Senate File 272 - Introduced SENATE FILE 272 BY McCOY A BILL FOR An Act establishing the state of Iowa higher education bank and 1 revolving loan program and fund and making appropriations 2 to the fund of amounts certified due to the elimination of 3 the deduction for federal taxes paid by certain individual 4 income taxpayers and including retroactive applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 2365XS (2) 87 gh/sc

S.F. 272 DIVISION I 1 CREATION OF STATE OF IOWA HIGHER EDUCATION BANK 2 Section 1. NEW SECTION . 525.1 Higher education revolving 3 loan program. 4 1. The treasurer of state shall administer a higher 5 education revolving loan program to provide loans to students 6 or parents of a student to finance all or a portion of the 7 cost of a student’s attendance at an institution of higher 8 education. A loan provided by the bank under this section 9 shall have a rate of interest fixed at one percent per year. 10 2. The treasurer, in consultation with the college student 11 aid commission, shall adopt rules for the bank to provide loans 12 pursuant to this section. The rules shall include student 13 eligibility requirements, repayment terms, and any other rules 14 necessary to properly administer the bank’s higher education 15 revolving loan program. 16 Sec. 2. NEW SECTION . 525.2 Establishment of state of Iowa 17 higher education bank. 18 Subject to article VIII, section 6, of the Constitution of 19 the State of Iowa, the state of Iowa higher education bank is 20 created with the purpose of encouraging and promoting higher 21 education in the state. 22 Sec. 3. NEW SECTION . 525.3 Definitions. 23 As used in this chapter, unless the context otherwise 24 requires: 25 1. “Bank” means the state of Iowa higher education bank 26 established under this chapter. 27 2. “Institution of higher education” means any educational 28 institution that offers a postsecondary educational degree, 29 certificate, or program of study and is eligible to receive 30 Tit. IV funds under the federal Higher Education Act of 1965, 31 as amended, or state funding or assistance. 32 3. “Taxable income” means as defined in section 422.4. 33 Sec. 4. NEW SECTION . 525.4 Management of bank —— duties of 34 treasurer. 35 -1- LSB 2365XS (2) 87 gh/sc 1/ 7

S.F. 272 The treasurer of state shall operate, manage, and control 1 the bank, locate and maintain its places of business, and make 2 and enforce orders, rules, regulations, and bylaws for the 3 transaction of its business. The treasurer shall employ and 4 fix the qualifications, duties, and compensation of employees 5 of the bank and may enter into contracts for any services that 6 may be required to conduct the business of the bank. 7 Sec. 5. NEW SECTION . 525.5 Advisory board of directors. 8 1. An advisory board of directors to the bank shall 9 be appointed to provide recommendations to the treasurer 10 regarding the bank. The advisory board shall consist of five 11 members appointed by the governor and confirmed by the senate 12 pursuant to section 2.32. Two members of the general assembly 13 shall serve as ex officio, nonvoting members, one senator to 14 be appointed by the majority leader of the senate and one 15 representative to be appointed by the speaker of the house of 16 representatives. The advisory board shall not be compensated. 17 Each member shall serve a term of four years. 18 2. The advisory board of directors shall have the following 19 duties: 20 a. Meet regularly with the management of the bank to review 21 the bank’s operations to determine whether recommendations 22 should be provided to the treasurer relating to improved 23 management performance, customer service, internal methods, 24 procedures, and operating policies. 25 b. Provide recommendations to the treasurer relating to the 26 establishment of additional objectives for the operation of the 27 bank. 28 c. Provide recommendations to the treasurer relating to 29 employment practices and personnel policies. 30 d. Meet regularly with the treasurer to present any 31 recommendations relating to the bank. 32 e. Advise the treasurer with respect to the powers and 33 functions of the bank. 34 Sec. 6. NEW SECTION . 525.6 Commencement of business. 35 -2- LSB 2365XS (2) 87 gh/sc 2/ 7

S.F. 272 The bank shall not transact any business except such 1 business as is incident to commencement of business until the 2 treasurer determines that the bank has acquired the minimum 3 capital necessary to operate and remain solvent. In doing so, 4 the treasurer shall consult with the superintendent of the 5 banking division to evaluate and determine the approximate 6 amount of capital required to commence operations. 7 Sec. 7. NEW SECTION . 525.7 Acquisition of capital. 8 The bank shall acquire capital to operate from any of the 9 following sources: 10 1. Repayment of loans and accrued interest. 11 2. Appropriations from the general assembly or federal 12 government. 13 3. Appropriations to the fund as provided in section 421.17, 14 subsection 14. 15 4. Funds derived from the settlement of legal disputes 16 subject to approval from the general assembly. 17 Sec. 8. NEW SECTION . 525.8 State of Iowa higher education 18 bank revolving loan fund. 19 1. A state of Iowa higher education bank revolving loan 20 fund is created in the state treasury under the control of 21 the treasurer. The moneys in the fund shall be used by the 22 treasurer for the purpose of operating the state of Iowa higher 23 education bank. 24 2. The fund shall consist of moneys credited to the fund 25 pursuant to section 525.7 and any other moneys available to 26 and obtained or accepted by the treasurer for placement in the 27 fund. Notwithstanding section 12C.7, subsection 2, interest or 28 earnings on moneys in the fund shall be credited to the fund. 29 Notwithstanding section 8.33, moneys that remain unencumbered 30 or unobligated at the close of the fiscal year shall not 31 revert but shall remain available for the same purpose in the 32 succeeding fiscal year. 33 DIVISION II 34 FEDERAL DEDUCTIBILITY —— APPROPRIATION TO STATE OF IOWA HIGHER 35 -3- LSB 2365XS (2) 87 gh/sc 3/ 7

S.F. 272 EDUCATION BANK REVOLVING LOAN FUND 1 Sec. 9. Section 421.17, Code 2017, is amended by adding the 2 following new subsection: 3 NEW SUBSECTION . 14. a. Beginning in calendar year 2018, 4 the director shall by October 15 of each year determine the 5 difference between the net amount of individual income taxes 6 due and paid for the fiscal year ending on the preceding June 7 30 and the net amount of individual income taxes that would 8 have been due and payable during that fiscal year had the 9 provisions of section 422.9, subsection 2, paragraph “b” , 10 subparagraph (2), not been applicable, and shall certify such 11 amount to the treasurer of state. 12 b. There is appropriated from the general fund of the state 13 to the state of Iowa higher education bank revolving loan fund 14 created in section 525.8 for the fiscal year beginning July 1, 15 2018, and for each fiscal year thereafter, an amount equal to 16 the amount certified during the fiscal year by the director of 17 revenue to the treasurer of state pursuant to paragraph “a” . 18 Sec. 10. Section 422.9, subsection 2, paragraph b, Code 19 2017, is amended to read as follows: 20 b. (1) Add the amount of federal income taxes paid or 21 accrued, as the case may be, during the tax year and subtract 22 any federal income tax refunds received during the tax year. 23 Where married persons, who have filed a joint federal income 24 tax return, file separately, such total shall be divided 25 between them according to the portion of the total paid or 26 accrued, as the case may be, by each. Federal income taxes 27 paid for a tax year in which an Iowa return was not required 28 to be filed shall not be added and federal income tax refunds 29 received from a tax year in which an Iowa return was not 30 required to be filed shall not be subtracted. 31 (2) Notwithstanding subparagraph (1), federal income taxes 32 paid for a tax year beginning on or after January 1, 2017, 33 in which the taxpayer’s net income exceeds three hundred 34 seventy-five thousand dollars in the case of a single person, 35 -4- LSB 2365XS (2) 87 gh/sc 4/ 7

S.F. 272 or seven hundred fifty thousand dollars in the case of a 1 married couple, shall not be added, and federal income tax 2 refunds received from a tax year beginning on or after January 3 1, 2017, in which the taxpayer’s net income exceeds three 4 hundred seventy-five thousand dollars in the case of a single 5 person, or seven hundred fifty thousand dollars in the case of 6 a married couple, shall not be subtracted. 7 Sec. 11. RETROACTIVE APPLICABILITY. This division of this 8 Act applies retroactively to January 1, 2017, for tax years 9 beginning on or after that date. 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 establishes the state of Iowa higher education 14 bank and revolving loan program and fund and provides moneys 15 for the fund by disallowing a deduction for federal taxes paid 16 by certain taxpayers. The bill provides that the purpose of 17 the bank is to promote and encourage higher education in the 18 state. 19 Division I provides the state treasurer with the authority 20 to operate, manage, and control the public state bank, 21 including locating and maintaining its places of business, 22 adopting rules and regulations, and employing staff for any 23 services that may be required for the bank to conduct its 24 business. 25 The bill establishes an advisory board of directors to 26 provide recommendations to the treasurer regarding the bank. 27 The board consists of five members appointed by the governor 28 and confirmed by the senate. Two members from the general 29 assembly shall serve as ex officio and shall be appointed by 30 the majority leader of the senate and the speaker of the house 31 of representatives. The board shall not be compensated and 32 each member shall serve a term of four years. The board shall 33 provide recommendations to the treasurer regarding the bank’s 34 operations, additional objectives, the hire of employees, and 35 -5- LSB 2365XS (2) 87 gh/sc 5/ 7

S.F. 272 any other recommendations relating to the bank. 1 The bill provides that the bank shall not commence its 2 operations until the treasurer, after consulting with the 3 superintendent of banking, determines that the bank has the 4 minimum capital necessary to operate and maintain solvency. 5 The bill provides that the bank shall acquire capital to 6 operate from the repayment of loans and accrued interest, 7 appropriations from the general assembly or federal government, 8 revenue from disallowing a deduction for federal taxes paid 9 for income taxpayers whose income exceeds $375,000 (single) 10 or $750,000 (married) annually, and funds derived from legal 11 settlements subject to approval from the general assembly. 12 The bill establishes a state of Iowa higher education bank 13 revolving loan fund in the state treasury and under the control 14 of the treasurer. Moneys in the fund are to be used to operate 15 the bank and the loan program and shall not revert to the 16 general fund of the state. 17 The bill provides that the bank shall establish a higher 18 education revolving loan program to provide loans to students 19 or parents of a student to finance the cost of attendance at 20 an institution of higher education, as defined in the bill. A 21 loan provided under this program shall have a fixed rate of 22 interest at 1 percent per year. The treasurer, in consultation 23 with the college student aid commission, is required to adopt 24 rules to administer the program. 25 Division II disallows the Iowa income tax deduction for 26 federal income taxes paid for tax years beginning on or after 27 January 1, 2017, if the taxpayer’s net income for the tax year 28 exceeds $750,000 ($375,000 for a single person). Beginning 29 in 2018, the bill requires the director of the department 30 of revenue to calculate the additional Iowa income tax 31 revenues collected as a result of the disallowance of federal 32 deductibility for each fiscal year and certify that amount to 33 the treasurer of state by October 15. For each fiscal year 34 beginning on or after July 1, 2018, an amount equal to the 35 -6- LSB 2365XS (2) 87 gh/sc 6/ 7