limited liability company, S corporation, 20 estate, or trust electing to have income taxed directly to the 21 individual. For an individual claiming a tax credit of an 22 estate or trust, the amount claimed by the individual shall be 23 based upon the pro rata share of the individual’s earnings from 24 the estate or trust. For an individual claiming a tax credit 25 of a partnership, limited liability company, or S corporation, 26 the amount claimed by the partner, member, or shareholder, 27 respectively, shall be based upon the amounts designated by 28 the eligible partnership, S corporation, or limited liability 29 company, as applicable. 30 Sec. 40. Section 404A.2, subsection 4, paragraph c, Code 31 2015, is amended to read as follows: 32 c. The tax credit certificate, unless rescinded by the 33 department, shall be accepted by the department of revenue 34 as payment for taxes imposed in chapter 422, divisions II, 35 -14- LSB 1746XS (5) 86 mm/sc 14/ 34

S.F. 481 III , and V , and in chapter 432 , subject to any conditions or 1 restrictions placed by the department or the department of 2 revenue upon the face of the tax credit certificate and subject 3 to the limitations of this program. 4 Sec. 41. Section 404A.2, subsection 5, paragraph c, Code 5 2015, is amended to read as follows: 6 c. A tax credit shall not be claimed by a transferee 7 under this section until a replacement tax credit certificate 8 identifying the transferee as the proper holder has been 9 issued. The transferee may use the amount of the tax credit 10 transferred against the taxes imposed in chapter 422, divisions 11 II, III , and V , and in chapter 432 , for any tax year the 12 original transferor could have claimed the tax credit. Any 13 consideration received for the transfer of the tax credit shall 14 not be included as income under chapter 422, divisions II, III , 15 and V . Any consideration paid for the transfer of the tax 16 credit shall not be deducted from income under chapter 422, 17 divisions II, III , and V . 18 Sec. 42. Section 422.1, subsection 2, Code 2015, is amended 19 to read as follows: 20 2. Division II Personal net income tax Provisions 21 related to the business tax on corporations . 22 Sec. 43. Section 422.11L, subsection 1, unnumbered 23 paragraph 1, Code 2015, is amended to read as follows: 24 The taxes imposed under this division , less the credits 25 allowed under section 422.12 , III shall be reduced by a solar 26 energy system tax credit equal to the sum of the following: 27 Sec. 44. Section 422.11L, subsection 3, paragraph a, Code 28 2015, is amended by striking the paragraph. 29 Sec. 45. Section 422.11N, subsection 3, unnumbered 30 paragraph 1, Code 2015, is amended to read as follows: 31 The taxes imposed under this division , less the credits 32 allowed under section 422.12 , III shall be reduced by an 33 ethanol promotion tax credit for each tax year that the 34 taxpayer is eligible to claim the tax credit under this 35 -15- LSB 1746XS (5) 86 mm/sc 15/ 34

S.F. 481 section . In order to be eligible, all of the following must 1 apply: 2 Sec. 46. Section 422.11N, subsection 9, Code 2015, is 3 amended by striking the subsection. 4 Sec. 47. Section 422.11O, subsection 2, unnumbered 5 paragraph 1, Code 2015, is amended to read as follows: 6 The taxes imposed under this division , less the credits 7 allowed under section 422.12 , III shall be reduced by an 8 E-85 gasoline promotion tax credit for each tax year that 9 the taxpayer is eligible to claim the tax credit under this 10 subsection . 11 Sec. 48. Section 422.11O, subsection 7, Code 2015, is 12 amended by striking the subsection. 13 Sec. 49. Section 422.11P, subsection 3, unnumbered 14 paragraph 1, Code 2015, is amended to read as follows: 15 The taxes imposed under this division , less the credits 16 allowed under section 422.12 , III shall be reduced by a 17 biodiesel blended fuel tax credit for each tax year that 18 the taxpayer is eligible to claim a tax credit under this 19 subsection . 20 Sec. 50. Section 422.11P, subsection 7, Code 2015, is 21 amended by striking the subsection. 22 Sec. 51. Section 422.11S, subsection 1, Code 2015, is 23 amended to read as follows: 24 1. The taxes imposed under this division , less the credits 25 allowed under section 422.12 , III shall be reduced by a 26 school tuition organization tax credit equal to sixty-five 27 percent of the amount of the voluntary cash or noncash 28 contributions made by the taxpayer during the tax year to a 29 school tuition organization, subject to the total dollar value 30 of the organization’s tax credit certificates as computed in 31 subsection 8 . The tax credit shall be claimed by use of a tax 32 credit certificate as provided in subsection 7 . 33 Sec. 52. Section 422.11S, subsections 4 and 5, Code 2015, 34 are amended by striking the subsections. 35 -16- LSB 1746XS (5) 86 mm/sc 16/ 34

S.F. 481 Sec. 53. Section 422.11S, subsection 8, paragraph a, 1 subparagraph (2), Code 2015, is amended to read as follows: 2 (2) “Total approved tax credits” means for the tax year 3 beginning in the 2006 calendar year, two million five hundred 4 thousand dollars, for the tax year beginning in the 2007 5 calendar year, five million dollars, for tax years beginning 6 on or after January 1, 2008, but before January 1, 2012, seven 7 million five hundred thousand dollars, for tax years beginning 8 on or after January 1, 2012, but before January 1, 2014, eight 9 million seven hundred fifty thousand dollars, and for tax years 10 beginning on or after January 1, 2014, twelve for tax years 11 beginning on or after January 1, 2015, three million dollars. 12 Sec. 54. Section 422.11Y, subsection 3, unnumbered 13 paragraph 1, Code 2015, is amended to read as follows: 14 The taxes imposed under this division , less the credits 15 allowed under section 422.12 , III shall be reduced by the 16 amount of the E-15 plus gasoline promotion tax credit for each 17 tax year that the taxpayer is eligible to claim a tax credit 18 under this subsection . 19 Sec. 55. Section 422.11Y, subsection 8, Code 2015, is 20 amended by striking the subsection. 21 Sec. 56. Section 422.15, subsections 2 and 3, Code 2015, are 22 amended by striking the subsections. 23 Sec. 57. Section 422.15, subsection 4, Code 2015, is amended 24 to read as follows: 25 4. Notwithstanding subsections subsection 1, 2, and 3, or 26 any other provision of this chapter , withholding of income 27 tax and any reporting requirement shall not be imposed upon 28 a person, corporation, or withholding agent or any payor of 29 deferred compensation, pensions, or annuities with regard to 30 such payments made to a nonresident of the state. 31 Sec. 58. Section 422.21, Code 2015, is amended by striking 32 the section and inserting in lieu thereof the following: 33 422.21 Form and time of return. 34 Returns shall be in the form the director prescribes, and 35 -17- LSB 1746XS (5) 86 mm/sc 17/ 34

S.F. 481 shall be filed with the department on or before the last day 1 of the fourth month after the expiration of the tax year. 2 However, cooperative associations as defined in section 6072(d) 3 of the Internal Revenue Code shall file their returns on or 4 before the fifteenth day of the ninth month following the 5 close of the taxable year and nonprofit corporations subject 6 to the unrelated business income tax imposed by section 7 422.33, subsection 1A, shall file their returns on or before 8 the fifteenth day of the fifth month following the close of 9 the taxable year. If, under the Internal Revenue Code, a 10 corporation is required to file a return covering a tax period 11 of less than twelve months, the state return shall be for the 12 same period and is due forty-five days after the due date of 13 the federal tax return, excluding any extension of time to 14 file. In case of sickness, absence, or other disability, or 15 if good cause exists, the director may allow further time for 16 filing returns. The director shall cause to be prepared blank 17 forms for the returns and shall cause them to be distributed 18 throughout the state and to be furnished upon application, 19 but failure to receive or secure the form does not relieve 20 the taxpayer from the obligation of making a return that is 21 required. The department may as far as consistent with the 22 Code draft income tax forms to conform to the income tax 23 forms of the internal revenue department of the United States 24 government. 25 Sec. 59. Section 422.22, Code 2015, is amended to read as 26 follows: 27 422.22 Supplementary returns. 28 If the director shall be of the opinion that any taxpayer 29 required under this division III to file a return has failed 30 to file such a return or to include in a return filed, either 31 intentionally or through error, items of taxable income, 32 the director may require from such taxpayer a return or 33 supplementary return in such form as the director shall 34 prescribe, of all the items of income which the taxpayer 35 -18- LSB 1746XS (5) 86 mm/sc 18/ 34

S.F. 481 received during the year for which the return is made, whether 1 or not taxable under the provisions of this division III . If 2 from a supplementary return, or otherwise, the director finds 3 that any items of income, taxable under this division III , have 4 been omitted from the original return, the director may require 5 the items so omitted to be added to the original return. Such 6 supplementary return and the correction of the original return 7 shall not relieve the taxpayer from any of the penalties to 8 which the taxpayer may be liable under any provisions of this 9 division III , whether or not the director required a return or 10 a supplementary return under this section . 11 Sec. 60. Section 422.32, Code 2015, is amended to read as 12 follows: 13 422.32 Definitions. 14 1. For the purpose of this division and unless otherwise 15 required by the context: 16 a. 1. “Affiliated group” means a group of corporations as 17 defined in section 1504(a) of the Internal Revenue Code. 18 b. 2. a. “Business income” means income arising from 19 transactions and activity in the regular course of the 20 taxpayer’s trade or business; or income from tangible and 21 intangible property if the acquisition, management, and 22 disposition of the property constitute integral parts of the 23 taxpayer’s regular trade or business operations; or gain or 24 loss resulting from the sale, exchange, or other disposition of 25 real property or of tangible or intangible personal property, 26 if the property while owned by the taxpayer was operationally 27 related to the taxpayer’s trade or business carried on in 28 Iowa or operationally related to sources within Iowa, or the 29 property was operationally related to sources outside this 30 state and to the taxpayer’s trade or business carried on in 31 Iowa; or gain or loss resulting from the sale, exchange, or 32 other disposition of stock in another corporation if the 33 activities of the other corporation were operationally related 34 to the taxpayer’s trade or business carried on in Iowa while 35 -19- LSB 1746XS (5) 86 mm/sc 19/ 34

S.F. 481 the stock was owned by the taxpayer. A taxpayer may have more 1 than one regular trade or business in determining whether 2 income is business income. 3 (1) b. It is the intent of the general assembly to treat as 4 apportionable business income all income that may be treated 5 as apportionable business income under the Constitution of the 6 United States. 7 (2) c. The filing of an Iowa income tax return on a 8 combined report basis is neither allowed nor required by this 9 paragraph “b” subsection . 10 c. 3. “Commercial domicile” means the principal place from 11 which the trade or business of the taxpayer is directed or 12 managed. 13 d. 4. “Corporation” includes joint stock companies, and 14 associations organized for pecuniary profit, and partnerships 15 and limited liability companies taxed as corporations under the 16 Internal Revenue Code. 17 e. 5. “Domestic corporation” means any corporation 18 organized under the laws of this state. 19 6. “Fiduciary” means a guardian, trustee, executor, 20 administrator, receiver, conservator, or any person, whether 21 individual or corporate, acting in any fiduciary capacity for 22 any person, trust, or estate. 23 7. “Fiscal year” means an accounting period of twelve 24 months, ending on the last day of any month other than 25 December. 26 f. 8. “Foreign corporation” means any corporation other 27 than a domestic corporation. 28 9. “Foreign country” means any jurisdiction other than one 29 embraced within the United States. The words “United States” , 30 when used in a geographical sense, include the states, the 31 District of Columbia, and the possessions of the United States. 32 g. 10. “Income from sources within this state” means income 33 from real, tangible, or intangible property located or having 34 a situs in this state. 35 -20- LSB 1746XS (5) 86 mm/sc 20/ 34

S.F. 481 11. “Income year” means the calendar year or the fiscal year 1 upon the basis of which the net income is computed under this 2 division. 3 12. “Individual” means a natural person. 4 h. 13. “Internal Revenue Code” means the Internal Revenue 5 Code of 1954, prior to the date of its redesignation as the 6 Internal Revenue Code of 1986 by the Tax Reform Act of 1986, 7 or means the Internal Revenue Code of 1986 as amended to and 8 including January 1, 2014. 9 i. 14. “Nonbusiness income” means all income other than 10 business income. 11 15. The word “paid” , for the purposes of the deductions 12 under this division, means “paid or accrued” or “paid or 13 incurred”, and the terms “paid or incurred” and “paid or 14 accrued” shall be construed according to the method of 15 accounting upon the basis of which the net income is computed 16 under this division. The term “received” , for the purpose 17 of the computation of net income under this division, means 18 “received or accrued”, and the term “received or accrued” shall 19 be construed according to the method of accounting upon the 20 basis of which the net income is computed under this division. 21 16. “Resident” applies only to individuals and includes, for 22 the purpose of determining liability to the tax imposed by this 23 division upon or with reference to the income of any tax year, 24 any individual domiciled in the state, and any other individual 25 who maintains a permanent place of abode within the state. 26 j. 17. “State” means any state of the United States, the 27 District of Columbia, the Commonwealth of Puerto Rico, any 28 territory or possession of the United States, and any foreign 29 country or political subdivision thereof. 30 18. a. “Tax year” means the calendar year, or the fiscal 31 year ending during such calendar year, upon the basis of which 32 the net income is computed under this division. 33 b. If a taxpayer has made the election provided by section 34 441, subsection “f”, of the Internal Revenue Code, “tax year” 35 -21- LSB 1746XS (5) 86 mm/sc 21/ 34

S.F. 481 means the annual period so elected, varying from fifty-two to 1 fifty-three weeks. 2 c. If the effective date or the applicability of a provision 3 of this division is expressed in terms of a tax year beginning, 4 including, or ending with reference to a specified date which 5 is the first or last day of a month, a tax year described in 6 paragraph “a” of this subsection shall be treated as beginning 7 with the first day of the calendar month beginning nearest to 8 the first day of the tax year or as ending with the last day of 9 the calendar month ending nearest to the last day of the tax 10 year. 11 k. 19. “Taxable in another state”. For purposes of 12 allocation and apportionment of income under this division , a 13 taxpayer is “taxable in another state” if: 14 (1) a. In that state the taxpayer is subject to a net 15 income tax, a franchise tax measured by net income, a franchise 16 tax for the privilege of doing business, or a corporate stock 17 tax; or 18 (2) b. That state has jurisdiction to subject the taxpayer 19 to a net income tax regardless of whether, in fact, the state 20 does or does not. 21 l. 20. “Unitary business” means a business carried on 22 partly within and partly without a state where the portion 23 of the business carried on within the state depends on or 24 contributes to the business outside the state. 25 2. The words, terms, and phrases defined in section 422.4, 26 subsections 4 to 6, 8, 9, 13, and 15 to 17 , when used in this 27 division , shall have the meanings ascribed to them in said 28 section except where the context clearly indicates a different 29 meaning. 30 Sec. 61. Section 422.33, subsection 28, Code 2015, is 31 amended to read as follows: 32 28. The taxes imposed under this division shall be reduced 33 by a school tuition organization tax credit allowed under 34 section 422.11S . The maximum amount of tax credits that 35 -22- LSB 1746XS (5) 86 mm/sc 22/ 34

S.F. 481 may be approved under this subsection for a tax year equals 1 twenty-five percent of the school tuition organization’s tax 2 credits that may be approved pursuant to section 422.11S, 3 subsection 8 , for a tax year. 4 Sec. 62. Section 422D.1, Code 2015, is amended to read as 5 follows: 6 422D.1 Authorization —— election —— imposition and repeal —— 7 use of revenues. 8 1. a. A county board of supervisors may offer for voter 9 approval any of the following taxes or a combination of the 10 following taxes: 11 (1) Local option income surtax. 12 (2) An an ad valorem property tax. 13 b. Revenues generated from these taxes the ad valorem 14 property tax shall be used for emergency medical services as 15 provided in section 422D.6 . 16 2. a. The taxes property tax for emergency medical services 17 shall only be imposed after an election at which a majority of 18 those voting on the question of imposing the tax or combination 19 of taxes specified in subsection 1 , paragraph “a” , subparagraph 20 (1) or (2), vote in favor of the question. However, the tax 21 or combination of taxes specified in subsection 1 shall not 22 be imposed on property within or on residents of a benefited 23 emergency medical services district under chapter 357F . The 24 question of imposing the tax or combination of the taxes may 25 be submitted at the regular city election, a special election, 26 or the general election. Notice of the question shall be 27 provided by publication at least sixty days before the time of 28 the election and shall identify the tax or combination of taxes 29 and the levy rate or rates, as applicable . If a majority of 30 those voting on the question approve the imposition of the tax 31 or combination of taxes , the tax or combination of taxes shall 32 be imposed as follows: 33 (1) A local option income surtax shall be imposed for tax 34 years beginning on or after January 1 of the fiscal year in 35 -23- LSB 1746XS (5) 86 mm/sc 23/ 34

S.F. 481 which the favorable election was held. 1 (2) An ad valorem property tax shall be imposed levied for 2 the fiscal year in which the election was held. 3 b. Before a county imposes an income surtax as specified 4 in subsection 1 , paragraph “a” , subparagraph (1), a benefited 5 emergency medical services district in the county shall be 6 dissolved, and the county shall be liable for the outstanding 7 obligations of the benefited district. If the benefited 8 district extends into more than one county, the county imposing 9 the income surtax shall be liable for only that portion of the 10 obligations relating to the portion of the benefited district 11 in the county. 12 3. Revenues received by the county from the taxes imposed 13 tax levied under this chapter shall be deposited into the 14 emergency medical services trust fund created pursuant to 15 section 422D.6 and shall be used as provided in that section. 16 4. Any tax or combination of taxes imposed levied under this 17 chapter shall be for a maximum period of five years. 18 Sec. 63. Section 425.23, subsection 4, paragraph b, Code 19 2015, is amended to read as follows: 20 b. The annual adjustment factor for the 1998 base year is 21 one hundred percent. For each subsequent base year, the annual 22 adjustment factor equals the annual inflation factor for the 23 calendar year, in which the base year begins, as computed in 24 section 422.4 for purposes of the individual income tax , Code 25 2015 . 26 Sec. 64. Section 476.20, subsection 3, paragraph b, Code 27 2015, is amended to read as follows: 28 b. A qualified applicant for the low income home energy 29 assistance program or the weatherization assistance program who 30 is also a “head of household”, as defined in section 422.4, 31 subsection 7 , head of household shall be promptly certified 32 by the local agency administering the applicant’s program to 33 the applicant’s public utility that the resident is a “head 34 of household” as defined in section 422.4, subsection 7 , head 35 -24- LSB 1746XS (5) 86 mm/sc 24/ 34

S.F. 481 of household and is qualified for the low income home energy 1 assistance program or weatherization assistance program. 2 Notwithstanding subsection 1 , a public utility furnishing gas 3 or electricity shall not disconnect service from November 1 4 through April 1 to a residence which has a resident that has 5 been certified under this paragraph. For purposes of this 6 paragraph, “head of household” has the same meaning as provided 7 by the Internal Revenue Code. 8 Sec. 65. Section 476B.2, Code 2015, is amended to read as 9 follows: 10 476B.2 General rule. 11 The owner of a qualified facility shall, for each 12 kilowatt-hour of qualified electricity that the owner sells 13 or uses for on-site consumption during the ten-year period 14 beginning on the date the qualified facility was originally 15 placed in service, be allowed a wind energy production tax 16 credit to the extent provided in this chapter against the tax 17 imposed in chapter 422, divisions II, III , and V, and chapter 18 432 , and may claim a refund of tax imposed by chapter 423 or 19 437A for any tax year within the time period set forth in 20 section 423.47 or 437A.14 . 21 Sec. 66. Section 476B.6, subsection 5, paragraphs a, b, and 22 c, Code 2015, are amended to read as follows: 23 a. If the tax credit application is filed by a partnership, 24 limited liability company, S corporation, estate, trust, or 25 other reporting entity all of the income of which is taxed 26 directly to its equity holders or beneficiaries, for the taxes 27 imposed under chapter 422, division II or III, the tax credit 28 certificate shall be issued directly to equity holders or 29 beneficiaries of the applicant in proportion to their pro rata 30 share of the income of such entity. The applicant shall, in 31 the application made under this section , identify its equity 32 holders or beneficiaries, and the percentage of such entity’s 33 income that is allocable to each equity holder or beneficiary. 34 b. If the tax credit applicant under this section is 35 -25- LSB 1746XS (5) 86 mm/sc 25/ 34

S.F. 481 eligible to receive renewable electricity production credits 1 authorized under section 45 of the Internal Revenue Code, 2 as amended, and the tax credit applicant is a partnership, 3 limited liability company, S corporation, estate, trust, or 4 other reporting entity all of the income of which is taxed 5 directly to its equity holders or beneficiaries, for the taxes 6 imposed under chapter 422, division II or III , the tax credit 7 certificate may be issued to a partner if the business is a 8 partnership, a shareholder if the business is an S corporation, 9 or a member if the business is a limited liability company 10 in the amounts designated by the eligible partnership, S 11 corporation, or limited liability company. In absence of 12 such designation, the credits under this section shall flow 13 through to the partners, shareholders, or members in accordance 14 with their pro rata share of the income of the entity. The 15 applicant shall, in the application made under this section , 16 identify the holders or beneficiaries that are to receive the 17 tax credit certificates and the percentage of the tax credit 18 that is allocable to each holder or beneficiary. 19 c. If an applicant under this section is eligible to 20 receive renewable electricity production credits authorized 21 under section 45 of the Internal Revenue Code, as amended, and 22 the tax credit applicant is a partnership, limited liability 23 company, S corporation, estate, trust, or other reporting 24 entity all of the income of which is taxed directly to its 25 equity holders or beneficiaries, for the taxes imposed under 26 chapter 422, division II or III , the tax credit certificates 27 and all future rights to the tax credit in this section may be 28 distributed to an equity holder or beneficiary as a liquidating 29 distribution or portion thereof, of a holder or beneficiary’s 30 interest in the applicant entity. The applicant shall, in the 31 application made under this section , designate the percentage 32 of the tax credit allocable to the liquidating equity holder 33 or beneficiary that is to receive the current and future tax 34 credit certificates under this section . 35 -26- LSB 1746XS (5) 86 mm/sc 26/ 34

S.F. 481 Sec. 67. Section 476B.7, subsection 2, Code 2015, is amended 1 to read as follows: 2 2. The tax credit shall be freely transferable. The 3 transferee may use the amount of the tax credit transferred 4 against the taxes imposed under chapter 422, divisions II, III , 5 and V , and chapter 432 for any tax year the original transferor 6 could have claimed the tax credit. The transferee may claim 7 a refund under chapter 423 or 437A for any tax year within 8 the time period set forth in section 423.47 or 437A.14 for 9 which the original transferor could have claimed a refund. 10 Any consideration received for the transfer of the tax credit 11 shall not be included as income under chapter 422, divisions 12 II, III , and V . Any consideration paid for the transfer of the 13 tax credit shall not be deducted from income under chapter 422, 14 divisions II, III , and V . 15 Sec. 68. Section 476C.4, subsection 4, paragraph a, Code 16 2015, is amended to read as follows: 17 a. If the tax credit application is filed by a partnership, 18 limited liability company, S corporation, estate, trust, or 19 other reporting entity all of the income of which is taxed 20 directly to its equity holders or beneficiaries, for the taxes 21 imposed under chapter 422, division II or III , the tax credit 22 certificate shall be issued directly to equity holders or 23 beneficiaries of the applicant in proportion to their pro rata 24 share of the income of such entity. The applicant shall, in 25 the application made under this section , identify its equity 26 holders or beneficiaries, and the percentage of such entity’s 27 income that is allocable to each equity holder or beneficiary. 28 Sec. 69. Section 476C.4, subsection 4, paragraph b, 29 subparagraph (1), Code 2015, is amended to read as follows: 30 (1) If the tax credit applicant under this section is 31 eligible to receive renewable electricity production credits 32 authorized under section 45 of the Internal Revenue Code, 33 as amended, and the tax credit applicant is a partnership, 34 limited liability company, S corporation, estate, trust, or 35 -27- LSB 1746XS (5) 86 mm/sc 27/ 34

S.F. 481 other reporting entity all of the income of which is taxed 1 directly to its equity holders or beneficiaries, for the taxes 2 imposed under chapter 422, division II or III , the tax credit 3 certificate may be issued to a partner if the business is a 4 partnership, a shareholder if the business is an S corporation, 5 or a member if the business is a limited liability company 6 in the amounts designated by the eligible partnership, S 7 corporation, or limited liability company. In absence of such 8 designation, the credits under this section shall flow through 9 to the partners, shareholders, or members in accordance with 10 their pro rata share of the income of the entity. 11 Sec. 70. Section 476C.4, subsection 4, paragraph c, 12 subparagraph (1), Code 2015, is amended to read as follows: 13 (1) If an applicant under this section is eligible to 14 receive renewable electricity production credits authorized 15 under section 45 of the Internal Revenue Code, as amended, and 16 the tax credit applicant is a partnership, limited liability 17 company, S corporation, estate, trust, or other reporting 18 entity all of the income of which is taxed directly to its 19 equity holders or beneficiaries, for the taxes imposed under 20 chapter 422, division II or III , the tax credit certificates 21 and all future rights to the tax credit in this section may be 22 distributed to an equity holder or beneficiary as a liquidating 23 distribution or portion thereof, of a holder or beneficiary’s 24 interest in the applicant entity. 25 Sec. 71. Section 476C.6, subsection 1, paragraph b, Code 26 2015, is amended to read as follows: 27 b. The transferee may use the amount of the tax credit 28 transferred against taxes imposed under chapter 422, divisions 29 II, III , and V , and chapter 432 for any tax year the original 30 transferor could have claimed the tax credit. The transferee 31 may claim a refund under chapter 423 or 437A for any tax 32 year within the time period set forth in section 423.47 or 33 437A.14 for which the original transferor could have claimed 34 the refund. Any consideration received for the transfer of 35 -28- LSB 1746XS (5) 86 mm/sc 28/ 34

S.F. 481 the tax credit shall not be included as income under chapter 1 422, divisions II, III , and V . Any consideration paid for the 2 transfer of the tax credit shall not be deducted from income 3 under chapter 422, divisions II, III , and V . 4 Sec. 72. Section 483A.1A, subsection 10, paragraph e, Code 5 2015, is amended to read as follows: 6 e. Is a member of the armed forces of the United States 7 who is serving on active duty , and claims residency in this 8 state , and has filed a state individual income tax return 9 as a resident pursuant to chapter 422, division II , for the 10 preceding tax year, or is stationed in this state. 11 Sec. 73. REPEAL. Sections 68A.601, 190B.105, 257.22 12 through 257.26, 298.14, 422.4 through 422.11F, 422.11H through 13 422.11J, 422.11M, 422.11Q, 422.11R, 422.11V, 422.11W, 422.11Z, 14 422.12, 422.12A through 422.12E, 422.12H, 422.12J through 15 422.14, 422.16, 422.17, 422.19, 422.23, 422.27, 422.31, 422D.2 16 through 422D.4, Code 2015, are repealed. 17 Sec. 74. CORRESPONDING AMENDMENTS LEGISLATION. Additional 18 legislation is required to fully implement this division of 19 this Act. The director of the department of revenue shall, in 20 compliance with section 2.16, prepare draft legislation for 21 submission to the legislative services agency, as necessary, to 22 implement the repeal of the individual income tax under this 23 division of this Act and under other provisions of law. 24 Sec. 75. APPLICABILITY. This division of this Act applies 25 to tax years beginning on or after January 1, 2016. 26 DIVISION II 27 SALES AND USE TAX 28 Sec. 76. Section 423.2, subsection 1, unnumbered paragraph 29 1, Code 2015, is amended to read as follows: 30 There is imposed a tax of six eleven percent upon the sales 31 price of all sales of tangible personal property, consisting 32 of goods, wares, or merchandise, sold at retail in the state 33 to consumers or users except as otherwise provided in this 34 subchapter . 35 -29- LSB 1746XS (5) 86 mm/sc 29/ 34

S.F. 481 Sec. 77. Section 423.2, subsections 2 and 3, Code 2015, are 1 amended to read as follows: 2 2. A tax of six eleven percent is imposed upon the sales 3 price of the sale or furnishing of gas, electricity, water, 4 heat, pay television service, and communication service, 5 including the sales price from such sales by any municipal 6 corporation or joint water utility furnishing gas, electricity, 7 water, heat, pay television service, and communication service 8 to the public in its proprietary capacity, except as otherwise 9 provided in this subchapter , when sold at retail in the state 10 to consumers or users. 11 3. A tax of six eleven percent is imposed upon the 12 sales price of all sales of tickets or admissions to places 13 of amusement, fairs, and athletic events except those of 14 elementary and secondary educational institutions. A tax 15 of six eleven percent is imposed on the sales price of an 16 entry fee or like charge imposed solely for the privilege of 17 participating in an activity at a place of amusement, fair, or 18 athletic event unless the sales price of tickets or admissions 19 charges for observing the same activity are taxable under this 20 subchapter . A tax of six eleven percent is imposed upon that 21 part of private club membership fees or charges paid for the 22 privilege of participating in any athletic sports provided club 23 members. 24 Sec. 78. Section 423.2, subsection 4, paragraph a, Code 25 2015, is amended to read as follows: 26 a. A tax of six eleven percent is imposed upon the sales 27 price derived from the operation of all forms of amusement 28 devices and games of skill, games of chance, raffles, and bingo 29 games as defined in chapter 99B , and card game tournaments 30 conducted under section 99B.7B , that are operated or conducted 31 within the state, the tax to be collected from the operator in 32 the same manner as for the collection of taxes upon the sales 33 price of tickets or admission as provided in this section . 34 Nothing in this subsection shall legalize any games of skill 35 -30- LSB 1746XS (5) 86 mm/sc 30/ 34

S.F. 481 or chance or slot-operated devices which are now prohibited by 1 law. 2 Sec. 79. Section 423.2, subsection 5, Code 2015, is amended 3 to read as follows: 4 5. There is imposed a tax of six eleven percent upon the 5 sales price from the furnishing of services as defined in 6 section 423.1 . 7 Sec. 80. Section 423.2, subsection 7, paragraph a, 8 unnumbered paragraph 1, Code 2015, is amended to read as 9 follows: 10 A tax of six eleven percent is imposed upon the sales 11 price from the sales, furnishing, or service of solid waste 12 collection and disposal service. 13 Sec. 81. Section 423.2, subsection 8, paragraph a, Code 14 2015, is amended to read as follows: 15 a. A tax of six eleven percent is imposed on the sales 16 price from sales of bundled transactions. For the purposes of 17 this subsection , a “bundled transaction” is the retail sale of 18 two or more distinct and identifiable products, except real 19 property and services to real property, which are sold for one 20 nonitemized price. A “bundled transaction” does not include 21 the sale of any products in which the sales price varies, or 22 is negotiable, based on the selection by the purchaser of the 23 products included in the transaction. 24 Sec. 82. Section 423.2, subsection 9, Code 2015, is amended 25 to read as follows: 26 9. A tax of six eleven percent is imposed upon the 27 sales price from any mobile telecommunications service, 28 including all paging services, that this state is allowed 29 to tax pursuant to the provisions of the federal Mobile 30 Telecommunications Sourcing Act, Pub. L. No. 106-252, 4 U.S.C. 31 §116 et seq. For purposes of this subsection , taxes on mobile 32 telecommunications service, as defined under the federal Mobile 33 Telecommunications Sourcing Act that are deemed to be provided 34 by the customer’s home service provider, shall be paid to 35 -31- LSB 1746XS (5) 86 mm/sc 31/ 34

S.F. 481 the taxing jurisdiction whose territorial limits encompass 1 the customer’s place of primary use, regardless of where the 2 mobile telecommunications service originates, terminates, 3 or passes through and shall in all other respects be taxed 4 in conformity with the federal Mobile Telecommunications 5 Sourcing Act. All other provisions of the federal Mobile 6 Telecommunications Sourcing Act are adopted by the state of 7 Iowa and incorporated into this subsection by reference. With 8 respect to mobile telecommunications service under the federal 9 Mobile Telecommunications Sourcing Act, the director shall, if 10 requested, enter into agreements consistent with the provisions 11 of the federal Act. 12 Sec. 83. Section 423.2, subsection 11, paragraph b, 13 subparagraph (3), Code 2015, is amended to read as follows: 14 (3) Transfer one-sixth seventeen and two thousand five 15 hundred forty-eight ten-thousandths percent of the remaining 16 revenues to the secure an advanced vision for education fund 17 created in section 423F.2 . This subparagraph (3) is repealed 18 December 31, 2029. 19 Sec. 84. Section 423.2, subsection 13, Code 2015, is amended 20 to read as follows: 21 13. The sales tax rate of six eleven percent is reduced to 22 five ten percent on January 1, 2030. 23 Sec. 85. Section 423.5, subsection 1, unnumbered paragraph 24 1, Code 2015, is amended to read as follows: 25 Except as provided in paragraph “c” , an excise tax at the 26 rate of six eleven percent of the purchase price or installed 27 purchase price is imposed on the following: 28 Sec. 86. Section 423.5, subsection 5, Code 2015, is amended 29 to read as follows: 30 5. The use tax rate of six eleven percent is reduced to five 31 ten percent on January 1, 2030. 32 Sec. 87. Section 423.43, subsection 1, paragraph b, Code 33 2015, is amended to read as follows: 34 b. Subsequent to the deposit into the general fund of 35 -32- LSB 1746XS (5) 86 mm/sc 32/ 34

S.F. 481 the state and after the transfer of such revenues collected 1 under chapter 423B , the department shall transfer one-sixth 2 one-eleventh of such remaining revenues to the secure an 3 advanced vision for education fund created in section 423F.2 . 4 This paragraph is repealed December 31, 2029. 5 Sec. 88. EFFECTIVE DATE. This division of this Act takes 6 effect January 1, 2016. 7 EXPLANATION 8 The inclusion of this explanation does not constitute agreement with 9 the explanation’s substance by the members of the general assembly. 10 This bill relates to state taxes by repealing the individual 11 income tax and increasing the state sales and use tax rates. 12 Division I repeals the individual income tax and makes 13 numerous conforming changes to the Code to remove references 14 to the individual income tax and to update or move provisions 15 of the individual income tax that are also applicable by 16 reference to the corporate income tax and the franchise tax. 17 The division also repeals the emergency medical services income 18 surtax in Code chapter 422D, the instructional support income 19 surtax in Code section 257.21, the educational improvement 20 income surtax in Code section 257.29, and the physical plant 21 and equipment income surtax in Code section 298.2, because 22 income surtax revenues will no longer be generated without the 23 state individual income tax. 24 The division provides that additional legislation is 25 required to fully implement the division and requires the 26 director of the department of revenue to prepare draft 27 legislation in compliance with Code section 2.16 for submission 28 to the legislative services agency to implement the repeal of 29 the individual income tax. 30 The division takes effect on January 1, 2016, and applies to 31 tax years beginning on or after that date. 32 Division II increases the state sales and use tax rate to 33 11 percent from 6 percent. By operation of law as provided in 34 Article VII, section 10 of the Iowa Constitution, a portion 35 -33- LSB 1746XS (5) 86 mm/sc 33/ 34

S.F. 481 (0.375 percent) of the state sales tax generated and collected 1 from the rate increase provided in this division will be 2 transferred to the natural resources and outdoor recreation 3 trust fund in Code section 461.31. The division amends the 4 transfer of state sales tax revenues to the secure an advanced 5 vision for education fund (SAVE) in Code section 423F.2 from 6 one-sixth (approximately 16.66 percent) of the revenues to 7 17.2548 percent of the revenues to ensure that SAVE receives 8 approximately the same proportion of the total sales tax 9 revenue as it did prior to the sales tax rate increase provided 10 in the division. 11 The division takes effect on January 1, 2016. 12 -34- LSB 1746XS (5) 86 mm/sc 34/ 34