Senate Study Bill 1059 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF REVENUE BILL) A BILL FOR An Act updating the Code references to the Internal Revenue 1 Code and decoupling from certain federal bonus depreciation 2 provisions, and including effective date and retroactive 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1308XD (2) 86 mm/sc
S.F. _____ H.F. _____ DIVISION I 1 INTERNAL REVENUE CODE REFERENCES 2 Section 1. Section 15.335, subsection 7, paragraph b, Code 3 2015, is amended to read as follows: 4 b. For purposes of this section , “Internal Revenue Code” 5 means the Internal Revenue Code in effect on January 1, 2014 6 2015 . 7 Sec. 2. Section 422.3, subsection 5, Code 2015, is amended 8 to read as follows: 9 5. “Internal Revenue Code” means the Internal Revenue Code 10 of 1954, prior to the date of its redesignation as the Internal 11 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 12 the Internal Revenue Code of 1986 as amended to and including 13 January 1, 2014 2015 . 14 Sec. 3. Section 422.9, subsection 2, paragraph i, Code 2015, 15 is amended to read as follows: 16 i. The deduction for state sales and use taxes is allowable 17 only if the taxpayer elected to deduct the state sales and use 18 taxes in lieu of state income taxes under section 164 of the 19 Internal Revenue Code. A deduction for state sales and use 20 taxes is not allowed if the taxpayer has taken the deduction 21 for state income taxes or claimed the standard deduction under 22 section 63 of the Internal Revenue Code. This paragraph 23 applies to taxable years beginning after December 31, 2003, and 24 before January 1, 2008, and to taxable years beginning after 25 December 31, 2009, and before January 1, 2014 2015 . 26 Sec. 4. Section 422.10, subsection 3, paragraph b, Code 27 2015, is amended to read as follows: 28 b. For purposes of this section , “Internal Revenue Code” 29 means the Internal Revenue Code in effect on January 1, 2014 30 2015 . 31 Sec. 5. Section 422.32, subsection 1, paragraph h, Code 32 2015, is amended to read as follows: 33 h. “Internal Revenue Code” means the Internal Revenue Code 34 of 1954, prior to the date of its redesignation as the Internal 35 -1- LSB 1308XD (2) 86 mm/sc 1/ 4
S.F. _____ H.F. _____ Revenue Code of 1986 by the Tax Reform Act of 1986, or means 1 the Internal Revenue Code of 1986 as amended to and including 2 January 1, 2014 2015 . 3 Sec. 6. Section 422.33, subsection 5, paragraph e, 4 subparagraph (2), Code 2015, is amended to read as follows: 5 (2) For purposes of this subsection , “Internal Revenue Code” 6 means the Internal Revenue Code in effect on January 1, 2014 7 2015 . 8 Sec. 7. EFFECTIVE UPON ENACTMENT. This division of this 9 Act, being deemed of immediate importance, takes effect upon 10 enactment. 11 Sec. 8. RETROACTIVE APPLICABILITY. This division of this 12 Act applies retroactively to January 1, 2014, for tax years 13 beginning on or after that date. 14 DIVISION II 15 BONUS DEPRECIATION 16 Sec. 9. Section 422.7, subsection 39A, unnumbered paragraph 17 1, Code 2015, is amended to read as follows: 18 The additional first-year depreciation allowance authorized 19 in section 168(k) of the Internal Revenue Code, as enacted by 20 Pub. L. No. 110-185, §103, Pub. L. No. 111-5, §1201, Pub. L. 21 No. 111-240, §2022, Pub. L. No. 111-312, §401, and Pub. L. No. 22 112-240, §331, and Pub. L. No. 113-295, §125, does not apply in 23 computing net income for state tax purposes. If the taxpayer 24 has taken the additional first-year depreciation allowance 25 for purposes of computing federal adjusted gross income, then 26 the taxpayer shall make the following adjustments to federal 27 adjusted gross income when computing net income for state tax 28 purposes: 29 Sec. 10. Section 422.35, subsection 19A, unnumbered 30 paragraph 1, Code 2015, is amended to read as follows: 31 The additional first-year depreciation allowance authorized 32 in section 168(k) of the Internal Revenue Code, as enacted by 33 Pub. L. No. 110-185, §103, Pub. L. No. 111-5, §1201, Pub. L. 34 No. 111-240, §2022, Pub. L. No. 111-312, §401, and Pub. L. No. 35 -2- LSB 1308XD (2) 86 mm/sc 2/ 4
S.F. _____ H.F. _____ 112-240, §331, and Pub. L. No. 113-295, §125, does not apply in 1 computing net income for state tax purposes. If the taxpayer 2 has taken the additional first-year depreciation allowance for 3 purposes of computing federal taxable income, then the taxpayer 4 shall make the following adjustments to federal taxable income 5 when computing net income for state tax purposes: 6 Sec. 11. EFFECTIVE UPON ENACTMENT. This division of this 7 Act, being deemed of immediate importance, takes effect upon 8 enactment. 9 Sec. 12. RETROACTIVE APPLICABILITY. This division of this 10 Act applies retroactively to January 1, 2014, for tax years 11 ending on or after that date. 12 EXPLANATION 13 The inclusion of this explanation does not constitute agreement with 14 the explanation’s substance by the members of the general assembly. 15 This bill updates the Iowa Code references to the Internal 16 Revenue Code to make federal income tax revisions enacted by 17 Congress in 2014 applicable for Iowa income tax purposes, and 18 decouples with certain bonus depreciation provisions. 19 DIVISION I —— INTERNAL REVENUE CODE REFERENCES. The 20 division amends Code sections 422.3 and 422.32, general 21 definition sections in the chapter of the Code that governs 22 corporate and individual income tax and the franchise tax 23 on financial institutions, to update the references to the 24 Internal Revenue Code. 25 The division amends Code sections 15.335, 422.10, and 422.33 26 to update the references to the Internal Revenue Code for the 27 state research activities credit for individuals, corporations, 28 and corporations in economic development areas to include the 29 federal changes to the research activities credit and the 30 alternative simplified research activities credit. 31 Code section 422.9 provides individuals a deduction from net 32 income for state sales and use taxes if the individual chose 33 to deduct sales and use tax in lieu of state income taxes or 34 the standard deduction for federal income tax purposes. This 35 -3- LSB 1308XD (2) 86 mm/sc 3/ 4
S.F. _____ H.F. _____ deduction was set to expire under both federal and Iowa law for 1 tax years beginning on or after January 1, 2014. The federal 2 Tax Increase Prevention Act of 2014 extended the federal 3 deduction for the 2014 tax year. This division extends the 4 Iowa deduction for the 2014 tax year. 5 Division I takes effect upon enactment and applies 6 retroactively to January 1, 2014, for tax years beginning on 7 or after that date. 8 DIVISION II —— BONUS DEPRECIATION. The division decouples, 9 for Iowa income tax purposes, from the federal additional 10 first-year depreciation allowance in section 168(k) of the 11 Internal Revenue Code which was extended through 2014 by the 12 federal Tax Increase Prevention Act of 2014. 13 Division II takes effect upon enactment and applies 14 retroactively to January 1, 2014, for tax years ending on or 15 after that date. 16 -4- LSB 1308XD (2) 86 mm/sc 4/ 4