S.F. 38 DIVISION I 1 REPEAL OF THE INDIVIDUAL INCOME TAX 2 Section 1. Section 8.57E, subsection 2, Code 2017, is 3 amended to read as follows: 4 2. Moneys in the taxpayers trust fund shall only be used 5 pursuant to appropriations or transfers made by the general 6 assembly for tax relief. During each fiscal year beginning on 7 or after July 1, 2014, in which the balance of the taxpayers 8 trust fund equals or exceeds thirty million dollars, there is 9 transferred from the taxpayers trust fund to the Iowa taxpayers 10 trust fund tax credit fund created in section 422.11E , the 11 entire balance of the taxpayers trust fund to be used for the 12 Iowa taxpayers trust fund tax credit in accordance with section 13 422.11E, subsection 5 . 14 Sec. 2. Section 15.293A, subsection 1, paragraph a, Code 15 2017, is amended to read as follows: 16 a. A redevelopment tax credit shall be allowed against 17 the taxes imposed in chapter 422, divisions II, III , and V , 18 and in chapter 432 , and against the moneys and credits tax 19 imposed in section 533.329 , for a portion of a taxpayer’s 20 equity investment, as provided in subsection 3 , in a qualifying 21 redevelopment project. 22 Sec. 3. Section 15.293A, subsection 1, paragraph b, Code 23 2017, is amended by striking the paragraph. 24 Sec. 4. Section 15.293A, subsection 2, paragraphs c and f, 25 Code 2017, are amended to read as follows: 26 c. The tax credit certificate, unless rescinded by the 27 authority, shall be accepted by the department of revenue as 28 payment for taxes imposed pursuant to chapter 422, divisions 29 II, III , and V , and in chapter 432 , and for the moneys and 30 credits tax imposed in section 533.329 , subject to any 31 conditions or restrictions placed by the authority upon 32 the face of the tax credit certificate and subject to the 33 limitations of this section . 34 f. A tax credit shall not be claimed by a transferee 35 -1- LSB 1216XS (5) 87 mm/sc 1/ 46

S.F. 38 under this section until a replacement tax credit certificate 1 identifying the transferee as the proper holder has been 2 issued. The transferee may use the amount of the tax credit 3 transferred against the taxes imposed in chapter 422, divisions 4 II, III , and V , and in chapter 432 , and against the moneys and 5 credits tax imposed in section 533.329 , for any tax year the 6 original transferor could have claimed the tax credit. Any 7 consideration received for the transfer of the tax credit shall 8 not be included as income under chapter 422, divisions II, III , 9 and V . Any consideration paid for the transfer of the tax 10 credit shall not be deducted from income under chapter 422, 11 divisions II, III , and V . 12 Sec. 5. Section 15.293A, subsection 4, Code 2017, is amended 13 to read as follows: 14 4. For purposes of individual and corporate income taxes and 15 the franchise tax, the increase in the basis of the redeveloped 16 property that would otherwise result from the qualified 17 redevelopment costs shall be reduced by the amount of the 18 credit computed under this part. 19 Sec. 6. Section 15.319, subsection 2, Code 2017, is amended 20 to read as follows: 21 2. The tax credit shall be allowed against taxes imposed 22 under chapter 422, division II or III . 23 Sec. 7. Section 15.319, subsection 4, Code 2017, is amended 24 by striking the subsection. 25 Sec. 8. Section 15.319, subsection 6, paragraph c, Code 26 2017, is amended to read as follows: 27 c. The tax credit certificate, unless rescinded by the 28 authority, shall be accepted by the department of revenue as 29 payment for taxes imposed pursuant to chapter 422, divisions 30 II and division III , subject to any conditions or restrictions 31 placed by the authority upon the face of the tax credit 32 certificate and subject to the limitations of the program. 33 Sec. 9. Section 15.333, subsection 1, Code 2017, is amended 34 to read as follows: 35 -2- LSB 1216XS (5) 87 mm/sc 2/ 46

S.F. 38 1. An eligible business may claim a tax credit equal to a 1 percentage of the new investment directly related to new jobs 2 created or retained by the project. The tax credit shall be 3 amortized equally over five calendar years. The tax credit 4 shall be allowed against taxes imposed under chapter 422, 5 division II, III , or V , and against the moneys and credits tax 6 imposed in section 533.329 . If the business is a partnership, 7 S corporation, limited liability company, cooperative organized 8 under chapter 501 and filing as a partnership for federal tax 9 purposes, or estate or trust electing to have the income taxed 10 directly to the individual, an individual may claim the tax 11 credit allowed. The amount claimed by the individual shall 12 be based upon the pro rata share of the individual’s earnings 13 of the partnership, S corporation, limited liability company, 14 cooperative organized under chapter 501 and filing as a 15 partnership for federal tax purposes, or estate or trust. The 16 percentage shall be determined as provided in section 15.335A . 17 Any tax credit in excess of the tax liability for the tax year 18 may be credited to the tax liability for the following seven 19 years or until depleted, whichever occurs first. 20 Sec. 10. Section 15.335, subsection 6, Code 2017, is amended 21 by striking the subsection. 22 Sec. 11. Section 15.355, subsection 3, paragraph b, Code 23 2017, is amended to read as follows: 24 b. The tax credit shall be allowed against the taxes imposed 25 in chapter 422, divisions II, III , and V , and in chapter 432 , 26 and against the moneys and credits tax imposed in section 27 533.329 . 28 Sec. 12. Section 15.355, subsection 3, paragraph c, Code 29 2017, is amended by striking the paragraph. 30 Sec. 13. Section 15.355, subsection 3, paragraph e, 31 subparagraphs (3) and (6), Code 2017, are amended to read as 32 follows: 33 (3) The tax credit certificate, unless rescinded by the 34 authority, shall be accepted by the department of revenue as 35 -3- LSB 1216XS (5) 87 mm/sc 3/ 46

S.F. 38 payment for taxes imposed pursuant to chapter 422, divisions 1 II, III , and V , and in chapter 432 , and for the moneys and 2 credits tax imposed in section 533.329 , subject to any 3 conditions or restrictions placed by the authority upon 4 the face of the tax credit certificate and subject to the 5 limitations of this program. 6 (6) 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 , and against the moneys and 12 credits tax imposed in section 533.329 , for any tax year the 13 original transferor could have claimed the tax credit. Any 14 consideration received for the transfer of the tax credit shall 15 not be included as income under chapter 422, divisions II, III , 16 and V . Any consideration paid for the transfer of the tax 17 credit shall not be deducted from income under chapter 422, 18 divisions II, III , and V . 19 Sec. 14. Section 15.355, subsection 3, paragraph f, Code 20 2017, is amended to read as follows: 21 f. For purposes of the individual and corporate income 22 taxes and the franchise tax, the increase in the basis of the 23 property that would otherwise result from the qualifying new 24 investment shall be reduced by the amount of the tax credit 25 computed under this subsection . 26 Sec. 15. Section 15A.7, subsection 1, Code 2017, is amended 27 to read as follows: 28 1. That the project shall be administered in the same 29 manner as a project under chapter 260E and that a supplemental 30 new jobs credit from withholding in an amount equal to one 31 and one-half percent of the gross wages paid by the employer 32 pursuant to section 422.16 , Code 2017, is authorized to fund 33 the program services for the additional project. 34 Sec. 16. Section 15E.43, subsection 1, Code 2017, is amended 35 -4- LSB 1216XS (5) 87 mm/sc 4/ 46

S.F. 38 to read as follows: 1 1. a. For tax years beginning on or after January 1, 2015, 2 a tax credit shall be allowed against the taxes imposed in 3 chapter 422, divisions II, III , and V , and in chapter 432 , and 4 against the moneys and credits tax imposed in section 533.329 , 5 for a portion of a taxpayer’s equity investment, as provided in 6 subsection 2 , in a qualifying business. 7 b. An individual may claim a tax credit under this section 8 of a partnership, limited liability company, S corporation, 9 estate, or trust electing to have income taxed directly to 10 the individual. The amount claimed by the individual shall 11 be based upon the pro rata share of the individual’s earnings 12 from the partnership, limited liability company, S corporation, 13 estate, or trust. 14 c. b. A tax credit shall be allowed only for an investment 15 made in the form of cash to purchase equity in a qualifying 16 business. 17 d. c. For a tax credit claimed against the taxes imposed 18 in chapter 422, division II , any tax credit in excess of the 19 tax liability is refundable. In lieu of claiming a refund, 20 the taxpayer may elect to have the overpayment shown on 21 the taxpayer’s final, completed return credited to the tax 22 liability for the following tax year. For a tax credit claimed 23 against the taxes imposed in chapter 422, divisions III and 24 V , and in chapter 432 , and against the moneys and credits tax 25 imposed in section 533.329 , any Any tax credit in excess of the 26 taxpayer’s liability for the tax year may be credited to the 27 tax liability for the following three years or until depleted, 28 whichever is earlier. A tax credit shall not be carried back 29 to a tax year prior to the tax year in which the taxpayer 30 redeems the tax credit. 31 Sec. 17. Section 15E.43, subsection 2, paragraph b, Code 32 2017, is amended by striking the paragraph. 33 Sec. 18. Section 15E.44, subsection 4, Code 2017, is amended 34 to read as follows: 35 -5- LSB 1216XS (5) 87 mm/sc 5/ 46

S.F. 38 4. After verifying the eligibility of a qualifying 1 business, the authority shall issue a tax credit certificate 2 to be included with the equity investor’s tax return. The tax 3 credit certificate shall contain the taxpayer’s name, address, 4 tax identification number, the amount of credit, the name of 5 the qualifying business, and other information required by the 6 department of revenue. The tax credit certificate, unless 7 rescinded by the authority, shall be accepted by the department 8 of revenue as payment for taxes imposed pursuant to chapter 9 422, divisions II, III , and V , and in chapter 432 , and for the 10 moneys and credits tax imposed in section 533.329 , subject to 11 any conditions or restrictions placed by the authority upon 12 the face of the tax credit certificate and subject to the 13 limitations of section 15E.43 . 14 Sec. 19. Section 15E.52, subsection 2, paragraph a, Code 15 2017, is amended to read as follows: 16 a. A tax credit shall be allowed against the taxes imposed 17 in chapter 422, divisions II, III , and V , and in chapter 432 , 18 and against the moneys and credits tax imposed in section 19 533.329 , for a portion of a taxpayer’s equity investment in the 20 form of cash in an innovation fund. 21 Sec. 20. Section 15E.52, subsection 2, paragraph b, Code 22 2017, is amended by striking the paragraph. 23 Sec. 21. Section 15E.52, subsection 13, Code 2017, is 24 amended to read as follows: 25 13. 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 -6- LSB 1216XS (5) 87 mm/sc 6/ 46

S.F. 38 Sec. 22. Section 15E.62, subsection 8, Code 2017, is amended 1 to read as follows: 2 8. “Tax credit” means a contingent tax credit issued 3 pursuant to section 15E.66 that is available against tax 4 liabilities imposed by chapter 422, divisions II, III , and 5 V , and by chapter 432 and against the moneys and credits tax 6 imposed by section 533.329 . 7 Sec. 23. Section 15E.66, subsection 1, Code 2017, is amended 8 to read as follows: 9 1. The board may issue certificates and related tax credits 10 to designated investors which, if redeemed for the maximum 11 possible amount, shall not exceed a total aggregate of sixty 12 million dollars of tax credits. The certificates shall be 13 issued contemporaneously with a commitment to invest in the 14 Iowa fund of funds by a designated investor. A certificate 15 issued by the board shall have a specific maturity date or 16 dates designated by the board and shall be redeemable only in 17 accordance with the contingencies reflected on the certificate 18 or incorporated therein by reference. A certificate and the 19 related tax credit shall be transferable by the designated 20 investor. A tax credit shall not be claimed or redeemed except 21 by a designated investor or transferee in accordance with the 22 terms of a certificate from the board. A tax credit shall not 23 be claimed for a tax year that begins earlier than the maturity 24 date or dates stated on the certificate. An individual may 25 claim the credit of a partnership, limited liability company, 26 S corporation, estate, or trust electing to have the income 27 taxed directly to the individual. The amount claimed by the 28 individual shall be based upon the pro rata share of the 29 individual’s earnings from the partnership, limited liability 30 company, S corporation, estate, or trust. Any tax credit in 31 excess of the taxpayer’s tax liability for the tax year may be 32 credited to the tax liability for the following seven years, or 33 until depleted, whichever is earlier. 34 Sec. 24. Section 15E.305, subsection 1, Code 2017, is 35 -7- LSB 1216XS (5) 87 mm/sc 7/ 46

S.F. 38 amended to read as follows: 1 1. For tax years beginning on or after January 1, 2003, 2 a tax credit shall be allowed against the taxes imposed in 3 chapter 422, divisions II, III , and V , and in chapter 432 , and 4 against the moneys and credits tax imposed in section 533.329 5 equal to twenty-five percent of a taxpayer’s endowment gift to 6 an endow Iowa qualified community foundation. An individual 7 may claim a tax credit under this section of a partnership, 8 limited liability company, S corporation, estate, or trust 9 electing to have income taxed directly to the individual. The 10 amount claimed by the individual shall be based upon the pro 11 rata share of the individual’s earnings from the partnership, 12 limited liability company, S corporation, estate, or trust. A 13 tax credit shall be allowed only for an endowment gift made to 14 an endow Iowa qualified community foundation for a permanent 15 endowment fund established to benefit a charitable cause in 16 this state. The amount of the endowment gift for which the 17 tax credit is claimed shall not be deductible in determining 18 taxable income for state income tax purposes. Any tax credit 19 in excess of the taxpayer’s tax liability for the tax year may 20 be credited to the tax liability for the following five years 21 or until depleted, whichever occurs first. A tax credit shall 22 not be carried back to a tax year prior to the tax year in which 23 the taxpayer claims the tax credit. 24 Sec. 25. Section 16.64, subsection 2, Code 2017, is amended 25 to read as follows: 26 2. Bonds and notes issued by the authority for purposes of 27 financing the beginning farmer loan program provided in section 28 16.75 are exempt from taxation by the state, and interest 29 earned on the bonds and notes is deductible in determining 30 net income for purposes of the state individual and corporate 31 income tax under divisions II and division III of chapter 422 . 32 Sec. 26. Section 16.80, subsection 1, Code 2017, is amended 33 to read as follows: 34 1. An agricultural assets transfer tax credit is allowed 35 -8- LSB 1216XS (5) 87 mm/sc 8/ 46

S.F. 38 under this section . The tax credit is allowed against the 1 taxes imposed in chapter 422, division II, as provided in 2 section 422.11M , and in chapter 422, division III, as provided 3 in section 422.33 , to facilitate the transfer of agricultural 4 assets from a taxpayer to a qualified beginning farmer. 5 Sec. 27. Section 16.80, subsection 3, Code 2017, is amended 6 by striking the subsection. 7 Sec. 28. Section 16.80, subsection 6, Code 2017, is amended 8 to read as follows: 9 6. A tax credit in excess of the taxpayer’s liability 10 for the tax year may be credited to the tax liability for 11 the following ten tax years or until depleted, whichever is 12 earlier. A tax credit shall not be carried back to a tax year 13 prior to the tax year in which the taxpayer redeems the tax 14 credit. A tax credit shall not be transferable to any other 15 person other than the taxpayer’s estate or trust upon the 16 taxpayer’s death. 17 Sec. 29. Section 16.81, subsection 1, Code 2017, is amended 18 to read as follows: 19 1. A custom farming contract tax credit is allowed under 20 this section . The tax credit is allowed against the taxes 21 imposed in chapter 422, division II, as provided in section 22 422.11M , and in chapter 422, division III, as provided in 23 section 422.33 , to encourage taxpayers who are considering 24 custom farming agricultural land located in this state to 25 negotiate with qualified beginning farmers. 26 Sec. 30. Section 16.81, subsection 3, Code 2017, is amended 27 by striking the subsection. 28 Sec. 31. Section 16.81, subsection 9, Code 2017, is amended 29 to read as follows: 30 9. A custom farming contract tax credit in excess of the 31 taxpayer’s liability for the tax year may be credited to 32 the tax liability for the following ten tax years or until 33 depleted, whichever is earlier. A tax credit shall not be 34 carried back to a tax year prior to the tax year in which the 35 -9- LSB 1216XS (5) 87 mm/sc 9/ 46

S.F. 38 taxpayer redeems the tax credit. A tax credit shall not be 1 transferable to any other person other than the taxpayer’s 2 estate or trust upon the taxpayer’s death . 3 Sec. 32. Section 28A.24, Code 2017, is amended to read as 4 follows: 5 28A.24 Exemption from taxation. 6 Since an authority is performing essential governmental 7 functions, an authority is not required to pay any taxes or 8 assessments of any kind or nature upon any property required 9 or used by it for its purposes, or any rates, fees, rentals, 10 receipts, or incomes at any time received by it, and the 11 bonds issued by an authority, their transfer, and the income, 12 including any profits made on the sale of the bonds, is 13 deductible in determining net income for the purposes of the 14 state individual and corporate income tax under chapter 422, 15 divisions II and division III , and shall not be taxed by any 16 political subdivision of this state. 17 Sec. 33. Section 29C.24, subsection 3, paragraph a, 18 subparagraph (3), Code 2017, is amended to read as follows: 19 (3) The imposition of income taxes under chapter 422, 20 divisions II and division III , including the requirement to 21 file tax returns under sections 422.13 through 422.15 or 22 section 422.36 , as applicable, and including the requirement 23 to withhold and remit income tax from out-of-state employees 24 under section 422.16 . In addition, the performance of disaster 25 or emergency-related work during a disaster response period 26 by an out-of-state business or out-of-state employee shall 27 not require an out-of-state business to be included in a 28 consolidated return under section 422.37 , and shall not 29 increase the amount of net income of the out-of-state business 30 allocated and apportioned to the state under section 422.8 or 31 422.33 , as applicable . 32 Sec. 34. Section 29C.24, subsection 3, paragraph b, 33 subparagraph (2), Code 2017, is amended by striking the 34 subparagraph. 35 -10- LSB 1216XS (5) 87 mm/sc 10/ 46

S.F. 38 Sec. 35. Section 35A.13, subsection 2, paragraph b, Code 1 2017, is amended to read as follows: 2 b. Moneys credited to the fund pursuant to an income tax 3 checkoff provided in chapter 422, division II , Code 2017, if 4 applicable. 5 Sec. 36. Section 68A.102, subsection 21, Code 2017, is 6 amended by striking the subsection. 7 Sec. 37. Section 85.61, subsection 6, paragraph b, Code 8 2017, is amended by striking the paragraph. 9 Sec. 38. Section 96.3, subsection 4, unnumbered paragraph 10 2, Code 2017, is amended to read as follows: 11 The maximum weekly benefit amount, if not a multiple of one 12 dollar, shall be rounded to the lower multiple of one dollar. 13 However, until such time as sixty-five percent of the statewide 14 average weekly wage exceeds one hundred ninety dollars, the 15 maximum weekly benefit amounts shall be determined using the 16 statewide average weekly wage computed on the basis of wages 17 reported for calendar year 1981. As used in this section 18 “dependent” means dependent as defined in section 422.12, 19 subsection 1 , paragraph “a” has the same meaning as provided by 20 the Internal Revenue Code , as if the individual claimant was 21 a taxpayer, except that an individual claimant’s nonworking 22 spouse shall be deemed to be a dependent under this section . 23 “Nonworking spouse” means a spouse who does not earn more than 24 one hundred twenty dollars in gross wages in one week. 25 Sec. 39. Section 99B.8, Code 2017, is amended to read as 26 follows: 27 99B.8 Tax on prizes. 28 All prizes awarded pursuant to a gambling activity under 29 this chapter are Iowa earned income and are subject to state 30 and federal income tax laws. A person conducting a game of 31 skill, game of chance, bingo, or a raffle shall deduct state 32 income taxes, pursuant to section 422.16, subsection 1 , from a 33 cash prize awarded to an individual. An amount deducted from 34 the prize for payment of a state tax shall be remitted to the 35 -11- LSB 1216XS (5) 87 mm/sc 11/ 46

S.F. 38 department of revenue on behalf of the prize winner. 1 Sec. 40. Section 99D.16, Code 2017, is amended to read as 2 follows: 3 99D.16 Withholding tax on winnings. 4 All winnings provided in section 99D.11 are Iowa earned 5 income and are subject to state and federal income tax laws. 6 An amount deducted from winnings for payment of the state tax, 7 pursuant to section 422.16, subsection 1 , shall be remitted to 8 the department of revenue on behalf of the individual who won 9 the wager. 10 Sec. 41. Section 99F.18, Code 2017, is amended to read as 11 follows: 12 99F.18 Tax on winnings. 13 All winnings derived from slot machines operated pursuant to 14 this chapter are Iowa earned income and are subject to state 15 and federal income tax laws. An amount deducted from winnings 16 for payment of the state tax, pursuant to section 422.16, 17 subsection 1 , shall be remitted to the department of revenue 18 on behalf of the winner. 19 Sec. 42. Section 99G.31, subsection 2, paragraph i, Code 20 2017, is amended to read as follows: 21 i. The proceeds of any lottery prize shall be subject to 22 state and federal income tax laws. An amount deducted from the 23 prize for payment of a state tax, pursuant to section 422.16, 24 subsection 1 , shall be transferred by the authority to the 25 department of revenue on behalf of the prize winner. 26 Sec. 43. Section 100B.13, subsection 2, paragraph a, Code 27 2017, is amended to read as follows: 28 a. Moneys credited to the fund pursuant to an income tax 29 checkoff provided in chapter 422, division II , Code 2017, if 30 applicable. 31 Sec. 44. Section 190B.103, Code 2017, is amended to read as 32 follows: 33 190B.103 From farm to food donation tax credit. 34 A from farm to food donation tax credit is allowed against 35 -12- LSB 1216XS (5) 87 mm/sc 12/ 46

S.F. 38 the taxes imposed in chapter 422, divisions II and division 1 III , as provided in this chapter . 2 Sec. 45. Section 216B.3, subsection 15, Code 2017, is 3 amended to read as follows: 4 15. Develop a plan to provide telephone yellow pages 5 information without charge to persons declared to be blind 6 under the standards in section 422.12, subsection 2 , paragraph 7 “a” , subparagraph (5) , Code 2017 . The department may apply for 8 federal funds to support the service. The program shall be 9 limited in scope by the availability of funds. 10 Sec. 46. Section 217.39, Code 2017, is amended to read as 11 follows: 12 217.39 Persecuted victims of World War II —— reparations —— 13 heirs. 14 Notwithstanding any other law of this state, payments paid 15 to and income from lost property of a victim of persecution for 16 racial, ethnic, or religious reasons by Nazi Germany or any 17 other Axis regime or as an heir of such victim which is exempt 18 from state income tax as provided in section 422.7, subsection 19 35 , Code 2017, shall not be considered as income or an asset 20 for determining the eligibility for state or local government 21 benefit or entitlement programs. The proceeds are not subject 22 to recoupment for the receipt of governmental benefits or 23 entitlements, and liens, except liens for child support, are 24 not enforceable against these sums for any reason. 25 Sec. 47. Section 235A.2, subsection 1, Code 2017, is amended 26 to read as follows: 27 1. A child abuse prevention program fund is created in 28 the state treasury under the control of the department of 29 human services. The fund is composed of moneys appropriated 30 or available to and obtained or accepted by the treasurer of 31 state for deposit in the fund. The fund shall include moneys 32 transferred to the fund pursuant to an income tax checkoff 33 provided in chapter 422, division II , Code 2017, if applicable. 34 All interest earned on moneys in the fund shall be credited to 35 -13- LSB 1216XS (5) 87 mm/sc 13/ 46

S.F. 38 and remain in the fund. Section 8.33 does not apply to moneys 1 in the fund. 2 Sec. 48. Section 257.19, Code 2017, is amended to read as 3 follows: 4 257.19 Instructional support funding. 5 1. The additional funding for the instructional support 6 program for a budget year is limited to an amount not exceeding 7 ten percent of the total of regular program district cost 8 for the budget year and moneys received under section 257.14 9 as a budget adjustment for the budget year. Moneys received 10 by a district for the instructional support program are 11 miscellaneous income and may be used for any general fund 12 purpose. However, moneys received by a district for the 13 instructional support program shall not be used as, or in a 14 manner which has the effect of, supplanting funds authorized to 15 be received under sections 257.41 , 257.46 , 298.2 , and 298.4 , 16 or to cover any deficiencies in funding for special education 17 instructional services resulting from the application of the 18 special education weighting plan under section 256B.9 . 19 2. Certification of a board’s intent to participate for 20 a budget year, the method of funding, and the amount to be 21 raised shall be made to the department of management not later 22 than April 15 of the base year. Funding for the instructional 23 support program shall be obtained from instructional support 24 state aid and from local funding using either an instructional 25 support property tax or a combination of an instructional 26 support property tax and an instructional support income 27 surtax . 28 The board of directors shall determine whether the 29 instructional support property tax or the combination of the 30 instructional support property tax and instructional support 31 income surtax shall be used for the local funding. Subject to 32 the limitation specified in section 298.14 , if the board elects 33 to use the combination of the instructional support property 34 tax and instructional support income surtax, for each budget 35 -14- LSB 1216XS (5) 87 mm/sc 14/ 46

S.F. 38 year the board shall determine the percent of income surtax 1 that will be imposed, expressed as full percentage points, not 2 to exceed twenty percent. 3 Sec. 49. Section 257.21, Code 2017, is amended to read as 4 follows: 5 257.21 Computation of instructional support amount. 6 1. The department of management shall establish the amount 7 of instructional support property tax to be levied and the 8 amount of instructional support income surtax to be imposed 9 by a district in accordance with the decision of the board 10 under section 257.19 for each school year for which the 11 instructional support program is authorized. The department 12 of management shall determine these amounts based upon the 13 most recent figures available for the district’s valuation of 14 taxable property , individual state income tax paid, and budget 15 enrollment in the district, and shall certify to the district’s 16 county auditor the amount of instructional support property 17 tax , and to the director of revenue the amount of instructional 18 support income surtax to be imposed if an instructional support 19 income surtax is to be imposed levied . 20 2. The instructional support income surtax shall be imposed 21 on the state individual income tax for the calendar year during 22 which the school’s budget year begins, or for a taxpayer’s 23 fiscal year ending during the second half of that calendar year 24 and after the date the board adopts a resolution to participate 25 in the program or the first half of the succeeding calendar 26 year, and shall be imposed on all individuals residing in the 27 school district on the last day of the applicable tax year. 28 As used in this section , “state individual income tax” means 29 the taxes computed under section 422.5 , less the amounts of 30 nonrefundable credits allowed under chapter 422, division II , 31 except for the Iowa taxpayers trust fund tax credit allowed 32 under section 422.11E . 33 Sec. 50. Section 257.29, subsections 3 and 4, Code 2017, are 34 amended to read as follows: 35 -15- LSB 1216XS (5) 87 mm/sc 15/ 46

S.F. 38 3. The educational improvement program shall be funded 1 by either an educational improvement property tax or by a 2 combination of an educational improvement property tax and an 3 educational improvement income surtax . The method of raising 4 the educational improvement moneys shall be determined by the 5 board. Subject to the limitation in section 298.14 , if the 6 board uses a combination of an educational improvement property 7 tax and an educational improvement income surtax, the board 8 shall determine the percent of income surtax to be imposed, 9 expressed as full percentage points, not to exceed twenty 10 percent. 11 4. The department of management shall establish the amount 12 of the educational improvement property tax to be levied or 13 the amount of the combination of the educational improvement 14 property tax to be levied and the amount of the school district 15 income surtax to be imposed for each school year that the 16 educational improvement amount is authorized. The educational 17 improvement property tax and income surtax, if an income 18 surtax is imposed, shall be levied and imposed , collected, 19 and paid to the school district in the manner provided for 20 the instructional support program in sections section 257.21 21 through 257.26 . Moneys received by a school district under the 22 educational improvement program are miscellaneous income. 23 Sec. 51. Section 260E.2, subsection 6, Code 2017, is amended 24 to read as follows: 25 6. “Employee” means the person employed in a new job. 26 “Employee” does not include a person who would not be subject 27 to the withholding of Iowa income pursuant to a reciprocal 28 agreement under section 422.8, subsection 5 , Code 2017 . 29 Sec. 52. Section 260E.5, subsections 2 and 6, Code 2017, are 30 amended to read as follows: 31 2. An amount equal to one and one-half percent of the gross 32 wages paid by the employer to each employee participating in a 33 project shall be credited from the payment made by an employer 34 pursuant to section 422.16 , Code 2017 . If the amount of the 35 -16- LSB 1216XS (5) 87 mm/sc 16/ 46

S.F. 38 withholding by the employer is less than one and one-half 1 percent of the gross wages paid to the employees covered by the 2 agreement, then the employer shall receive a credit against 3 other withholding taxes due by the employer. The employer 4 shall remit the amount of the credit quarterly in the same 5 manner as withholding payments are reported to the department 6 of revenue, to the community college to be allocated to and 7 when collected paid into a special fund of the community 8 college to pay the principal of and interest on certificates 9 issued by the community college to finance or refinance, in 10 whole or in part, the project. When the principal and interest 11 on the certificates have been paid, the employer credits shall 12 cease and any money received after the certificates have 13 been paid shall be remitted to the treasurer of state to be 14 deposited in the general fund of the state. 15 6. An employee participating in a project will receive full 16 credit for the amount withheld as provided in section 422.16 , 17 Code 2017 . 18 Sec. 53. Section 260G.4A, subsections 2 and 5, Code 2017, 19 are amended to read as follows: 20 2. Eligibility for program job credits shall be based on 21 certification of program job positions and program job wages 22 by the employer at the time established in the agreement. An 23 amount up to ten percent of the gross program job wage as 24 certified by the employer in the agreement shall be credited 25 from the total payment made by an employer pursuant to section 26 422.16 , Code 2017 . The employer shall receive a credit against 27 all withholding taxes due by the employer regardless of whether 28 or not the withholding from the employer of current program 29 job wages is less than ten percent. The employer shall remit 30 the amount of the credit quarterly in the same manner as 31 withholding payments are reported to the department of revenue, 32 to the community college to be allocated to and when collected 33 paid into a special fund of the community college to pay, in 34 part, the program costs. When the program costs have been 35 -17- LSB 1216XS (5) 87 mm/sc 17/ 46

S.F. 38 paid, the employer credits shall cease and any moneys received 1 after the program costs have been paid shall be remitted to the 2 treasurer of state to be deposited in the general fund of the 3 state. 4 5. Employees from an employer participating in an agreement 5 shall receive full credit for the amount withheld as provided 6 in section 422.16 , Code 2017 . 7 Sec. 54. Section 279.63, subsection 2, paragraph a, Code 8 2017, is amended to read as follows: 9 a. All property tax levies , income surtaxes, and local 10 option sales taxes in place in the school district, listed by 11 type of levy, rate, amount, duration, and notification of the 12 maximum rate and amount limitations permitted by statute. 13 Sec. 55. Section 298.2, subsection 1, paragraph a, Code 14 2017, is amended to read as follows: 15 a. A physical plant and equipment levy of not exceeding 16 one dollar and sixty-seven cents per thousand dollars of 17 assessed valuation in the district is established except as 18 otherwise provided in this subsection . The physical plant 19 and equipment levy consists of the regular physical plant 20 and equipment levy of not exceeding thirty-three cents per 21 thousand dollars of assessed valuation in the district and 22 a voter-approved physical plant and equipment levy of not 23 exceeding one dollar and thirty-four cents per thousand 24 dollars of assessed valuation in the district. However, the 25 voter-approved physical plant and equipment levy may consist 26 of a combination of a physical plant and equipment property 27 tax levy and a physical plant and equipment income surtax as 28 provided in subsection 4 with the maximum amount levied and 29 imposed limited to an amount that could be raised by a one 30 dollar and thirty-four cent property tax levy. 31 Sec. 56. Section 298.2, subsection 4, Code 2017, is amended 32 to read as follows: 33 4. a. The board may on its own motion, and upon the 34 written request of not less than one hundred eligible electors 35 -18- LSB 1216XS (5) 87 mm/sc 18/ 46

S.F. 38 or thirty percent of the number of eligible electors voting 1 at the last regular school election, whichever is greater, 2 shall, direct the county commissioner of elections to provide 3 for submitting the proposition of levying the voter-approved 4 physical plant and equipment levy for a period of time 5 authorized by the voters at the election, not to exceed ten 6 years. The election shall be held on a date specified in 7 section 39.2, subsection 4 , paragraph “c” . The proposition is 8 adopted if a majority of those voting on the proposition at the 9 election approves it. The voter-approved physical plant and 10 equipment levy shall be funded either by a physical plant and 11 equipment property tax or by a combination of a physical plant 12 and equipment property tax and a physical plant and equipment 13 income surtax, as determined by the board . However, if the 14 board intends to enter into a rental or lease arrangement under 15 section 279.26 , or intends to enter into a loan agreement under 16 section 297.36 , only a property tax shall be levied for those 17 purposes. Subject to the limitations of section 298.14 , if 18 the board uses a combination of a physical plant and equipment 19 property tax and a physical plant and equipment surtax, for 20 each fiscal year the board shall determine the percent of 21 income surtax to be imposed expressed as full percentage 22 points, not to exceed twenty percent. 23 b. If a combination of a property tax and income surtax 24 is used, by April 15 of the previous school year, the board 25 shall certify the percent of the income surtax to be imposed 26 and the amount to be raised to the department of management 27 and the department of management shall establish the rate of 28 the property tax and income surtax for the school year. The 29 physical plant and equipment property tax and income surtax 30 shall be levied or imposed , collected, and paid to the school 31 district in the manner provided for the instructional support 32 program in sections section 257.21 through 257.26 . 33 Sec. 57. Section 403.19A, subsection 3, paragraphs b and i, 34 Code 2017, are amended to read as follows: 35 -19- LSB 1216XS (5) 87 mm/sc 19/ 46

S.F. 38 b. An amount equal to three percent of the gross wages paid 1 by an employer to each employee under a withholding agreement 2 shall be credited from the payment made by the employer 3 pursuant to section 422.16 , Code 2017 . If the amount of the 4 withholding by the employer is less than three percent of the 5 gross wages paid to the employees covered by the withholding 6 agreement, the employer shall receive a credit against other 7 withholding taxes due by the employer or may carry the credit 8 forward for up to ten years or until depleted, whichever is 9 the earlier. The employer shall remit the amount of the 10 credit quarterly, in the same manner as withholding payments 11 are reported to the department of revenue, to the pilot 12 project city to be allocated to and when collected paid into 13 a designated withholding project fund for the project. All 14 amounts so deposited shall be used or pledged by the pilot 15 project city for a project related to the employer pursuant to 16 the withholding agreement. 17 i. An employee whose wages are subject to a withholding 18 agreement shall receive full credit for the amount withheld as 19 provided in section 422.16 , Code 2017 . 20 Sec. 58. Section 404A.2, subsection 2, Code 2017, is amended 21 to read as follows: 22 2. The tax credit shall be allowed against the taxes imposed 23 in chapter 422, divisions II, III , and V , and in chapter 24 432 . An individual may claim a tax credit under this section 25 of a partnership, limited liability company, S corporation, 26 estate, or trust electing to have income taxed directly to the 27 individual. For an individual claiming a tax credit of an 28 estate or trust, the amount claimed by the individual shall be 29 based upon the pro rata share of the individual’s earnings from 30 the estate or trust. For an individual claiming a tax credit 31 of a partnership, limited liability company, or S corporation, 32 the amount claimed by the partner, member, or shareholder, 33 respectively, shall be based upon the amounts designated by 34 the eligible partnership, S corporation, or limited liability 35 -20- LSB 1216XS (5) 87 mm/sc 20/ 46

S.F. 38 company, as applicable. 1 Sec. 59. Section 404A.2, subsection 3, paragraph c, Code 2 2017, is amended to read as follows: 3 c. A tax credit shall not be claimed by a transferee 4 under this section until a replacement tax credit certificate 5 identifying the transferee as the proper holder has been 6 issued. The transferee may use the amount of the tax credit 7 transferred against the taxes imposed in chapter 422, divisions 8 II, III , and V , and in chapter 432 , for any tax year the 9 original transferor could have claimed the tax credit. Any 10 consideration received for the transfer of the tax credit shall 11 not be included as income under chapter 422, divisions II, III , 12 and V . Any consideration paid for the transfer of the tax 13 credit shall not be deducted from income under chapter 422, 14 divisions II, III , and V . 15 Sec. 60. Section 404A.2, subsection 5, paragraph c, Code 16 2017, is amended to read as follows: 17 c. The tax credit certificate, unless rescinded by the 18 authority, shall be accepted by the department of revenue 19 as payment for taxes imposed in chapter 422, divisions II, 20 III , and V , and in chapter 432 , subject to any conditions 21 or restrictions placed by the authority or the department of 22 revenue upon the face of the tax credit certificate and subject 23 to the limitations of this program. 24 Sec. 61. Section 404A.2, subsection 6, Code 2017, is amended 25 to read as follows: 26 6. For purposes of the individual and corporate income taxes 27 tax and the franchise tax, the increase in the basis of the 28 rehabilitated property that would otherwise result from the 29 qualified rehabilitation expenditures shall be reduced by the 30 amount of the credit computed under this section . 31 Sec. 62. Section 422.1, subsection 2, Code 2017, is amended 32 to read as follows: 33 2. Division II Personal net income tax Provisions 34 related to the business tax on corporations . 35 -21- LSB 1216XS (5) 87 mm/sc 21/ 46

S.F. 38 Sec. 63. Section 422.11L, subsection 1, unnumbered 1 paragraph 1, Code 2017, is amended to read as follows: 2 The taxes imposed under this division , less the credits 3 allowed under section 422.12 , III shall be reduced by a solar 4 energy system tax credit equal to the sum of the following: 5 Sec. 64. Section 422.11L, subsection 3, paragraph a, Code 6 2017, is amended by striking the paragraph. 7 Sec. 65. Section 422.11N, subsection 3, unnumbered 8 paragraph 1, Code 2017, is amended to read as follows: 9 The taxes imposed under this division , less the credits 10 allowed under section 422.12 , III shall be reduced by an 11 ethanol promotion tax credit for each tax year that the 12 taxpayer is eligible to claim the tax credit under this 13 section . In order to be eligible, all of the following must 14 apply: 15 Sec. 66. Section 422.11N, subsection 9, Code 2017, is 16 amended by striking the subsection. 17 Sec. 67. Section 422.11O, subsection 2, unnumbered 18 paragraph 1, Code 2017, is amended to read as follows: 19 The taxes imposed under this division , less the credits 20 allowed under section 422.12 , III shall be reduced by an 21 E-85 gasoline promotion tax credit for each tax year that 22 the taxpayer is eligible to claim the tax credit under this 23 subsection . 24 Sec. 68. Section 422.11O, subsection 7, Code 2017, is 25 amended by striking the subsection. 26 Sec. 69. Section 422.11P, subsection 3, unnumbered 27 paragraph 1, Code 2017, is amended to read as follows: 28 The taxes imposed under this division , less the credits 29 allowed under section 422.12 , III shall be reduced by a 30 biodiesel blended fuel tax credit for each tax year that 31 the taxpayer is eligible to claim a tax credit under this 32 subsection . 33 Sec. 70. Section 422.11P, subsection 7, Code 2017, is 34 amended by striking the subsection. 35 -22- LSB 1216XS (5) 87 mm/sc 22/ 46

S.F. 38 Sec. 71. Section 422.11S, subsection 1, Code 2017, is 1 amended to read as follows: 2 1. The taxes imposed under this division , less the credits 3 allowed under section 422.12 , III shall be reduced by a 4 school tuition organization tax credit equal to sixty-five 5 percent of the amount of the voluntary cash or noncash 6 contributions made by the taxpayer during the tax year to a 7 school tuition organization, subject to the total dollar value 8 of the organization’s tax credit certificates as computed in 9 subsection 8 . The tax credit shall be claimed by use of a tax 10 credit certificate as provided in subsection 7 . 11 Sec. 72. Section 422.11S, subsections 4 and 5, Code 2017, 12 are amended by striking the subsections. 13 Sec. 73. Section 422.11S, subsection 8, paragraph a, 14 subparagraph (2), Code 2017, is amended to read as follows: 15 (2) “Total approved tax credits” means for the tax year 16 beginning in the 2006 calendar year, two million five hundred 17 thousand dollars, for the tax year beginning in the 2007 18 calendar year, five million dollars, for tax years beginning 19 on or after January 1, 2008, but before January 1, 2012, seven 20 million five hundred thousand dollars, for tax years beginning 21 on or after January 1, 2012, but before January 1, 2014, eight 22 million seven hundred fifty thousand dollars, and for tax years 23 beginning on or after January 1, 2014, twelve for tax years 24 beginning on or after January 1, 2017, three million dollars. 25 Sec. 74. Section 422.11Y, subsection 3, unnumbered 26 paragraph 1, Code 2017, is amended to read as follows: 27 The taxes imposed under this division , less the credits 28 allowed under section 422.12 , III shall be reduced by the 29 amount of the E-15 plus gasoline promotion tax credit for each 30 tax year that the taxpayer is eligible to claim a tax credit 31 under this subsection . 32 Sec. 75. Section 422.11Y, subsection 8, Code 2017, is 33 amended by striking the subsection. 34 Sec. 76. Section 422.15, subsections 2 and 3, Code 2017, are 35 -23- LSB 1216XS (5) 87 mm/sc 23/ 46

S.F. 38 amended by striking the subsections. 1 Sec. 77. Section 422.15, subsection 4, Code 2017, is amended 2 to read as follows: 3 4. Notwithstanding subsections subsection 1, 2, and 3, or 4 any other provision of this chapter , withholding of income 5 tax and any reporting requirement shall not be imposed upon 6 a person, corporation, or withholding agent or any payor of 7 deferred compensation, pensions, or annuities with regard to 8 such payments made to a nonresident of the state. 9 Sec. 78. Section 422.21, Code 2017, is amended by striking 10 the section and inserting in lieu thereof the following: 11 422.21 Form and time of return. 12 Returns shall be in the form the director prescribes, and 13 shall be filed with the department on or before the last day 14 of the fourth month after the expiration of the tax year. 15 However, cooperative associations as defined in section 6072(d) 16 of the Internal Revenue Code shall file their returns on or 17 before the fifteenth day of the ninth month following the 18 close of the taxable year and nonprofit corporations subject 19 to the unrelated business income tax imposed by section 20 422.33, subsection 1A, shall file their returns on or before 21 the fifteenth day of the fifth month following the close of 22 the taxable year. If, under the Internal Revenue Code, a 23 corporation is required to file a return covering a tax period 24 of less than twelve months, the state return shall be for the 25 same period and is due forty-five days after the due date of 26 the federal tax return, excluding any extension of time to 27 file. In case of sickness, absence, or other disability, or 28 if good cause exists, the director may allow further time for 29 filing returns. The director shall cause to be prepared blank 30 forms for the returns and shall cause them to be distributed 31 throughout the state and to be furnished upon application, 32 but failure to receive or secure the form does not relieve 33 the taxpayer from the obligation of making a return that is 34 required. The department may as far as consistent with the 35 -24- LSB 1216XS (5) 87 mm/sc 24/ 46

S.F. 38 Code draft income tax forms to conform to the income tax 1 forms of the internal revenue department of the United States 2 government. 3 Sec. 79. Section 422.22, Code 2017, is amended to read as 4 follows: 5 422.22 Supplementary returns. 6 If the director shall be of the opinion that any taxpayer 7 required under this division III to file a return has failed 8 to file such a return or to include in a return filed, either 9 intentionally or through error, items of taxable income, 10 the director may require from such taxpayer a return or 11 supplementary return in such form as the director shall 12 prescribe, of all the items of income which the taxpayer 13 received during the year for which the return is made, whether 14 or not taxable under the provisions of this division III . If 15 from a supplementary return, or otherwise, the director finds 16 that any items of income, taxable under this division III , have 17 been omitted from the original return, the director may require 18 the items so omitted to be added to the original return. Such 19 supplementary return and the correction of the original return 20 shall not relieve the taxpayer from any of the penalties to 21 which the taxpayer may be liable under any provisions of this 22 division III , whether or not the director required a return or 23 a supplementary return under this section . 24 Sec. 80. Section 422.32, Code 2017, is amended to read as 25 follows: 26 422.32 Definitions. 27 1. For the purpose of this division and unless otherwise 28 required by the context: 29 a. 1. “Affiliated group” means a group of corporations as 30 defined in section 1504(a) of the Internal Revenue Code. 31 b. 2. a. “Business income” means income arising from 32 transactions and activity in the regular course of the 33 taxpayer’s trade or business; or income from tangible and 34 intangible property if the acquisition, management, and 35 -25- LSB 1216XS (5) 87 mm/sc 25/ 46

S.F. 38 disposition of the property constitute integral parts of the 1 taxpayer’s regular trade or business operations; or gain or 2 loss resulting from the sale, exchange, or other disposition of 3 real property or of tangible or intangible personal property, 4 if the property while owned by the taxpayer was operationally 5 related to the taxpayer’s trade or business carried on in 6 Iowa or operationally related to sources within Iowa, or the 7 property was operationally related to sources outside this 8 state and to the taxpayer’s trade or business carried on in 9 Iowa; or gain or loss resulting from the sale, exchange, or 10 other disposition of stock in another corporation if the 11 activities of the other corporation were operationally related 12 to the taxpayer’s trade or business carried on in Iowa while 13 the stock was owned by the taxpayer. A taxpayer may have more 14 than one regular trade or business in determining whether 15 income is business income. 16 (1) b. It is the intent of the general assembly to treat as 17 apportionable business income all income that may be treated 18 as apportionable business income under the Constitution of the 19 United States. 20 (2) c. The filing of an Iowa income tax return on a 21 combined report basis is neither allowed nor required by this 22 paragraph “b” subsection . 23 c. 3. “Commercial domicile” means the principal place from 24 which the trade or business of the taxpayer is directed or 25 managed. 26 d. 4. “Corporation” includes joint stock companies, and 27 associations organized for pecuniary profit, and partnerships 28 and limited liability companies taxed as corporations under the 29 Internal Revenue Code. 30 e. 5. “Domestic corporation” means any corporation 31 organized under the laws of this state. 32 6. “Fiduciary” means a guardian, trustee, executor, 33 administrator, receiver, conservator, or any person, whether 34 individual or corporate, acting in any fiduciary capacity for 35 -26- LSB 1216XS (5) 87 mm/sc 26/ 46

S.F. 38 any person, trust, or estate. 1 7. “Fiscal year” means an accounting period of twelve 2 months, ending on the last day of any month other than 3 December. 4 f. 8. “Foreign corporation” means any corporation other 5 than a domestic corporation. 6 9. “Foreign country” means any jurisdiction other than one 7 embraced within the United States. The words “United States” , 8 when used in a geographical sense, include the states, the 9 District of Columbia, and the possessions of the United States. 10 g. 10. “Income from sources within this state” means income 11 from real, tangible, or intangible property located or having 12 a situs in this state. 13 11. “Income year” means the calendar year or the fiscal year 14 upon the basis of which the net income is computed under this 15 division. 16 12. “Individual” means a natural person. 17 h. 13. “Internal Revenue Code” means the Internal Revenue 18 Code of 1954, prior to the date of its redesignation as the 19 Internal Revenue Code of 1986 by the Tax Reform Act of 1986, 20 or means the Internal Revenue Code of 1986 as amended to and 21 including January 1, 2015. 22 i. 14. “Nonbusiness income” means all income other than 23 business income. 24 15. “Paid” , for the purposes of the deductions under this 25 division, means “paid or accrued” or “paid or incurred”, and 26 the terms “paid or incurred” and “paid or accrued” shall be 27 construed according to the method of accounting upon the basis 28 of which the net income is computed under this division. The 29 term “received” , for the purpose of the computation of net 30 income under this division, means “received or accrued”, and 31 the term “received or accrued” shall be construed according to 32 the method of accounting upon the basis of which the net income 33 is computed under this division. 34 16. “Resident” applies only to individuals and includes, for 35 -27- LSB 1216XS (5) 87 mm/sc 27/ 46

S.F. 38 the purpose of determining liability to the tax imposed by this 1 division upon or with reference to the income of any tax year, 2 any individual domiciled in the state, and any other individual 3 who maintains a permanent place of abode within the state. 4 j. 17. “State” means any state of the United States, the 5 District of Columbia, the Commonwealth of Puerto Rico, any 6 territory or possession of the United States, and any foreign 7 country or political subdivision thereof. 8 18. a. “Tax year” means the calendar year, or the fiscal 9 year ending during such calendar year, upon the basis of which 10 the net income is computed under this division. 11 b. If a taxpayer has made the election provided by section 12 441(f) of the Internal Revenue Code, “tax year” means the annual 13 period so elected, varying from fifty-two to fifty-three weeks. 14 c. If the effective date or the applicability of a provision 15 of this division is expressed in terms of a tax year beginning, 16 including, or ending with reference to a specified date which 17 is the first or last day of a month, a tax year described in 18 paragraph “a” of this subsection shall be treated as beginning 19 with the first day of the calendar month beginning nearest to 20 the first day of the tax year or as ending with the last day of 21 the calendar month ending nearest to the last day of the tax 22 year. 23 k. 19. “Taxable in another state”. For purposes of 24 allocation and apportionment of income under this division , a 25 taxpayer is “taxable in another state” if: 26 (1) a. In that state the taxpayer is subject to a net 27 income tax, a franchise tax measured by net income, a franchise 28 tax for the privilege of doing business, or a corporate stock 29 tax; or 30 (2) b. That state has jurisdiction to subject the taxpayer 31 to a net income tax regardless of whether, in fact, the state 32 does or does not. 33 l. 20. “Unitary business” means a business carried on 34 partly within and partly without a state where the portion 35 -28- LSB 1216XS (5) 87 mm/sc 28/ 46

S.F. 38 of the business carried on within the state depends on or 1 contributes to the business outside the state. 2 2. The words, terms, and phrases defined in section 422.4, 3 subsections 4 to 6, 8, 9, 13, and 15 to 17 , when used in this 4 division , shall have the meanings ascribed to them in said 5 section except where the context clearly indicates a different 6 meaning. 7 Sec. 81. Section 422.33, subsection 28, Code 2017, is 8 amended to read as follows: 9 28. The taxes imposed under this division shall be reduced 10 by a school tuition organization tax credit allowed under 11 section 422.11S . The maximum amount of tax credits that 12 may be approved under this subsection for a tax year equals 13 twenty-five percent of the school tuition organization’s tax 14 credits that may be approved pursuant to section 422.11S, 15 subsection 8 , for a tax year. 16 Sec. 82. Section 422.35, subsection 2, Code 2017, is amended 17 to read as follows: 18 2. Add interest and dividends from foreign securities, from 19 securities of state and other political subdivisions, and from 20 regulated investment companies exempt from federal income tax 21 under the Internal Revenue Code, except for those securities 22 the interest and dividends from which are exempt from taxation 23 by the state of Iowa as otherwise provided by law, including 24 those set forth in section 422.7, subsection 2 . : 25 a. Vision Iowa program bonds pursuant to section 12.71, 26 subsection 8. 27 b. School infrastructure program bonds pursuant to section 28 12.81, subsection 8. 29 c. Iowa jobs program revenue bonds pursuant to section 30 12.87, subsection 8. 31 d. Iowa utility board and Iowa consumer advocate building 32 project bonds pursuant to section 12.91, subsection 9. 33 e. Iowa finance authority beginning farmer loan program 34 bonds pursuant to section 16.64, subsection 2. 35 -29- LSB 1216XS (5) 87 mm/sc 29/ 46

S.F. 38 f. Water pollution control works and drinking facilities 1 financing program bonds pursuant to section 16.131, subsection 2 5. 3 g. Iowa prison infrastructure revenue bonds pursuant to 4 section 12.80, subsection 3, and section 16.177, subsection 8. 5 h. Quad cities interstate metropolitan authority bonds 6 pursuant to section 28A.24. 7 i. Iowa finance authority E911 program bonds pursuant to 8 section 34A.20, subsection 6. 9 j. Soil and water conservation subdistrict bonds pursuant 10 to section 161A.22. 11 k. Community college residence hall and dormitory bonds 12 pursuant to section 260C.61. 13 l. Community college bond program bonds pursuant to section 14 260C.71, subsection 6. 15 m. Higher education loan authority bonds pursuant to section 16 261A.27. 17 n. State board of regents bonds pursuant to sections 262.41, 18 262.51, 262.60, 262A.8, and 263A.6. 19 o. Interstate bridges bonds pursuant to section 313A.36. 20 p. Aviation authority bonds pursuant to section 330A.16. 21 q. County health center bonds pursuant to section 331.441, 22 subsection 2, paragraph “c” , subparagraph (7). 23 r. Rural water district bonds pursuant to section 357A.15. 24 s. Urban renewal bonds pursuant to section 403.9, subsection 25 2. 26 t. Municipal housing project bonds pursuant to section 27 403A.12. 28 u. Comprehensive petroleum underground storage tank fund 29 bonds pursuant to section 455G.6, subsection 14. 30 v. Honey creek premier destination park bonds pursuant to 31 section 463C.12, subsection 8. 32 Sec. 83. Section 422.39, Code 2017, is amended to read as 33 follows: 34 422.39 Statutes applicable to corporation tax. 35 -30- LSB 1216XS (5) 87 mm/sc 30/ 46

S.F. 38 All the provisions of sections 422.24 to 422.27 422.26 of 1 division II, respecting payment and collection, shall apply in 2 respect to the tax due and payable by a corporation taxable 3 under this division . 4 Sec. 84. Section 422.73, Code 2017, is amended to read as 5 follows: 6 422.73 Correction of errors —— refunds, credits, and 7 carrybacks. 8 1. If it appears that an amount of tax, penalty, or interest 9 has been paid which was not due under division II, III or V 10 of this chapter , then that amount shall be credited against 11 any tax due on the books of the department by the person who 12 made the excessive payment, or that amount shall be refunded 13 to the person or with the person’s approval, credited to tax 14 to become due. A claim for refund or credit that has not been 15 filed with the department within three years after the return 16 upon which a refund or credit claimed became due, or within one 17 year after the payment of the tax upon which a refund or credit 18 is claimed was made, whichever time is the later, shall not be 19 allowed by the director. If, as a result of a carryback of a 20 net operating loss or a net capital loss, the amount of tax 21 in a prior period is reduced and an overpayment results, the 22 claim for refund or credit of the overpayment shall be filed 23 with the department within the three years after the return 24 for the taxable year of the net operating loss or net capital 25 loss became due. Notwithstanding the period of limitation 26 specified, the taxpayer shall have six months from the day of 27 final disposition of any income tax matter between the taxpayer 28 and the internal revenue service with respect to the particular 29 tax year to claim an income tax refund or credit. 30 2. Notwithstanding subsection 1 , a claim for refund or 31 credit of the individual income tax paid which resulted from a 32 reduction in a person’s federal adjusted gross income due to 33 section 1106 of the FAA Modernization and Reform Act of 2012 , 34 Pub. L. No. 112-95 , shall be considered timely if the claim is 35 -31- LSB 1216XS (5) 87 mm/sc 31/ 46

S.F. 38 filed with the department on or before June 30, 2013. 1 3. The department shall enter into an agreement with the 2 internal revenue service for the transmission of federal income 3 tax reports on individuals required to file an Iowa income tax 4 return who have been involved in an income tax matter with 5 the internal revenue service. After final disposition of 6 the income tax matter between the taxpayer and the internal 7 revenue service, the department shall determine whether the 8 individual is due a state income tax refund as a result of 9 final disposition of such income tax matter. If the individual 10 is due a state income tax refund, the department shall notify 11 the individual within thirty days and request the individual to 12 file a claim for refund or credit with the department. 13 Sec. 85. Section 422.110, Code 2017, is amended to read as 14 follows: 15 422.110 Income tax credit in lieu of refund. 16 1. In lieu of the fuel tax refund provided in section 17 452A.17 , a person or corporation subject to taxation under 18 division II or III of this chapter may elect to receive an 19 income tax credit. The person or corporation which elects to 20 receive an income tax credit shall cancel its refund permit 21 obtained under section 452A.18 within thirty days after the 22 first day of its tax year or the permit becomes invalid at that 23 time. For the purposes of this section , “person” includes a 24 person claiming a tax credit based upon the person’s pro rata 25 share of the earnings from a partnership, limited liability 26 company, or corporation which is not subject to a tax under 27 division II or III of this chapter as a partnership, limited 28 liability company, or corporation “corporation” means the same 29 as defined in section 422.32 . If the election to receive 30 an income tax credit has been made, it remains effective for 31 at least one tax year, and for subsequent tax years unless 32 a change is requested and a new refund permit applied for 33 within thirty days after the first day of the person’s or 34 corporation’s tax year. The income tax credit shall be the 35 -32- LSB 1216XS (5) 87 mm/sc 32/ 46

S.F. 38 amount of the Iowa fuel tax paid on fuel purchased by the 1 person or corporation and is subject to the conditions provided 2 in section 452A.17 with the exception that the income tax 3 credit is not available for refunds relating to casualty 4 losses, transport diversions, pumping credits, blending 5 errors, idle time, power takeoffs, reefer units, and exports by 6 distributors. 7 2. The right to a credit under this section is not 8 assignable and the credit may be claimed only by the person or 9 corporation that purchased the fuel. 10 Sec. 86. Section 422D.1, Code 2017, is amended to read as 11 follows: 12 422D.1 Authorization —— election —— imposition and repeal —— 13 use of revenues. 14 1. a. A county board of supervisors may offer for voter 15 approval any of the following taxes or a combination of the 16 following taxes: 17 (1) Local option income surtax. 18 (2) An an ad valorem property tax. 19 b. Revenues generated from these taxes the ad valorem 20 property tax shall be used for emergency medical services as 21 provided in section 422D.6 . 22 2. a. The taxes property tax for emergency medical services 23 shall only be imposed after an election at which a majority of 24 those voting on the question of imposing the tax or combination 25 of taxes specified in subsection 1 , paragraph “a” , subparagraph 26 (1) or (2), vote in favor of the question. However, the tax 27 or combination of taxes specified in subsection 1 shall not 28 be imposed on property within or on residents of a benefited 29 emergency medical services district under chapter 357F . The 30 question of imposing the tax or combination of the taxes may 31 be submitted at the regular city election, a special election, 32 or the general election. Notice of the question shall be 33 provided by publication at least sixty days before the time of 34 the election and shall identify the tax or combination of taxes 35 -33- LSB 1216XS (5) 87 mm/sc 33/ 46

S.F. 38 and the levy rate or rates, as applicable . If a majority of 1 those voting on the question approve the imposition of the tax 2 or combination of taxes , the tax or combination of taxes shall 3 be imposed as follows: 4 (1) A local option income surtax shall be imposed for tax 5 years beginning on or after January 1 of the fiscal year in 6 which the favorable election was held. 7 (2) An ad valorem property tax shall be imposed levied for 8 the fiscal year in which the election was held. 9 b. Before a county imposes an income surtax as specified 10 in subsection 1 , paragraph “a” , subparagraph (1), a benefited 11 emergency medical services district in the county shall be 12 dissolved, and the county shall be liable for the outstanding 13 obligations of the benefited district. If the benefited 14 district extends into more than one county, the county imposing 15 the income surtax shall be liable for only that portion of the 16 obligations relating to the portion of the benefited district 17 in the county. 18 3. Revenues received by the county from the taxes imposed 19 tax levied under this chapter shall be deposited into the 20 emergency medical services trust fund created pursuant to 21 section 422D.6 and shall be used as provided in that section. 22 4. Any tax or combination of taxes imposed levied under this 23 chapter shall be for a maximum period of five years. 24 Sec. 87. Section 425.17, subsection 7, Code 2017, is amended 25 to read as follows: 26 7. “Income” means the sum of Iowa net income as defined 27 in section 422.7 , Code 2017, plus all of the following to 28 the extent not already included in Iowa net income: capital 29 gains, alimony, child support money, cash public assistance and 30 relief, except property tax relief granted under this division , 31 amount of in-kind assistance for housing expenses, the gross 32 amount of any pension or annuity, including but not limited 33 to railroad retirement benefits, payments received under the 34 federal Social Security Act, except child insurance benefits 35 -34- LSB 1216XS (5) 87 mm/sc 34/ 46

S.F. 38 received by a member of the claimant’s household, and all 1 military retirement and veterans’ disability pensions, interest 2 received from the state or federal government or any of its 3 instrumentalities, workers’ compensation and the gross amount 4 of disability income or “loss of time” insurance. “Income” 5 does not include gifts from nongovernmental sources, or surplus 6 foods or other relief in kind supplied by a governmental 7 agency. In determining income, net operating losses and net 8 capital losses shall not be considered. 9 Sec. 88. Section 425.23, subsection 4, paragraph b, Code 10 2017, is amended to read as follows: 11 b. The annual adjustment factor for the 1998 base year is 12 one hundred percent. For each subsequent base year, the annual 13 adjustment factor equals the annual inflation factor for the 14 calendar year, in which the base year begins, as computed in 15 section 422.4 for purposes of the individual income tax , Code 16 2017 . 17 Sec. 89. Section 476.20, subsection 2, Code 2017, is amended 18 to read as follows: 19 2. The board shall establish rules requiring a regulated 20 public utility furnishing gas or electricity to include in 21 the utility’s notice of pending disconnection of service a 22 written statement advising the customer that the customer 23 may be eligible to participate in the low income home energy 24 assistance program or weatherization assistance program 25 administered by the division of community action agencies of 26 the department of human rights. The written statement shall 27 list the address and telephone number of the local agency 28 which is administering the customer’s low income home energy 29 assistance program and the weatherization assistance program. 30 The written statement shall also state that the customer 31 is advised to contact the public utility to settle any of 32 the customer’s complaints with the public utility, but if a 33 complaint is not settled to the customer’s satisfaction, the 34 customer may file the complaint with the board. The written 35 -35- LSB 1216XS (5) 87 mm/sc 35/ 46

S.F. 38 statement shall include the address and phone number of the 1 board. If the notice of pending disconnection of service 2 applies to a residence, the written statement shall advise 3 that the disconnection does not apply from November 1 through 4 April 1 for a resident who is a “head of household”, as 5 defined in section 422.4 , head of household and who has been 6 certified to the public utility by the local agency which is 7 administering the low income home energy assistance program and 8 weatherization assistance program as being eligible for either 9 the low income home energy assistance program or weatherization 10 assistance program, and that if such a resident resides within 11 the serviced residence, the customer should promptly have 12 the qualifying resident notify the local agency which is 13 administering the low income home energy assistance program and 14 weatherization assistance program. The board shall establish 15 rules requiring that the written notice contain additional 16 information as it deems necessary and appropriate. 17 Sec. 90. Section 476.20, subsection 3, paragraph b, Code 18 2017, is amended to read as follows: 19 b. A qualified applicant for the low income home energy 20 assistance program or the weatherization assistance program who 21 is also a “head of household”, as defined in section 422.4, 22 subsection 7 , head of household shall be promptly certified 23 by the local agency administering the applicant’s program to 24 the applicant’s public utility that the resident is a “head 25 of household” as defined in section 422.4, subsection 7 , head 26 of household and is qualified for the low income home energy 27 assistance program or weatherization assistance program. 28 Notwithstanding subsection 1 , a public utility furnishing gas 29 or electricity shall not disconnect service from November 1 30 through April 1 to a residence which has a resident that has 31 been certified under this paragraph. For purposes of this 32 section, “head of household” has the same meaning as provided 33 by the Internal Revenue Code. 34 Sec. 91. Section 476B.2, Code 2017, is amended to read as 35 -36- LSB 1216XS (5) 87 mm/sc 36/ 46

S.F. 38 follows: 1 476B.2 General rule. 2 The owner of a qualified facility shall, for each 3 kilowatt-hour of qualified electricity that the owner sells 4 or uses for on-site consumption during the ten-year period 5 beginning on the date the qualified facility was originally 6 placed in service, be allowed a wind energy production tax 7 credit to the extent provided in this chapter against the tax 8 imposed in chapter 422, divisions II, III , and V, and chapter 9 432 , and may claim a refund of tax imposed by chapter 423 or 10 437A for any tax year within the time period set forth in 11 section 423.47 or 437A.14 . 12 Sec. 92. Section 476B.6, subsection 5, paragraphs a, b, and 13 c, Code 2017, are amended to read as follows: 14 a. If the tax credit application is filed by a partnership, 15 limited liability company, S corporation, estate, trust, or 16 other reporting entity all of the income of which is taxed 17 directly to its equity holders or beneficiaries, for the taxes 18 imposed under chapter 422, division II or III, the tax credit 19 certificate shall be issued directly to equity holders or 20 beneficiaries of the applicant in proportion to their pro rata 21 share of the income of such entity. The applicant shall, in 22 the application made under this section , identify its equity 23 holders or beneficiaries, and the percentage of such entity’s 24 income that is allocable to each equity holder or beneficiary. 25 b. If the tax credit applicant under this section is 26 eligible to receive renewable electricity production credits 27 authorized under section 45 of the Internal Revenue Code, 28 as amended, and the tax credit applicant is a partnership, 29 limited liability company, S corporation, estate, trust, or 30 other reporting entity all of the income of which is taxed 31 directly to its equity holders or beneficiaries, for the taxes 32 imposed under chapter 422, division II or III , the tax credit 33 certificate may be issued to a partner if the business is a 34 partnership, a shareholder if the business is an S corporation, 35 -37- LSB 1216XS (5) 87 mm/sc 37/ 46

S.F. 38 or a member if the business is a limited liability company 1 in the amounts designated by the eligible partnership, S 2 corporation, or limited liability company. In absence of 3 such designation, the credits under this section shall flow 4 through to the partners, shareholders, or members in accordance 5 with their pro rata share of the income of the entity. The 6 applicant shall, in the application made under this section , 7 identify the holders or beneficiaries that are to receive the 8 tax credit certificates and the percentage of the tax credit 9 that is allocable to each holder or beneficiary. 10 c. If an applicant under this section is eligible to 11 receive renewable electricity production credits authorized 12 under section 45 of the Internal Revenue Code, as amended, and 13 the tax credit applicant is a partnership, limited liability 14 company, S corporation, estate, trust, or other reporting 15 entity all of the income of which is taxed directly to its 16 equity holders or beneficiaries, for the taxes imposed under 17 chapter 422, division II or III , the tax credit certificates 18 and all future rights to the tax credit in this section may be 19 distributed to an equity holder or beneficiary as a liquidating 20 distribution or portion thereof, of a holder or beneficiary’s 21 interest in the applicant entity. The applicant shall, in the 22 application made under this section , designate the percentage 23 of the tax credit allocable to the liquidating equity holder 24 or beneficiary that is to receive the current and future tax 25 credit certificates under this section . 26 Sec. 93. Section 476B.7, subsection 2, Code 2017, is amended 27 to read as follows: 28 2. The tax credit shall be freely transferable. The 29 transferee may use the amount of the tax credit transferred 30 against the taxes imposed under chapter 422, divisions II, III , 31 and V , and chapter 432 for any tax year the original transferor 32 could have claimed the tax credit. The transferee may claim 33 a refund under chapter 423 or 437A for any tax year within 34 the time period set forth in section 423.47 or 437A.14 for 35 -38- LSB 1216XS (5) 87 mm/sc 38/ 46

S.F. 38 which the original transferor could have claimed a refund. 1 Any consideration received for the transfer of the tax credit 2 shall not be included as income under chapter 422, divisions 3 II, III , and V . Any consideration paid for the transfer of the 4 tax credit shall not be deducted from income under chapter 422, 5 divisions II, III , and V . 6 Sec. 94. Section 476C.4, subsection 4, paragraph a, Code 7 2017, is amended to read as follows: 8 a. If the tax credit application is filed by a partnership, 9 limited liability company, S corporation, estate, trust, or 10 other reporting entity all of the income of which is taxed 11 directly to its equity holders or beneficiaries, for the taxes 12 imposed under chapter 422, division II or III , the tax credit 13 certificate shall be issued directly to equity holders or 14 beneficiaries of the applicant in proportion to their pro rata 15 share of the income of such entity. The applicant shall, in 16 the application made under this section , identify its equity 17 holders or beneficiaries, and the percentage of such entity’s 18 income that is allocable to each equity holder or beneficiary. 19 Sec. 95. Section 476C.4, subsection 4, paragraph b, 20 subparagraph (1), Code 2017, is amended to read as follows: 21 (1) If the tax credit applicant under this section is 22 eligible to receive renewable electricity production credits 23 authorized under section 45 of the Internal Revenue Code, 24 as amended, and the tax credit applicant is a partnership, 25 limited liability company, S corporation, estate, trust, or 26 other reporting entity all of the income of which is taxed 27 directly to its equity holders or beneficiaries, for the taxes 28 imposed under chapter 422, division II or III , the tax credit 29 certificate may be issued to a partner if the business is a 30 partnership, a shareholder if the business is an S corporation, 31 or a member if the business is a limited liability company 32 in the amounts designated by the eligible partnership, S 33 corporation, or limited liability company. In absence of such 34 designation, the credits under this section shall flow through 35 -39- LSB 1216XS (5) 87 mm/sc 39/ 46

S.F. 38 to the partners, shareholders, or members in accordance with 1 their pro rata share of the income of the entity. 2 Sec. 96. Section 476C.4, subsection 4, paragraph c, 3 subparagraph (1), Code 2017, is amended to read as follows: 4 (1) If an applicant under this section is eligible to 5 receive renewable electricity production credits authorized 6 under section 45 of the Internal Revenue Code, as amended, and 7 the tax credit applicant is a partnership, limited liability 8 company, S corporation, estate, trust, or other reporting 9 entity all of the income of which is taxed directly to its 10 equity holders or beneficiaries, for the taxes imposed under 11 chapter 422, division II or III , the tax credit certificates 12 and all future rights to the tax credit in this section may be 13 distributed to an equity holder or beneficiary as a liquidating 14 distribution or portion thereof, of a holder or beneficiary’s 15 interest in the applicant entity. 16 Sec. 97. Section 476C.6, subsection 1, paragraph b, Code 17 2017, is amended to read as follows: 18 b. The transferee may use the amount of the tax credit 19 transferred against taxes imposed under chapter 422, divisions 20 II, III , and V , and chapter 432 for any tax year the original 21 transferor could have claimed the tax credit. The transferee 22 may claim a refund under chapter 423 or 437A for any tax 23 year within the time period set forth in section 423.47 or 24 437A.14 for which the original transferor could have claimed 25 the refund. Any consideration received for the transfer of 26 the tax credit shall not be included as income under chapter 27 422, divisions II, III , and V . Any consideration paid for the 28 transfer of the tax credit shall not be deducted from income 29 under chapter 422, divisions II, III , and V . 30 Sec. 98. Section 483A.1A, subsection 10, paragraph e, Code 31 2017, is amended to read as follows: 32 e. Is a member of the armed forces of the United States 33 who is serving on active duty , and claims residency in this 34 state , and has filed a state individual income tax return 35 -40- LSB 1216XS (5) 87 mm/sc 40/ 46

S.F. 38 as a resident pursuant to chapter 422, division II , for the 1 preceding tax year, or is stationed in this state. 2 Sec. 99. Section 904.809, subsection 5, paragraph a, 3 subparagraph (2), Code 2017, is amended to read as follows: 4 (2) The inmate’s employer shall provide each employed 5 inmate with the withholding statement required under section 6 422.16 , and any other employment information necessary for the 7 receipt of the remainder of an inmate’s payroll earnings. 8 Sec. 100. REPEAL. Sections 68A.601, 190B.105, 257.22 9 through 257.26, 298.14, 422.4 through 422.11F, 422.11H through 10 422.11J, 422.11M, 422.11Q, 422.11R, 422.11V, 422.11W, 422.11Z, 11 422.12, 422.12A through 422.12E, 422.12H, 422.12J through 12 422.12M, 422.13, 422.14, 422.16, 422.17, 422.19, 422.23, 13 422.27, 422.31, 422D.2 through 422D.4, Code 2017, are repealed. 14 Sec. 101. CORRESPONDING AMENDMENTS LEGISLATION. Additional 15 legislation is required to fully implement this division of 16 this Act. The director of the department of revenue shall, in 17 compliance with section 2.16, prepare draft legislation for 18 submission to the legislative services agency, as necessary, to 19 implement the repeal of the individual income tax under this 20 division of this Act and under other provisions of law. 21 Sec. 102. EFFECTIVE DATE. This division of this Act takes 22 effect January 1, 2018. 23 Sec. 103. APPLICABILITY. This division of this Act applies 24 to tax years beginning on or after January 1, 2018. 25 DIVISION II 26 SALES AND USE TAX 27 Sec. 104. Section 423.2, subsection 1, unnumbered paragraph 28 1, Code 2017, is amended to read as follows: 29 There is imposed a tax of six eleven percent upon the sales 30 price of all sales of tangible personal property, consisting 31 of goods, wares, or merchandise, sold at retail in the state 32 to consumers or users except as otherwise provided in this 33 subchapter . 34 Sec. 105. Section 423.2, subsections 2 and 3, Code 2017, are 35 -41- LSB 1216XS (5) 87 mm/sc 41/ 46

S.F. 38 amended to read as follows: 1 2. A tax of six eleven percent is imposed upon the sales 2 price of the sale or furnishing of gas, electricity, water, 3 heat, pay television service, and communication service, 4 including the sales price from such sales by any municipal 5 corporation or joint water utility furnishing gas, electricity, 6 water, heat, pay television service, and communication service 7 to the public in its proprietary capacity, except as otherwise 8 provided in this subchapter , when sold at retail in the state 9 to consumers or users. 10 3. A tax of six eleven percent is imposed upon the 11 sales price of all sales of tickets or admissions to places 12 of amusement, fairs, and athletic events except those of 13 elementary and secondary educational institutions. A tax 14 of six eleven percent is imposed on the sales price of an 15 entry fee or like charge imposed solely for the privilege of 16 participating in an activity at a place of amusement, fair, or 17 athletic event unless the sales price of tickets or admissions 18 charges for observing the same activity are taxable under this 19 subchapter . A tax of six eleven percent is imposed upon that 20 part of private club membership fees or charges paid for the 21 privilege of participating in any athletic sports provided club 22 members. 23 Sec. 106. Section 423.2, subsection 4, paragraph a, Code 24 2017, is amended to read as follows: 25 a. A tax of six eleven percent is imposed upon the sales 26 price derived from the operation of all forms of amusement 27 devices and games of skill, games of chance, raffles, and bingo 28 games as defined in chapter 99B , and card game tournaments 29 conducted under section 99B.27 , that are operated or conducted 30 within the state, the tax to be collected from the operator in 31 the same manner as for the collection of taxes upon the sales 32 price of tickets or admission as provided in this section . 33 Nothing in this subsection shall legalize any games of skill 34 or chance or slot-operated devices which are now prohibited by 35 -42- LSB 1216XS (5) 87 mm/sc 42/ 46

S.F. 38 law. 1 Sec. 107. Section 423.2, subsection 5, Code 2017, is amended 2 to read as follows: 3 5. There is imposed a tax of six eleven percent upon the 4 sales price from the furnishing of services as defined in 5 section 423.1 . 6 Sec. 108. Section 423.2, subsection 7, paragraph a, 7 unnumbered paragraph 1, Code 2017, is amended to read as 8 follows: 9 A tax of six eleven percent is imposed upon the sales 10 price from the sales, furnishing, or service of solid waste 11 collection and disposal service. 12 Sec. 109. Section 423.2, subsection 8, paragraph a, Code 13 2017, is amended to read as follows: 14 a. A tax of six eleven percent is imposed on the sales 15 price from sales of bundled transactions. For the purposes of 16 this subsection , a “bundled transaction” is the retail sale of 17 two or more distinct and identifiable products, except real 18 property and services to real property, which are sold for one 19 nonitemized price. A “bundled transaction” does not include 20 the sale of any products in which the sales price varies, or 21 is negotiable, based on the selection by the purchaser of the 22 products included in the transaction. 23 Sec. 110. Section 423.2, subsection 9, Code 2017, is amended 24 to read as follows: 25 9. A tax of six eleven percent is imposed upon the 26 sales price from any mobile telecommunications service, 27 including all paging services, that this state is allowed 28 to tax pursuant to the provisions of the federal Mobile 29 Telecommunications Sourcing Act, Pub. L. No. 106-252, 4 U.S.C. 30 §116 et seq. For purposes of this subsection , taxes on mobile 31 telecommunications service, as defined under the federal Mobile 32 Telecommunications Sourcing Act that are deemed to be provided 33 by the customer’s home service provider, shall be paid to 34 the taxing jurisdiction whose territorial limits encompass 35 -43- LSB 1216XS (5) 87 mm/sc 43/ 46

S.F. 38 the customer’s place of primary use, regardless of where the 1 mobile telecommunications service originates, terminates, 2 or passes through and shall in all other respects be taxed 3 in conformity with the federal Mobile Telecommunications 4 Sourcing Act. All other provisions of the federal Mobile 5 Telecommunications Sourcing Act are adopted by the state of 6 Iowa and incorporated into this subsection by reference. With 7 respect to mobile telecommunications service under the federal 8 Mobile Telecommunications Sourcing Act, the director shall, if 9 requested, enter into agreements consistent with the provisions 10 of the federal Act. 11 Sec. 111. Section 423.2, subsection 11, paragraph b, 12 subparagraphs (2) and (3), Code 2017, are amended to read as 13 follows: 14 (2) Transfer from the remaining revenues the amounts 15 required under Article VII, section 10, of the Constitution 16 of the State of Iowa to the natural resources and outdoor 17 recreation trust fund created in section 461.31 , if applicable . 18 (3) Transfer one-sixth seventeen and two thousand five 19 hundred forty-eight ten-thousandths percent of the remaining 20 revenues to the secure an advanced vision for education fund 21 created in section 423F.2 . This subparagraph (3) is repealed 22 December 31, 2029. 23 Sec. 112. Section 423.2, subsection 14, Code 2017, is 24 amended to read as follows: 25 14. The sales tax rate of six eleven percent is reduced to 26 five ten percent on January 1, 2030. 27 Sec. 113. Section 423.5, subsection 1, unnumbered paragraph 28 1, Code 2017, is amended to read as follows: 29 Except as provided in paragraph “c” , an excise tax at the 30 rate of six eleven percent of the purchase price or installed 31 purchase price is imposed on the following: 32 Sec. 114. Section 423.5, subsection 5, Code 2017, is amended 33 to read as follows: 34 5. The use tax rate of six eleven percent is reduced to five 35 -44- LSB 1216XS (5) 87 mm/sc 44/ 46

S.F. 38 ten percent on January 1, 2030. 1 Sec. 115. Section 423.43, subsection 1, paragraph b, Code 2 2017, is amended to read as follows: 3 b. Subsequent to the deposit into the general fund of 4 the state and after the transfer of such revenues collected 5 under chapter 423B , the department shall transfer one-sixth 6 one-eleventh of such remaining revenues to the secure an 7 advanced vision for education fund created in section 423F.2 . 8 This paragraph is repealed December 31, 2029. 9 Sec. 116. EFFECTIVE DATE. This division of this Act takes 10 effect January 1, 2018. 11 EXPLANATION 12 The inclusion of this explanation does not constitute agreement with 13 the explanation’s substance by the members of the general assembly. 14 This bill relates to state taxes by repealing the individual 15 income tax and increasing the state sales and use tax rates. 16 Division I repeals the individual income tax and makes 17 numerous conforming changes to the Code to remove references 18 to the individual income tax and to update or move provisions 19 of the individual income tax that are also applicable by 20 reference to the corporate income tax and the franchise tax. 21 The division also repeals the emergency medical services income 22 surtax in Code chapter 422D, the instructional support income 23 surtax in Code section 257.21, the educational improvement 24 income surtax in Code section 257.29, and the physical plant 25 and equipment income surtax in Code section 298.2, because 26 income surtax revenues will no longer be generated without the 27 state individual income tax. 28 The repeal of the individual income tax will also affect the 29 industrial new jobs training program in Code chapter 260E, the 30 accelerated career education program in Code chapter 260G, and 31 the targeted jobs withholding credit in Code section 403.19A, 32 because those programs rely on income tax amounts withheld from 33 employee wages by employers. 34 The division provides that additional legislation is 35 -45- LSB 1216XS (5) 87 mm/sc 45/ 46

S.F. 38 required to fully implement the division and requires the 1 director of the department of revenue to prepare draft 2 legislation in compliance with Code section 2.16 for submission 3 to the legislative services agency to implement the repeal of 4 the individual income tax. 5 The division takes effect January 1, 2018, and applies to tax 6 years beginning on or after that date. 7 Division II increases the state sales and use tax rate to 8 11 percent from 6 percent. By operation of law as provided in 9 Article VII, section 10 of the Iowa Constitution, a portion 10 (0.375 percent) of the state sales tax generated and collected 11 from the rate increase provided in this division will be 12 transferred to the natural resources and outdoor recreation 13 trust fund in Code section 461.31. The division amends the 14 transfer of state sales tax revenues to the secure an advanced 15 vision for education fund (SAVE) in Code section 423F.2 from 16 one-sixth (approximately 16.66 percent) of the revenues to 17 17.2548 percent of the revenues to ensure that SAVE receives 18 approximately the same proportion of the total sales tax 19 revenue as it did prior to the sales tax rate increase provided 20 in the division. 21 The division takes effect January 1, 2018. 22 -46- LSB 1216XS (5) 87 mm/sc 46/ 46