Senate Study Bill 3195 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED GOVERNOR BILL) A BILL FOR An Act relating to state and local revenue and finance by 1 modifying the income taxes, the sales and use taxes and 2 local option sales tax, the hotel and motel excise tax, the 3 automobile rental excise tax, the Iowa educational savings 4 plan trust, and the disabilities expenses savings plan 5 trust, making penalties applicable, and including immediate 6 effective date and retroactive and other applicability 7 provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 5613XL (25) 87 mm/jh
S.F. _____ H.F. _____ DIVISION I 1 INCOME TAX CHANGES FOR TAX YEAR 2018 2 Section 1. EARNED INCOME TAX CREDIT FOR 2018. 3 Notwithstanding the definition of “Internal Revenue Code” 4 in section 422.3, for tax years beginning during the 2018 5 calendar year, any reference to the term “Internal Revenue 6 Code” in section 422.12B shall mean the Internal Revenue Code 7 of 1954, prior to the date of its redesignation as the Internal 8 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 9 the Internal Revenue Code of 1986 as amended and in effect on 10 January 1, 2016, but shall not be construed to include any 11 amendment to the Internal Revenue Code enacted after January 1, 12 2016, including any amendment with retroactive applicability 13 or effectiveness. 14 Sec. 2. ACCOUNTING METHOD AND OTHER MISCELLANEOUS 15 COUPLING PROVISIONS FOR TAX YEAR 2018. Notwithstanding any 16 other provision of law to the contrary, amendments to the 17 Internal Revenue Code enacted in Pub. L. No. 115-97, §13102, 18 §13221, §13504, §13541, §13543, §13611, and §13613, apply in 19 calculating federal adjusted gross income or federal taxable 20 income, as applicable, for state tax purposes for purposes of 21 chapter 422 for tax years beginning during the 2018 calendar 22 year to the extent those amendments affect the calculation of 23 federal adjusted gross income or federal taxable income, as 24 applicable, for federal tax purposes for tax years beginning 25 during the 2018 calendar year. 26 Sec. 3. TEACHER EXPENSE DEDUCTION. Notwithstanding any 27 other provision of law to the contrary, for tax years beginning 28 during the 2018 calendar year, a taxpayer is allowed to take 29 the deduction for certain expenses of elementary and secondary 30 school teachers allowed under section 62(a)(2)(D) of the 31 Internal Revenue Code, as amended by Pub. L. No. 114-113, 32 division Q, §104, in computing net income for state tax 33 purposes. 34 Sec. 4. EFFECTIVE DATE. This division of this Act, being 35 -1- LSB 5613XL (25) 87 mm/jh 1/ 106
S.F. _____ H.F. _____ deemed of immediate importance, takes effect upon enactment. 1 Sec. 5. RETROACTIVE APPLICABILITY. This division of this 2 Act applies retroactively to January 1, 2018, for tax years 3 beginning on or after that date, but before January 1, 2019. 4 DIVISION II 5 INDIVIDUAL INCOME TAX CHANGES BEGINNING IN TAX YEAR 2019 6 Sec. 6. Section 422.4, subsection 1, paragraphs b and c, 7 Code 2018, are amended to read as follows: 8 b. “Cumulative inflation factor” means the product of the 9 annual inflation factor for the 1988 2019 calendar year and 10 all annual inflation factors for subsequent calendar years 11 as determined pursuant to this subsection . The cumulative 12 inflation factor applies to all tax years beginning on or after 13 January 1 of the calendar year for which the latest annual 14 inflation factor has been determined. 15 c. The annual inflation factor for the 1988 2019 calendar 16 year is one hundred percent. 17 Sec. 7. Section 422.4, subsection 2, paragraph b, Code 2018, 18 is amended to read as follows: 19 b. “Cumulative standard deduction factor” means the product 20 of the annual standard deduction factor for the 1989 calendar 21 year years set forth in section 422.21, subsection 5, paragraph 22 “b” , and all annual standard deduction factors for subsequent 23 calendar years as determined pursuant to this subsection . 24 The cumulative standard deduction factor applies to all tax 25 years beginning on or after January 1 of the calendar year for 26 which the latest annual standard deduction factor has been 27 determined. 28 Sec. 8. Section 422.4, Code 2018, is amended by adding the 29 following new subsection: 30 NEW SUBSECTION . 9A. “Internal Revenue Code” means the 31 Internal Revenue Code of 1954, prior to the date of its 32 redesignation as the Internal Revenue Code of 1986 by the Tax 33 Reform Act of 1986, or means the Internal Revenue Code of 1986 34 as amended and in effect on January 1, 2018. This definition 35 -2- LSB 5613XL (25) 87 mm/jh 2/ 106
S.F. _____ H.F. _____ shall not be construed to include any amendment to the 1 Internal Revenue Code enacted after the date specified in the 2 preceding sentence, including any amendment with retroactive 3 applicability or effectiveness. 4 Sec. 9. Section 422.4, subsection 16, Code 2018, is amended 5 to read as follows: 6 16. The words “taxable income” mean the net income as 7 defined in section 422.7 minus the deductions allowed by 8 section 422.9 , in the case of individuals; in the case of 9 estates or trusts, the words “taxable income” mean the taxable 10 income (without a deduction for personal exemption) as 11 computed for federal income tax purposes under the Internal 12 Revenue Code, but with the following adjustments specified in 13 section 422.7 plus the Iowa income tax deducted in computing 14 the federal taxable income and minus federal income taxes as 15 provided in section 422.9 . : 16 a. Add back the personal exemption deduction taken in 17 computing federal taxable income. 18 b. Make the adjustments specified in section 422.7. 19 c. Add back Iowa income tax deducted in computing federal 20 taxable income. 21 d. Subtract federal income taxes as provided in section 22 422.9, if available. 23 e. Add back seventy-five percent of the qualified business 24 income deduction under section 199A of the Internal Revenue 25 Code taken in calculating federal taxable income. 26 Sec. 10. Section 422.5, subsection 1, Code 2018, is amended 27 to read as follows: 28 1. a. A tax is imposed upon every resident and nonresident 29 of the state which tax shall be levied, collected, and paid 30 annually upon and with respect to the entire taxable income 31 as defined in this division at rates as follows: provided in 32 section 422.5A. 33 a. On all taxable income from zero through one thousand 34 dollars, thirty-six hundredths of one percent. 35 -3- LSB 5613XL (25) 87 mm/jh 3/ 106
S.F. _____ H.F. _____ b. On all taxable income exceeding one thousand dollars but 1 not exceeding two thousand dollars, seventy-two hundredths of 2 one percent. 3 c. On all taxable income exceeding two thousand dollars 4 but not exceeding four thousand dollars, two and forty-three 5 hundredths percent. 6 d. On all taxable income exceeding four thousand dollars but 7 not exceeding nine thousand dollars, four and one-half percent. 8 e. On all taxable income exceeding nine thousand dollars 9 but not exceeding fifteen thousand dollars, six and twelve 10 hundredths percent. 11 f. On all taxable income exceeding fifteen thousand dollars 12 but not exceeding twenty thousand dollars, six and forty-eight 13 hundredths percent. 14 g. On all taxable income exceeding twenty thousand dollars 15 but not exceeding thirty thousand dollars, six and eight-tenths 16 percent. 17 h. On all taxable income exceeding thirty thousand dollars 18 but not exceeding forty-five thousand dollars, seven and 19 ninety-two hundredths percent. 20 i. On all taxable income exceeding forty-five thousand 21 dollars, eight and ninety-eight hundredths percent. 22 j. b. (1) The tax imposed upon the taxable income of a 23 nonresident shall be computed by reducing the amount determined 24 pursuant to paragraphs “a” through “i” paragraph “a” by the 25 amounts of nonrefundable credits under this division and by 26 multiplying this resulting amount by a fraction of which the 27 nonresident’s net income allocated to Iowa, as determined in 28 section 422.8, subsection 2 , paragraph “a” , is the numerator and 29 the nonresident’s total net income computed under section 422.7 30 is the denominator. This provision also applies to individuals 31 who are residents of Iowa for less than the entire tax year. 32 (2) (a) The tax imposed upon the taxable income of a 33 resident shareholder in an S corporation or of an estate 34 or trust with a situs in Iowa that is a shareholder in an S 35 -4- LSB 5613XL (25) 87 mm/jh 4/ 106
S.F. _____ H.F. _____ corporation, which S corporation has in effect for the tax 1 year an election under subchapter S of the Internal Revenue 2 Code and carries on business within and without the state, 3 may be computed by reducing the amount determined pursuant 4 to paragraphs “a” through “i” paragraph “a” by the amounts of 5 nonrefundable credits under this division and by multiplying 6 this resulting amount by a fraction of which the resident’s 7 or estate’s or trust’s net income allocated to Iowa, as 8 determined in section 422.8, subsection 2 , paragraph “b” , is 9 the numerator and the resident’s or estate’s or trust’s total 10 net income computed under section 422.7 is the denominator. If 11 a resident shareholder, or an estate or trust with a situs in 12 Iowa that is a shareholder, has elected to take advantage of 13 this subparagraph (2), and for the next tax year elects not to 14 take advantage of this subparagraph, the resident or estate or 15 trust shareholder shall not reelect to take advantage of this 16 subparagraph for the three tax years immediately following the 17 first tax year for which the shareholder elected not to take 18 advantage of this subparagraph, unless the director consents to 19 the reelection. This subparagraph also applies to individuals 20 who are residents of Iowa for less than the entire tax year. 21 (b) This subparagraph (2) shall not affect the amount of 22 the taxpayer’s checkoffs under this division , the credits from 23 tax provided under this division , and the allocation of these 24 credits between spouses if the taxpayers filed separate returns 25 or separately on combined returns. 26 Sec. 11. NEW SECTION . 422.5A Tax rates —— net tax receipts 27 calculation —— revenue targets. 28 1. Tax rate categories. One of the categories of tax rates 29 in category I, II, III, IV, or V, below apply for each tax year 30 beginning on or after January 1, 2019, as determined pursuant 31 to subsections 2 through 9: 32 I II III IV V 33 a. On all 34 taxable income 35 -5- LSB 5613XL (25) 87 mm/jh 5/ 106
S.F. _____ H.F. _____ from 0 through 1 $1,628: 0.32% 0.32% 0.30% 0.30% 0.30% 2 b. On all 3 taxable income 4 exceeding $1,628 5 but not exceeding 6 $3,256: 0.64% 0.64% 0.60% 0.60% 0.60% 7 c. On all 8 taxable income 9 exceeding $3,256 10 but not exceeding 11 $6,512: 2.10% 2.10% 2.00% 2.00% 2.00% 12 d. On all 13 taxable income 14 exceeding $6,512 15 but not exceeding 16 $14,652: 4.05% 4.05% 4.00% 4.00% 4.00% 17 e. On all 18 taxable income 19 exceeding $14,652 20 but not exceeding 21 $24,420: 5.40% 5.40% 5.30% 5.30% 5.20% 22 f. On all 23 taxable income 24 exceeding $24,420 25 but not exceeding 26 $48,840: 5.70% 5.70% 5.60% 5.60% 5.40% 27 g. On all 28 taxable income 29 exceeding $48,840 30 but not exceeding 31 $150,000: 6.70% 6.70% 6.30% 6.30% 6.30% 32 h. On all 33 taxable income 34 exceeding 35 -6- LSB 5613XL (25) 87 mm/jh 6/ 106
S.F. _____ H.F. _____ $150,000: 7.60% 7.40% 7.00% 7.00% 6.90% 1 2. Net tax receipts calculation. 2 a. For purposes of this section, “net tax receipts” means 3 total tax receipts adjusted by net accruals, less the sum of 4 tax refunds and school infrastructure transfers made on an 5 accrual basis, as computed for purposes of the comprehensive 6 annual financial reports of the state. 7 b. Net tax receipts shall be calculated by the department 8 of revenue, in consultation with the department of management, 9 for each fiscal year of the fiscal period beginning on or 10 after July 1, 2018, but prior to July 1, 2024, in accordance 11 with rules adopted by the director of revenue. The director 12 of revenue shall adopt rules pursuant to chapter 17A for 13 calculating net tax receipts as defined in paragraph “a” , 14 including rules defining “total tax receipts” , “net accruals” , 15 “tax refunds” , and “school infrastructure transfers” for purposes 16 of the calculation of net tax receipts, including the types 17 and categories of receipts that will be included within each 18 definition and in the calculation of net tax receipts. 19 c. The department of revenue shall submit an annual report 20 to the governor and general assembly by November 1 following 21 the close of each fiscal year of the fiscal period beginning on 22 or after July 1, 2018, but prior to July 1, 2024, which report 23 shall identify the net tax receipts for the fiscal year and 24 the individual income tax rates that will be in effect for tax 25 years beginning on or after January 1 of the following calendar 26 year, and shall include a detailed description of the net tax 27 receipts calculation made by the department of revenue. 28 3. Tax rates beginning in 2019. The tax rates in category I 29 provided in subsection 1 shall apply for tax years beginning on 30 or after January 1, 2019. 31 4. Fiscal year 2019 revenue target. If one or more of the 32 contingencies in paragraph “a” or “b” of this subsection 4 33 are met for the fiscal year ending June 30, 2019, then this 34 subsection 4 shall apply for tax years beginning on or after 35 -7- LSB 5613XL (25) 87 mm/jh 7/ 106
S.F. _____ H.F. _____ January 1, 2020, notwithstanding subsection 3. 1 a. If net tax receipts for the fiscal year ending June 30, 2 2019, equal or exceed seven billion one hundred six million 3 five hundred thousand dollars, then the tax rates in category 4 II provided in subsection 1 shall apply for tax years beginning 5 on or after January 1, 2020. 6 b. Notwithstanding paragraph “a” , if net tax receipts for 7 the fiscal year ending June 30, 2019, equal or exceed seven 8 billion three hundred twenty-three million eight hundred 9 thousand dollars, then the tax rates in category III provided 10 in subsection 1 shall apply for tax years beginning on or after 11 January 1, 2020. 12 5. Fiscal year 2020 revenue target. If one or more of the 13 contingencies in paragraphs “a” through “d” of this subsection 14 5 are met for the fiscal year ending June 30, 2020, then this 15 subsection 5 shall apply for tax years beginning on or after 16 January 1, 2021, notwithstanding subsections 3 and 4. 17 a. If the tax rates in category I provided in subsection 1 18 applied for tax years beginning on or after January 1, 2020, 19 and if net tax receipts for the fiscal year ending June 30, 20 2020, equal or exceed seven billion three hundred nineteen 21 million seven hundred thousand dollars, then the tax rates in 22 category II provided in subsection 1 shall apply for tax years 23 beginning on or after January 1, 2021. 24 b. Notwithstanding paragraph “a” , if the tax rates in 25 category I provided in subsection 1 applied for tax years 26 beginning on or after January 1, 2020, and if net tax receipts 27 for the fiscal year ending June 30, 2020, equal or exceed 28 seven billion five hundred forty-three million five hundred 29 thousand dollars, then the tax rates in category III provided 30 in subsection 1 shall apply for tax years beginning on or after 31 January 1, 2021. 32 c. If the tax rates in category II provided in subsection 1 33 applied for tax years beginning on or after January 1, 2020, 34 and if net tax receipts for the fiscal year ending June 30, 35 -8- LSB 5613XL (25) 87 mm/jh 8/ 106
S.F. _____ H.F. _____ 2020, equal or exceed seven billion three hundred twenty-three 1 million eight hundred thousand dollars, then the tax rates in 2 category III provided in subsection 1 shall apply for tax years 3 beginning on or after January 1, 2021. 4 d. Notwithstanding paragraphs “a” through “c” , if net tax 5 receipts for the fiscal year ending June 30, 2020, equal or 6 exceed seven billion five hundred twenty-five million five 7 hundred thousand dollars, then the tax rates in category IV 8 provided in subsection 1 shall apply for tax years beginning on 9 or after January 1, 2021. 10 6. Fiscal year 2021 revenue target. If one or more of the 11 contingencies in paragraphs “a” through “e” of this subsection 12 are met for the fiscal year ending June 30, 2021, then this 13 subsection 6 shall apply for tax years beginning on or after 14 January 1, 2022, notwithstanding subsections 3, 4, and 5. 15 a. If the tax rates in category I provided in subsection 1 16 applied for tax years beginning on or after January 1, 2021, 17 and the net tax receipts for the fiscal year ending June 30, 18 2021, equal or exceed seven billion five hundred thirty-nine 19 million three hundred thousand dollars, the tax rates in 20 category II provided in subsection 1 shall apply for tax years 21 beginning on or after January 1, 2022. 22 b. Notwithstanding paragraph “a” , if the tax rates in 23 category I or II provided in subsection 1 applied for tax years 24 beginning on or after January 1, 2021, and the net tax receipts 25 for the fiscal year ending June 30, 2021, equal or exceed seven 26 billion five hundred forty-three million five hundred thousand 27 dollars, the tax rates in category III provided in subsection 28 1 shall apply for tax years beginning on or after January 1, 29 2022. 30 c. Notwithstanding paragraphs “a” and “b” , if the tax rates 31 in category I or II provided in subsection 1 applied for tax 32 years beginning on or after January 1, 2021, and the net tax 33 receipts for the fiscal year ending June 30, 2021, equal or 34 exceed seven billion seven hundred fifty-one million three 35 -9- LSB 5613XL (25) 87 mm/jh 9/ 106
S.F. _____ H.F. _____ hundred thousand dollars, the tax rates in category IV provided 1 in subsection 1 shall apply for tax years beginning on or after 2 January 1, 2022. 3 d. If the tax rates in category III provided in subsection 4 1 applied for tax years beginning on or after January 1, 2021, 5 and the net tax receipts for the fiscal year ending June 30, 6 2021, equal or exceed seven billion five hundred twenty-five 7 million five hundred thousand dollars, the tax rates in 8 category IV provided in subsection 1 shall apply for tax years 9 beginning on or after January 1, 2022. 10 e. Notwithstanding paragraphs “a” through “d” , if the net 11 tax receipts for the fiscal year ending June 30, 2021, equal 12 or exceed seven billion seven hundred sixty-five million four 13 hundred thousand dollars, the tax rates in category V provided 14 in subsection 1 shall apply for tax years beginning on or after 15 January 1, 2022. 16 7. Fiscal year 2022 revenue target. If one or more of the 17 contingencies in paragraphs “a” through “e” of this subsection 18 are met for the fiscal year ending June 30, 2022, then this 19 subsection 7 shall apply for tax years beginning on or after 20 January 1, 2023, notwithstanding subsections 3, 4, 5, and 6. 21 a. If the tax rates in category I provided in subsection 1 22 applied for tax years beginning on or after January 1, 2022, 23 and the net tax receipts for the fiscal year ending June 30, 24 2022, equal or exceed seven billion seven hundred sixty-five 25 million five hundred thousand dollars, the tax rates in 26 category II provided in subsection 1 shall apply for tax years 27 beginning on or after January 1, 2023. 28 b. Notwithstanding paragraph “a” , if the tax rates in 29 category I or II provided in subsection 1 applied for tax years 30 beginning on or after January 1, 2022, and the net tax receipts 31 for the fiscal year ending June 30, 2022, equal or exceed seven 32 billion seven hundred sixty-nine million eight hundred thousand 33 dollars, the tax rates in category III provided in subsection 34 1 shall apply for tax years beginning on or after January 1, 35 -10- LSB 5613XL (25) 87 mm/jh 10/ 106
S.F. _____ H.F. _____ 2023. 1 c. Notwithstanding paragraphs “a” and “b” , if the tax rates 2 in category I, II, or III provided in subsection 1 applied for 3 tax years beginning on or after January 1, 2022, and the net 4 tax receipts for the fiscal year ending June 30, 2022, equal 5 or exceed seven billion seven hundred fifty-one million three 6 hundred thousand dollars, the tax rates in category IV provided 7 in subsection 1 shall apply for tax years beginning on or after 8 January 1, 2023. 9 d. Notwithstanding paragraphs “a” through “c” , if the 10 tax rates in category I, II, or III provided in subsection 1 11 applied for tax years beginning on or after January 1, 2022, 12 and the net tax receipts for the fiscal year ending June 30, 13 2022, equal or exceed seven billion nine hundred ninety-eight 14 million four hundred thousand dollars, the tax rates in 15 category V provided in subsection 1 shall apply for tax years 16 beginning on or after January 1, 2023. 17 e. If the tax rates in category IV provided in subsection 1 18 applied for tax years beginning on or after January 1, 2022, 19 and the net tax receipts for the fiscal year ending June 30, 20 2022, equal or exceed seven billion seven hundred sixty-five 21 million four hundred thousand dollars, the tax rates in 22 category V provided in subsection 1 shall apply for tax years 23 beginning on or after January 1, 2023. 24 8. Fiscal year 2023 revenue target. If one or more of the 25 contingencies in paragraphs “a” through “d” of this subsection 26 are met for the fiscal year ending June 30, 2023, then this 27 subsection 8 shall apply for tax years beginning on or after 28 January 1, 2024, notwithstanding subsections 3, 4, 5, 6, and 7. 29 a. If the tax rates in category I provided in subsection 1 30 applied for tax years beginning on or after January 1, 2023, 31 and the net tax receipts for the fiscal year ending June 30, 32 2023, equal or exceed seven billion nine hundred ninety-eight 33 million five hundred thousand dollars, the tax rates in 34 category II provided in subsection 1 shall apply for tax years 35 -11- LSB 5613XL (25) 87 mm/jh 11/ 106
S.F. _____ H.F. _____ beginning on or after January 1, 2024. 1 b. Notwithstanding paragraph “a” , if the tax rates in 2 category I or II provided in subsection 1 applied for tax years 3 beginning on or after January 1, 2023, and the net tax receipts 4 for the fiscal year ending June 30, 2023, equal or exceed eight 5 billion two million nine hundred thousand dollars, the tax 6 rates in category III provided in subsection 1 shall apply for 7 tax years beginning on or after January 1, 2024. 8 c. Notwithstanding paragraphs “a” and “b” , if the tax rates 9 in category I, II, or III provided in subsection 1 applied for 10 tax years beginning on or after January 1, 2023, and the net 11 tax receipts for the fiscal year ending June 30, 2023, equal or 12 exceed seven billion nine hundred eighty-three million eight 13 hundred thousand dollars, the tax rates in category IV provided 14 in subsection 1 shall apply for tax years beginning on or after 15 January 1, 2024. 16 d. Notwithstanding paragraphs “a” through “c” , if the tax 17 rates in category I, II, III, or IV provided in subsection 1 18 applied for tax years beginning on or after January 1, 2023, 19 and the net tax receipts for the fiscal year ending June 30, 20 2023, equal or exceed seven billion nine hundred ninety-eight 21 million four hundred thousand dollars, the tax rates in 22 category V provided in subsection 1 shall apply for tax years 23 beginning on or after January 1, 2024. 24 9. Fiscal year 2024 revenue target. If one or more of the 25 contingencies in paragraphs “a” through “d” of this subsection 26 are met for the fiscal year ending June 30, 2024, then this 27 subsection 9 shall apply for tax years beginning on or after 28 January 1, 2025, notwithstanding subsections 3, 4, 5, 6, 7, and 29 8. 30 a. If the tax rates in category I provided in subsection 1 31 applied for tax years beginning on or after January 1, 2024, 32 and the net tax receipts for the fiscal year ending June 30, 33 2024, equal or exceed eight billion two hundred thirty-eight 34 million five hundred thousand dollars, the tax rates in 35 -12- LSB 5613XL (25) 87 mm/jh 12/ 106
S.F. _____ H.F. _____ category II provided in subsection 1 shall apply for tax years 1 beginning on or after January 1, 2025. 2 b. Notwithstanding paragraph “a” , if the tax rates in 3 category I or II provided in subsection 1 applied for tax years 4 beginning on or after January 1, 2024, and the net tax receipts 5 for the fiscal year ending June 30, 2024, equal or exceed eight 6 billion two hundred forty-three million dollars, the tax rates 7 in category III provided in subsection 1 shall apply for tax 8 years beginning on or after January 1, 2025. 9 c. Notwithstanding paragraphs “a” and “b” , if the tax rates 10 in category I, II, or III provided in subsection 1 applied for 11 tax years beginning on or after January 1, 2024, and the net 12 tax receipts for the fiscal year ending June 30, 2024, equal 13 or exceed eight billion two hundred twenty-three million three 14 hundred thousand dollars, the tax rates in category IV provided 15 in subsection 1 shall apply for tax years beginning on or after 16 January 1, 2025. 17 d. Notwithstanding paragraphs “a” through “c” , if the tax 18 rates in category I, II, III, or IV provided in subsection 1 19 applied for tax years beginning on or after January 1, 2024, 20 and the net tax receipts for the fiscal year ending June 30, 21 2024, equal or exceed eight billion two hundred thirty-eight 22 million four hundred thousand dollars, the tax rates in 23 category V provided in subsection 1 shall apply for tax years 24 beginning on or after January 1, 2025. 25 Sec. 12. Section 422.5, subsection 2, Code 2018, is amended 26 by striking the subsection. 27 Sec. 13. Section 422.5, subsection 3, paragraph b, Code 28 2018, is amended to read as follows: 29 b. In lieu of the computation in subsection 1 or 2 , or in 30 paragraph “a” of this subsection , if the married persons’, 31 filing jointly or filing separately on a combined return, 32 head of household’s, or surviving spouse’s net income exceeds 33 thirteen thousand five hundred dollars, the regular tax imposed 34 under this division shall be the lesser of the maximum state 35 -13- LSB 5613XL (25) 87 mm/jh 13/ 106
S.F. _____ H.F. _____ individual income tax rate for the tax year times the portion 1 of the net income in excess of thirteen thousand five hundred 2 dollars or the regular tax liability computed without regard 3 to this sentence. Taxpayers electing to file separately shall 4 compute the alternate tax described in this paragraph using the 5 total net income of the husband and wife. The alternate tax 6 described in this paragraph does not apply if one spouse elects 7 to carry back or carry forward the loss as provided in section 8 422.9, subsection 3 . 9 Sec. 14. Section 422.5, subsection 3B, paragraph b, Code 10 2018, is amended to read as follows: 11 b. In lieu of the computation in subsection 1 , 2, or 3 , if 12 the married persons’, filing jointly or filing separately on 13 a combined return, head of household’s, or surviving spouse’s 14 net income exceeds thirty-two thousand dollars, the regular tax 15 imposed under this division shall be the lesser of the maximum 16 state individual income tax rate for the tax year times the 17 portion of the net income in excess of thirty-two thousand 18 dollars or the regular tax liability computed without regard 19 to this sentence. Taxpayers electing to file separately shall 20 compute the alternate tax described in this paragraph using the 21 total net income of the husband and wife. The alternate tax 22 described in this paragraph does not apply if one spouse elects 23 to carry back or carry forward the loss as provided in section 24 422.9, subsection 3 . 25 Sec. 15. Section 422.5, subsection 6, Code 2018, is amended 26 to read as follows: 27 6. Upon determination of the latest cumulative inflation 28 factor, the director shall multiply each dollar amount set 29 forth in subsection 1 , paragraphs “a” through “i” section 30 422.5A, subsection 1, by this cumulative inflation factor, 31 shall round off the resulting product to the nearest one 32 dollar, and shall incorporate the result into the income tax 33 forms and instructions for each tax year beginning on or after 34 January 1, 2019 . 35 -14- LSB 5613XL (25) 87 mm/jh 14/ 106
S.F. _____ H.F. _____ Sec. 16. Section 422.7, subsection 39A, unnumbered 1 paragraph 1, Code 2018, is amended to read as follows: 2 The additional first-year depreciation allowance authorized 3 in section 168(k) of the Internal Revenue Code, as enacted by 4 Pub. L. No. 110-185, §103, Pub. L. No. 111-5, §1201, Pub. L. 5 No. 111-240, §2022, Pub. L. No. 111-312, §401, Pub. L. No. 6 112-240, §331, and Pub. L. No. 113-295, §125, Pub. L. No. 7 114-113, division Q, §143, and Pub. L. No. 115-97, §13201, does 8 not apply in computing net income for state tax purposes. If 9 the taxpayer has taken the additional first-year depreciation 10 allowance for purposes of computing federal adjusted gross 11 income, then the taxpayer shall make the following adjustments 12 to federal adjusted gross income when computing net income for 13 state tax purposes: 14 Sec. 17. Section 422.7, Code 2018, is amended by adding the 15 following new subsections: 16 NEW SUBSECTION . 51. a. The increased expensing allowance 17 under section 179 of the Internal Revenue Code applies in 18 computing net income for state tax purposes for tax years 19 beginning on or after January 1, 2019, subject to the 20 limitations in this subsection. 21 b. If the taxpayer has taken the increased expensing 22 allowance under section 179 of the Internal Revenue Code for 23 purposes of computing federal adjusted gross income for tax 24 years beginning on or after January 1, 2019, then the taxpayer 25 shall make the following adjustments to federal adjusted gross 26 income when computing net income for state tax purposes for the 27 same tax year: 28 (1) Add the total amount of expense deduction taken on 29 section 179 property allowable for federal tax purposes under 30 section 179 of the Internal Revenue Code. 31 (2) Subtract the amount of expense deduction on section 32 179 property allowable for federal tax purposes under section 33 179 of the Internal Revenue Code, not to exceed one hundred 34 thousand dollars. The subtraction in this subparagraph shall 35 -15- LSB 5613XL (25) 87 mm/jh 15/ 106
S.F. _____ H.F. _____ be reduced, but not below zero, by the amount by which the 1 total cost of section 179 property placed in service by the 2 taxpayer during the tax year exceeds four hundred thousand 3 dollars. 4 (3) Any other adjustments to gains or losses necessary to 5 reflect adjustments made in subparagraphs (1) and (2). 6 c. The director shall adopt rules pursuant to chapter 17A 7 to administer this subsection. 8 NEW SUBSECTION . 52. a. For tax years beginning on or 9 after January 1, 2019, a taxpayer may elect to take advantage 10 of this subsection if the taxpayer’s total expensing allowance 11 deduction for federal tax purposes under section 179 of the 12 Internal Revenue Code that is allocated to the taxpayer from 13 one or more partnerships, S corporations, or limited liability 14 companies electing to have the income taxed directly to the 15 individual exceeds one hundred thousand dollars and would, 16 except as provided in this subsection, be limited for purposes 17 of computing net income for state tax purposes pursuant to 18 subsection 51. 19 b. A taxpayer who elects to take advantage of this 20 subsection shall make the following adjustments to federal 21 adjusted gross income when computing net income for state tax 22 purposes: 23 (1) Add the total amount of section 179 expense 24 deduction allocated to the taxpayer from all partnerships, S 25 corporations, or limited liability companies electing to have 26 the income taxed directly to the individual, to the extent the 27 allocated amount was allowed as a deduction to the taxpayer for 28 federal tax purposes for the tax year. 29 (2) From the amount added in subparagraph (1), subtract 30 the first one hundred thousand dollars of expensing allowance 31 deduction on section 179 property. 32 (3) The remaining amount, equal to the difference between 33 the amount added in subparagraph (1), and the amount subtracted 34 in subparagraph (2), may be deducted by the taxpayer but such 35 -16- LSB 5613XL (25) 87 mm/jh 16/ 106
S.F. _____ H.F. _____ deduction shall be amortized equally over five tax years 1 beginning in the following tax year. 2 (4) Any other adjustments to gains or losses necessary to 3 reflect adjustments made in subparagraphs (1) through (3). 4 c. A taxpayer who elects to take advantage of this 5 subsection shall not take the increased expensing allowance 6 under section 179 of the Internal Revenue Code for any section 7 179 property placed in service by the taxpayer in computing 8 adjusted gross income for state tax purposes. If the taxpayer 9 has taken any such deduction for purposes of computing federal 10 adjusted gross income, the taxpayer shall make the following 11 adjustments to federal adjusted gross income when computing net 12 income for state tax purposes: 13 (1) Add the total amount of expense deduction for federal 14 tax purposes taken on section 179 property placed in service by 15 the taxpayer under section 179 of the Internal Revenue Code. 16 (2) Subtract the amount of depreciation allowable on such 17 property under the modified accelerated cost recovery system 18 described in section 168 of the Internal Revenue Code, without 19 regard to section 168(k) of the Internal Revenue Code. The 20 taxpayer shall continue to take depreciation on the applicable 21 property in future tax years to the extent allowed under the 22 modified accelerated cost recovery system described in section 23 168 of the Internal Revenue Code, without regard to section 24 168(k) of the Internal Revenue Code. 25 (3) Any other adjustments to gains or losses necessary to 26 reflect the adjustments made in subparagraphs (1) and (2). 27 d. The election made under this subsection is for one tax 28 year and the taxpayer may elect or not elect to take advantage 29 of this subsection in any subsequent tax year. However, not 30 electing to take advantage of this subsection in a subsequent 31 tax year shall not affect the taxpayer’s ability to claim the 32 tax deduction under paragraph “b” , subparagraph (3), that 33 originated from a previous tax year. 34 e. The director shall adopt rules pursuant to chapter 17A 35 -17- LSB 5613XL (25) 87 mm/jh 17/ 106
S.F. _____ H.F. _____ to administer this subsection. 1 Sec. 18. Section 422.8, subsection 2, paragraph a, Code 2 2018, is amended to read as follows: 3 a. Nonresident’s net income allocated to Iowa is the net 4 income, or portion of net income, which is derived from a 5 business, trade, profession, or occupation carried on within 6 this state or income from any property, trust, estate, or 7 other source within Iowa. However, income derived from a 8 business, trade, profession, or occupation carried on within 9 this state and income from any property, trust, estate, or 10 other source within Iowa shall not include distributions from 11 pensions, including defined benefit or defined contribution 12 plans, annuities, individual retirement accounts, and deferred 13 compensation plans or any earnings attributable thereto so long 14 as the distribution is directly related to an individual’s 15 documented retirement and received while the individual is a 16 nonresident of this state. If a business, trade, profession, 17 or occupation is carried on partly within and partly without 18 the state, only the portion of the net income which is fairly 19 and equitably attributable to that part of the business, 20 trade, profession, or occupation carried on within the state 21 is allocated to Iowa for purposes of section 422.5, subsection 22 1 , paragraph “j” “b” , and section 422.13 and income from any 23 property, trust, estate, or other source partly within and 24 partly without the state is allocated to Iowa in the same 25 manner, except that annuities, interest on bank deposits and 26 interest-bearing obligations, and dividends are allocated 27 to Iowa only to the extent to which they are derived from a 28 business, trade, profession, or occupation carried on within 29 the state. Net income described in section 29C.24, subsection 30 3 , paragraph “a” , subparagraph (3), and paragraph “b” , 31 subparagraph (2), shall not be allocated and apportioned to the 32 state, as provided in section 29C.24 . 33 Sec. 19. Section 422.8, subsection 4, Code 2018, is amended 34 by striking the subsection. 35 -18- LSB 5613XL (25) 87 mm/jh 18/ 106
S.F. _____ H.F. _____ Sec. 20. Section 422.9, unnumbered paragraph 1, Code 2018, 1 is amended to read as follows: 2 1. In computing taxable income of individuals, there 3 shall be deducted from net income the larger of the following 4 amounts : computed under subsection 1A or 2, plus the amount 5 computed under subsection 2A. 6 Sec. 21. Section 422.9, subsection 1, Code 2018, is amended 7 by striking the subsection. 8 Sec. 22. Section 422.9, Code 2018, is amended by adding the 9 following new subsections: 10 NEW SUBSECTION . 1A. a. An optional standard deduction 11 equal to the sum of the amount in subparagraph (1) or (2), plus 12 the amounts in subparagraphs (3) and (4) as applicable: 13 (1) For a married person who files separately or a single 14 person, four thousand dollars. 15 (2) For a married couple who file a joint return, a 16 surviving spouse, or a head of household, eight thousand 17 dollars. 18 (3) If an individual described in subparagraph (1) or (2) is 19 at least sixty-five years old on December 31 of the tax year, 20 an additional amount equal to one of the following: 21 (a) For each tax year beginning on or after January 1, 2019, 22 but before January 1 of the first tax year for which the tax 23 rates in tax category III, IV, or V, as provided in section 24 422.5A, subsection 1, take effect, if at all, one thousand five 25 hundred dollars per individual who is at least sixty-five on 26 December 31 of the tax year. 27 (b) For each tax year beginning on or after January 1 of the 28 first tax year for which the tax rates in tax category III, IV, 29 or V, as provided in section 422.5A, subsection 1, take effect, 30 if at all, two thousand seventy dollars per individual who is 31 at least sixty-five on December 31 of the tax year. 32 (4) If an individual described in subparagraph (1) or (2) 33 is blind on December 31 of the tax year as described in section 34 422.12, subsection 2, paragraph “a” , subparagraph (5), an 35 -19- LSB 5613XL (25) 87 mm/jh 19/ 106
S.F. _____ H.F. _____ additional amount equal to one of the following: 1 (a) For each tax year beginning on or after January 1, 2019, 2 but before January 1 of the first tax year for which the tax 3 rates in tax category III, IV, or V, as provided in section 4 422.5A, subsection 1, take effect, if at all, one thousand five 5 hundred dollars per individual who is blind on December 31 of 6 the tax year. 7 (b) For each tax year beginning on or after January 1 of the 8 first tax year for which the tax rates in tax category III, IV, 9 or V, as provided in section 422.5A, subsection 1, take effect, 10 if at all, two thousand seventy dollars per individual who is 11 blind on December 31 of the tax year. 12 b. The optional standard deduction in this subsection 13 shall be applied after the deduction for federal income tax as 14 provided in subsection 2, paragraph “b” , and shall not exceed 15 the amount remaining after deduction of the federal income tax. 16 This paragraph is repealed January 1, 2022. 17 NEW SUBSECTION . 2A. a. Twenty-five percent of the amount 18 deductible by the taxpayer for federal income tax purposes 19 under section 199A of the Internal Revenue Code. 20 b. Notwithstanding paragraph “a” , and section 422.4, 21 subsection 16, paragraph “e” , for an entity electing or required 22 to file a composite return under section 422.13, subsection 5, 23 the deduction allowed under this subsection for purposes of 24 the composite return shall be an amount equal to twenty-five 25 percent of the deduction that would be allowable for federal 26 income tax purposes under section 199A of the Internal Revenue 27 Code by an individual taxpayer reporting the same items of 28 income and loss that are included in the composite return. 29 Sec. 23. Section 422.9, subsection 2, paragraphs b, h, and 30 i, Code 2018, are amended to read as follows: 31 b. (1) Add Subject to the limitations in subparagraphs 32 (2) and (3), add the amount of federal income taxes paid or 33 accrued, as the case may be, during the tax year and subtract 34 any federal income tax refunds received during the tax year. 35 -20- LSB 5613XL (25) 87 mm/jh 20/ 106
S.F. _____ H.F. _____ (2) Where married persons, who have filed a joint federal 1 income tax return, file separately, such total shall be divided 2 between them according to the portion of the total paid or 3 accrued, as the case may be, by each. Federal income taxes 4 paid for a tax year in which an Iowa return was not required 5 to be filed shall not be added and federal income tax refunds 6 received from a tax year in which an Iowa return was not 7 required to be filed shall not be subtracted. 8 (3) For tax years beginning on or after January 1, 2019, 9 the deduction of federal income tax is limited and shall be 10 calculated as follows: 11 (a) For tax years beginning in the 2019 calendar year, 12 add an amount equal to the sum of the federal income tax paid 13 during the tax year to the extent payment is for a tax year 14 beginning prior to January 1, 2019, and twenty-five percent of 15 the federal income tax paid during the tax year to the extent 16 payment is for a tax year beginning in the 2019 calendar year, 17 and subtract any federal income tax refunds received during the 18 tax year. 19 (b) For each tax year beginning on or after January 1, 20 2020, add an amount equal to the sum of twenty-five percent 21 of the federal income tax paid during the tax year to the 22 extent payment is for a tax year during which the tax rates in 23 tax category I as provided in section 422.5A, subsection 1, 24 applied, and fifteen percent of the federal income tax paid 25 during the tax year to the extent payment is for a tax year 26 during which the tax rates in tax category II as provided in 27 section 422.5A, subsection 1, applied, and subtract any federal 28 income tax refunds received during the tax year to the extent 29 the federal income tax was deducted for a prior tax year. 30 (c) Federal income tax paid during a tax year shall not be 31 deducted if the payment is for a tax year during which the tax 32 rates in category III, IV, or V, as provided in section 422.5A, 33 subsection 1, applied. 34 h. For purposes of calculating the deductions in this 35 -21- LSB 5613XL (25) 87 mm/jh 21/ 106
S.F. _____ H.F. _____ subsection that are authorized under the Internal Revenue Code, 1 and to the extent that any of such deductions is determined by 2 an individual’s federal adjusted gross income, the individual’s 3 federal adjusted gross income is computed in accordance with 4 section 422.7, subsections 39, 39A, 39B, 51, 52, and 53 . 5 i. The deduction for state sales and use taxes is allowable 6 only if the taxpayer elected to deduct the state sales and use 7 taxes in lieu of state income taxes under section 164 of the 8 Internal Revenue Code. A deduction for state sales and use 9 taxes is not allowed if the taxpayer has taken the deduction 10 for state income taxes or claimed the standard deduction under 11 section 63 of the Internal Revenue Code. This paragraph 12 applies to taxable years beginning after December 31, 2003, and 13 before January 1, 2008, and to taxable years beginning after 14 December 31, 2009, and before January 1, 2015 December 31, 15 2018 . 16 Sec. 24. Section 422.9, subsection 2, Code 2018, is amended 17 by adding the following new paragraph: 18 NEW PARAGRAPH . l. The limitation on the deduction of 19 certain taxes in section 164(b)(6) of the Internal Revenue 20 Code does not apply in computing taxable income for state tax 21 purposes. A taxpayer is allowed to deduct taxes in computing 22 taxable income as otherwise provided in this subsection without 23 regard to section 164(b)(6), as enacted by Pub. L. No. 115-97, 24 §11042. 25 Sec. 25. Section 422.9, subsection 3, paragraph d, Code 26 2018, is amended to read as follows: 27 d. Notwithstanding paragraph “a” , for a taxpayer who is 28 engaged in the trade or business of farming as defined in 29 section 263A(e)(4) of the Internal Revenue Code and has a loss 30 from farming as defined in section 172(b)(1)(F) 172(b)(1)(B) of 31 the Internal Revenue Code including modifications prescribed by 32 rule by the director, the Iowa loss from the trade or business 33 of farming is a net operating loss which may be carried back 34 five taxable years prior to the taxable year of the loss. 35 -22- LSB 5613XL (25) 87 mm/jh 22/ 106
S.F. _____ H.F. _____ Sec. 26. Section 422.9, subsection 5, Code 2018, is amended 1 to read as follows: 2 5. A taxpayer affected by section 422.8 shall , if the 3 optional standard deduction is not used, be permitted to deduct 4 only such portion of the total referred to in subsection 5 subsections 2 above and 2A as is fairly and equitably allocable 6 to Iowa under the rules prescribed by the director. 7 Sec. 27. Section 422.9, subsections 6 and 7, Code 2018, are 8 amended by striking the subsections. 9 Sec. 28. Section 422.11B, Code 2018, is amended to read as 10 follows: 11 422.11B Minimum tax credit. 12 1. a. There For tax years beginning before January 1, 2020, 13 there is allowed as a credit against the tax determined in 14 section 422.5, subsection 1 , paragraphs “a” through “j” for a 15 tax year an amount equal to the minimum tax credit for that tax 16 year. 17 b. The minimum tax credit for a tax year is the excess, if 18 any, of the net minimum tax imposed for all prior tax years 19 beginning on or after January 1, 1987, but before January 1, 20 2019, over the amount allowable as a credit under this section 21 for those prior tax years. 22 2. a. The allowable credit under subsection 1 for a 23 tax year beginning before January 1, 2019, shall not exceed 24 the excess, if any, of the tax determined in section 422.5, 25 subsection 1 , paragraphs “a” through “j” over the state 26 alternative minimum tax as determined in section 422.5, 27 subsection 2 , Code 2018 . The allowable credit under subsection 28 1 for a tax year beginning in the 2019 calendar year shall not 29 exceed the tax determined under section 422.5, subsection 1. 30 b. The net minimum tax for a tax year is the excess, if 31 any, of the tax determined in section 422.5, subsection 2 , 32 Code 2018, for the tax year over the tax determined in section 33 422.5, subsection 1 , paragraphs “a” through “j” for the tax 34 year. 35 -23- LSB 5613XL (25) 87 mm/jh 23/ 106
S.F. _____ H.F. _____ 3. This section is repealed January 1, 2020, for tax years 1 beginning on or after January 1, 2020. 2 Sec. 29. Section 422.13, subsection 1, paragraph c, Code 3 2018, is amended by striking the paragraph. 4 Sec. 30. Section 422.21, subsection 5, Code 2018, is amended 5 to read as follows: 6 5. a. The director shall determine for the 1989 2019 7 and each subsequent calendar year the annual and cumulative 8 inflation factors for each calendar year to be applied to tax 9 years beginning on or after January 1 of that calendar year. 10 The director shall compute the new dollar amounts as specified 11 to be adjusted in section 422.5 by the latest cumulative 12 inflation factor and round off the result to the nearest one 13 dollar. The annual and cumulative inflation factors determined 14 by the director are not rules as defined in section 17A.2, 15 subsection 11 . 16 b. The director shall determine for the 1990 2020 calendar 17 year and each subsequent calendar year the annual and 18 cumulative standard deduction factors to be applied to tax 19 years beginning on or after January 1 of that calendar year for 20 purposes of the standard deduction amounts in section 422.9, 21 subsection 1A, paragraph “a” , subparagraphs (1) and (2), and 22 subparagraph (3), subparagraph division (a), and subparagraph 23 (4), subparagraph division (a) . The director shall determine 24 for the calendar following the first calendar year for which 25 the tax rates in tax category III, IV, or V, as provided in 26 section 422.5A, subsection 1, take effect, if at all, and 27 for each subsequent calendar year, the annual and cumulative 28 standard deduction factors to be applied to tax years beginning 29 on or after January 1 of that calendar year for purposes of the 30 standard deduction amounts in section 422.9, subsection 1A, 31 paragraph “a” , subparagraph (3), subparagraph division (b), 32 and subparagraph (4), subparagraph division (b). The director 33 shall compute the new dollar amounts of the standard deductions 34 specified in section 422.9, subsection 1 , by the applicable 35 -24- LSB 5613XL (25) 87 mm/jh 24/ 106
S.F. _____ H.F. _____ latest cumulative standard deduction factor and round off the 1 result to the nearest ten dollars. The annual and cumulative 2 standard deduction factors determined by the director are not 3 rules as defined in section 17A.2, subsection 11 . 4 Sec. 31. EFFECTIVE DATE. This division of this Act takes 5 effect January 1, 2019. 6 Sec. 32. APPLICABILITY. This division of this Act applies 7 to tax years beginning on or after January 1, 2019. 8 DIVISION III 9 CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST AND IOWA ABLE 10 SAVINGS PLAN TRUST 11 Sec. 33. Section 12D.1, Code 2018, is amended to read as 12 follows: 13 12D.1 Purpose and definitions. 14 1. The general assembly finds that the general welfare and 15 well-being of the state are directly related to educational 16 levels and skills of the citizens of the state, and that a 17 vital and valid public purpose is served by the creation and 18 implementation of programs which encourage and make possible 19 the attainment of higher formal education by the greatest 20 number of citizens of the state. The state has limited 21 resources to provide additional programs for higher education 22 funding and the continued operation and maintenance of the 23 state’s public institutions of higher education and the general 24 welfare of the citizens of the state will be enhanced by 25 establishing a program which allows citizens of the state to 26 invest money in a public trust for future application to the 27 payment of higher education costs qualified education expenses . 28 The creation of the means of encouragement for citizens to 29 invest in such a program represents the carrying out of a 30 vital and valid public purpose. In order to make available 31 to the citizens of the state an opportunity to fund future 32 higher formal education needs, it is necessary that a public 33 trust be established in which moneys may be invested for future 34 educational use. 35 -25- LSB 5613XL (25) 87 mm/jh 25/ 106
S.F. _____ H.F. _____ 2. As used in this chapter , unless the context otherwise 1 requires: 2 a. “Account balance limit” means the maximum allowable 3 aggregate balance of accounts established for the same 4 beneficiary. Account earnings, if any, are included in the 5 account balance limit. 6 b. “Administrative fund” means the administrative fund 7 established under section 12D.4 . 8 c. “Beneficiary” means the individual designated by a 9 participation agreement to benefit from advance payments of 10 higher education costs qualified education expenses on behalf 11 of the beneficiary. 12 d. “Benefits” means the payment of higher education costs 13 qualified education expenses on behalf of a beneficiary by the 14 trust during the beneficiary’s attendance at an institution of 15 higher education a qualified educational institution . 16 e. “Higher education costs” means the same as “qualified 17 higher education expenses” as defined in section 529(e)(3) of 18 the Internal Revenue Code . 19 f. e. “Institution of higher education” means an institution 20 described in section 481 of the federal Higher Education Act of 21 1965, 20 U.S.C. §1088, which is eligible to participate in the 22 United States department of education’s student aid programs. 23 g. f. “Internal Revenue Code” means the same as defined 24 in section 12I.1 . 25 h. g. “Iowa educational savings plan trust” or “trust” means 26 the trust created under section 12D.2 . 27 i. h. “Participant” means an individual, individual’s legal 28 representative, trust, estate, or an organization described 29 in section 501(c)(3) of the Internal Revenue Code and exempt 30 from taxation under section 501(a) of the Internal Revenue 31 Code, that has entered into a participation agreement under 32 this chapter for the advance payment of higher education costs 33 qualified education expenses on behalf of a beneficiary. 34 j. i. “Participation agreement” means an agreement between 35 -26- LSB 5613XL (25) 87 mm/jh 26/ 106
S.F. _____ H.F. _____ a participant and the trust entered into under this chapter . 1 k. j. “Program fund” means the program fund established 2 under section 12D.4 . 3 k. “Qualified education expenses” means the same as 4 “qualified higher education expenses” as defined in section 5 529(e)(3) of the Internal Revenue Code, as amended by Pub. L. 6 No. 115-97, and shall include elementary and secondary school 7 expenses for tuition described in section 529(c)(7) of the 8 Internal Revenue Code, subject to the limitations imposed by 9 section 529(e)(3)(A) of the Internal Revenue Code. 10 l. “Qualified educational institution” means an institution 11 of higher education, or any elementary or secondary public, 12 private, or religious school described in section 529(c)(7) of 13 the Internal Revenue Code. 14 l. m. “Tuition and fees” “Tuition” means the quarter , or 15 semester , or annual charges imposed to attend an institution 16 of higher education a qualified educational institution and 17 required as a condition of enrollment or attendance . 18 Sec. 34. Section 12D.2, subsections 2, 5, 9, and 14, Code 19 2018, are amended to read as follows: 20 2. Enter into agreements with any institution of higher 21 education qualified educational institution , the state, or any 22 federal or other state agency, or other entity as required to 23 implement this chapter . 24 5. Carry out studies and projections so the treasurer of 25 state may advise participants regarding present and estimated 26 future higher education costs qualified education expenses 27 and levels of financial participation in the trust required 28 in order to enable participants to achieve their educational 29 funding objectives. 30 9. Make payments to institutions of higher education 31 qualified educational institutions , participants, or 32 beneficiaries, pursuant to participation agreements on behalf 33 of beneficiaries. 34 14. Establish, impose, and collect administrative fees 35 -27- LSB 5613XL (25) 87 mm/jh 27/ 106
S.F. _____ H.F. _____ and charges in connection with transactions of the trust, and 1 provide for reasonable service charges , including penalties for 2 cancellations and late payments with respect to participation 3 agreements . 4 Sec. 35. Section 12D.3, subsections 1 and 2, Code 2018, are 5 amended to read as follows: 6 1. a. Each participation agreement may require a 7 participant to agree to invest a specific amount of money in 8 the trust for a specific period of time for the benefit of a 9 specific beneficiary. A participant shall not be required to 10 make an annual contribution on behalf of a beneficiary. The 11 maximum contribution that may be deducted for Iowa income tax 12 purposes shall not exceed two thousand dollars per beneficiary 13 per year adjusted annually to reflect increases in the consumer 14 price index. The treasurer of state shall set an account 15 balance limit to maintain compliance with section 529 of the 16 Internal Revenue Code. A contribution shall not be permitted 17 to the extent it causes the aggregate balance of all accounts 18 established for the same beneficiary under the trust to exceed 19 the applicable account balance limit. 20 b. Participation agreements may be amended to provide for 21 adjusted levels of payments based upon changed circumstances or 22 changes in educational plans. 23 2. The execution of a participation agreement by the trust 24 shall not guarantee in any way that higher education costs 25 qualified education expenses will be equal to projections 26 and estimates provided by the trust or that the beneficiary 27 named in any participation agreement will attain any of the 28 following: 29 a. Be admitted to an institution of higher education a 30 qualified educational institution . 31 b. If admitted, be determined a resident for tuition 32 purposes by the institution of higher education qualified 33 educational institution . 34 c. Be allowed to continue attendance at the institution of 35 -28- LSB 5613XL (25) 87 mm/jh 28/ 106
S.F. _____ H.F. _____ higher education qualified educational institution following 1 admission. 2 d. Graduate from the institution of higher education 3 qualified educational institution . 4 Sec. 36. Section 12D.3, Code 2018, is amended by adding the 5 following new subsection: 6 NEW SUBSECTION . 5. A participant may designate a successor 7 in accordance with rules adopted by the treasurer of state. 8 The designated successor shall succeed to the ownership of the 9 account in the event of the death of the participant. In the 10 event a participant dies and has not designated a successor to 11 the account, the following criteria shall apply: 12 a. The beneficiary of the account, if eighteen years of 13 age or older, shall become the owner of the account as well as 14 remain the beneficiary upon filing the appropriate forms in 15 accordance with rules adopted by the treasurer of state. 16 b. If the beneficiary of the account is under the age of 17 eighteen, account ownership shall be transferred to the first 18 surviving parent or other legal guardian of the beneficiary to 19 file the appropriate forms in accordance with rules adopted by 20 the treasurer of state. 21 Sec. 37. Section 12D.4, Code 2018, is amended to read as 22 follows: 23 12D.4 Program and administrative funds —— investment and 24 payments. 25 1. a. The treasurer of state shall segregate moneys 26 received by the trust into two funds: the program fund and the 27 administrative fund. 28 b. All moneys paid by participants in connection with 29 participation agreements shall be deposited as received into 30 separate accounts within the program fund. 31 c. Contributions to the trust made by participants may only 32 be made in the form of cash. 33 d. A participant or beneficiary shall not provide investment 34 direction regarding program contributions or earnings held by 35 -29- LSB 5613XL (25) 87 mm/jh 29/ 106
S.F. _____ H.F. _____ the trust may, directly or indirectly, direct the investment of 1 any contributions to the trust or any earnings thereon no more 2 than two times in a calendar year . 3 e. The amount of cash distributions from the trust and all 4 other qualified state tuition programs under section 529 of 5 the Internal Revenue Code to a beneficiary during any taxable 6 year shall, in the aggregate, include no more than ten thousand 7 dollars in expenses for tuition in connection with enrollment 8 at an elementary or secondary public, private, or religious 9 school incurred during the taxable year. 10 2. Moneys accrued by participants in the program fund of 11 the trust may be used for payments to any institution of higher 12 education qualified educational institution . Payments can be 13 made to the qualified educational institution, the participant, 14 or the beneficiary. 15 Sec. 38. Section 12D.6, subsection 1, paragraph a, Code 16 2018, is amended to read as follows: 17 a. A participant retains ownership of all payments made 18 under a participation agreement up to the date of utilization 19 for payment of higher education costs qualified education 20 expenses for the beneficiary. 21 Sec. 39. Section 12D.6, subsections 2, 3, and 5, Code 2018, 22 are amended to read as follows: 23 2. In the event the program is terminated prior to payment 24 of higher education costs qualified education expenses for the 25 beneficiary, the participant is entitled to a refund of the 26 participant’s account balance. 27 3. The institution of higher education qualified 28 educational institution shall obtain ownership of the payments 29 made for the higher education costs qualified education 30 expenses paid to the institution at the time each payment is 31 made to the institution. 32 5. A participant may transfer ownership rights to another 33 eligible individual, including a gift of the ownership rights 34 to a minor beneficiary participant, or may transfer funds to 35 -30- LSB 5613XL (25) 87 mm/jh 30/ 106
S.F. _____ H.F. _____ another plan under the trust or to an ABLE account as permitted 1 under section 529(c)(3)(C) of the Internal Revenue Code . 2 The transfer shall be made and the property distributed in 3 accordance with rules adopted by the treasurer of state or with 4 the terms of the participation agreement. 5 Sec. 40. Section 12D.7, Code 2018, is amended to read as 6 follows: 7 12D.7 Effect of payments on determination of need and 8 eligibility for student financial aid. 9 A student loan program, student grant program, or other 10 program administered by any agency of the state, except as 11 may be otherwise provided by federal law or the provisions 12 of any specific grant applicable to that law, shall not take 13 into account and shall not consider amounts available for 14 the payment of higher education costs qualified education 15 expenses pursuant to the Iowa educational savings plan trust in 16 determining need and eligibility for student aid. 17 Sec. 41. Section 12D.9, subsection 1, paragraph a, Code 18 2018, is amended to read as follows: 19 a. Pursuant to section 12D.3, subsection 1 , paragraph “a” , 20 a participant may make contributions to an account which is 21 established for the purpose of meeting the qualified higher 22 education expenses of the designated beneficiary of the 23 account. 24 Sec. 42. Section 422.7, subsection 32, paragraph c, Code 25 2018, is amended by striking the paragraph and inserting in 26 lieu thereof the following: 27 c. (1) Add, to the extent previously deducted as a 28 contribution to the trust, the amount resulting from a 29 withdrawal or transfer made by the taxpayer from the Iowa 30 educational savings plan trust for purposes other than any of 31 the following: 32 (a) The payment of qualified higher education expenses. 33 (b) The payment of tuition to an elementary or secondary 34 school if the tuition amounts are qualified education expenses. 35 -31- LSB 5613XL (25) 87 mm/jh 31/ 106
S.F. _____ H.F. _____ (c) A change in beneficiaries under, or transfer to another 1 account within, the Iowa educational savings plan trust, or a 2 transfer to the Iowa ABLE savings plan trust, provided such 3 change or transfer is permitted under section 12D.6, subsection 4 5. 5 (2) For purposes of this paragraph: 6 (a) “Elementary or secondary school” means an elementary 7 or secondary school in this state which is accredited under 8 section 256.11, and adheres to the provisions of the federal 9 Civil Rights Act of 1964 and chapter 216. 10 (b) “Institution of higher education” and “tuition” all mean 11 the same as defined in section 12D.1, subsection 2. 12 (c) (i) “Qualified higher education expenses” means the same 13 as defined in section 529(e)(3) of the Internal Revenue Code. 14 (ii) For purposes of this subparagraph division (c), 15 “Internal Revenue Code” means the Internal Revenue Code of 16 1954, prior to the date of its redesignation as the Internal 17 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 18 the Internal Revenue Code of 1986 as amended and in effect on 19 January 1, 2018. This definition shall not be construed to 20 include any amendment to the Internal Revenue Code enacted 21 after the date specified in the preceding sentence, including 22 any amendment with retroactive applicability or effectiveness. 23 Sec. 43. Section 422.7, subsection 34, Code 2018, is amended 24 to read as follows: 25 34. a. (1) Subtract the amount contributed during the tax 26 year on behalf of a designated beneficiary that is a resident 27 of this state to the Iowa ABLE savings plan trust or to the 28 qualified ABLE program with which the state has contracted 29 pursuant to section 12I.10 , not to exceed the maximum 30 contribution level established in section 12I.3, subsection 1 , 31 paragraph “d” , or section 12I.10, subsection 2 , paragraph “a” , 32 as applicable. 33 (2) This paragraph “a” shall not apply to any amount 34 of contribution that represents a transfer from the Iowa 35 -32- LSB 5613XL (25) 87 mm/jh 32/ 106
S.F. _____ H.F. _____ educational savings plan trust created in chapter 12D that 1 meets the requirements of subsection 32, paragraph “c” , 2 subparagraph (1), subparagraph division (c), and that was 3 previously deducted as a contribution to the Iowa educational 4 savings plan trust. 5 b. Add the amount resulting from the cancellation of a 6 participation agreement refunded to the taxpayer as an account 7 owner in the Iowa ABLE savings plan trust or the qualified 8 ABLE program with which the state has contracted pursuant to 9 section 12I.10 to the extent previously deducted pursuant 10 to this subsection by the taxpayer or any other person as a 11 contribution to the trust or qualified ABLE program , or to the 12 extent the amount was previously deducted by the taxpayer or 13 any other person pursuant to subsection 32, paragraph “a” , and 14 qualified as a transfer under paragraph “a” , subparagraph (2), 15 of this subsection . 16 c. Add the amount resulting from a withdrawal made by a 17 taxpayer from the Iowa ABLE savings plan trust or the qualified 18 ABLE program with which the state has contracted pursuant to 19 section 12I.10 for purposes other than the payment of qualified 20 disability expenses to the extent previously deducted pursuant 21 to this subsection by the taxpayer or any other person as a 22 contribution to the trust or qualified ABLE program , or to the 23 extent the amount was previously deducted by the taxpayer or 24 any other person pursuant to subsection 32, paragraph “a” , and 25 qualified as a transfer under paragraph “a” , subparagraph (2), 26 of this subsection . 27 Sec. 44. Section 627.6, Code 2018, is amended by adding the 28 following new subsection: 29 NEW SUBSECTION . 17. The debtor’s interest, whether as 30 participant or beneficiary, in contributions and assets, 31 including the accumulated earnings and market increases in 32 value, held in an account in the Iowa educational savings plan 33 trust organized under chapter 12D. 34 Sec. 45. EFFECTIVE DATE. This division of this Act, being 35 -33- LSB 5613XL (25) 87 mm/jh 33/ 106
S.F. _____ H.F. _____ deemed of immediate importance, takes effect upon enactment. 1 Sec. 46. RETROACTIVE APPLICABILITY. 2 1. Except as provided in subsection 2, this division of this 3 Act applies retroactively to January 1, 2018, for withdrawals 4 from the Iowa educational savings plan trust made on or after 5 that date. 6 2. The sections of this division of this Act amending 7 section 422.7 apply retroactively to January 1, 2018, for tax 8 years beginning on or after that date, and for withdrawals from 9 the Iowa educational savings plan trust made on or after that 10 date. 11 DIVISION IV 12 SALES AND USE TAXES 13 Sec. 47. Section 15J.4, subsection 3, paragraph f, Code 14 2018, is amended to read as follows: 15 f. The total aggregate amount of state sales tax revenues 16 and state hotel and motel tax revenues that may be approved by 17 the board for remittance to all municipalities and that may 18 be transferred to the state reinvestment district fund under 19 section 423.2, subsection 11 , 423.2A or section 423A.6 , and 20 remitted to all municipalities having a reinvestment district 21 under this chapter shall not exceed one hundred million 22 dollars. 23 Sec. 48. Section 15J.5, subsection 1, paragraph a, Code 24 2018, is amended to read as follows: 25 a. The department shall calculate quarterly the amount of 26 new state sales tax revenues for each district established in 27 the state to be deposited in the state reinvestment district 28 fund created in section 15J.6 , pursuant to section 423.2, 29 subsection 11 , paragraph “b” 423.2A, subsection 2 , subject to 30 remittance limitations established by the board pursuant to 31 section 15J.4, subsection 3 . 32 Sec. 49. Section 15J.6, subsection 1, Code 2018, is amended 33 to read as follows: 34 1. A state reinvestment district fund is established in the 35 -34- LSB 5613XL (25) 87 mm/jh 34/ 106
S.F. _____ H.F. _____ state treasury under the control of the department consisting 1 of the new state sales tax revenues collected within each 2 district and deposited in the fund pursuant to section 423.2, 3 subsection 11 , paragraph “b” 423.2A, subsection 2 , and the 4 new state hotel and motel tax revenues collected within each 5 district and deposited in the fund pursuant to section 423A.6 . 6 Moneys deposited in the fund are appropriated to the department 7 for the purposes of this section . Moneys in the fund shall 8 only be used for the purposes of this section . 9 Sec. 50. Section 418.11, subsection 1, Code 2018, is amended 10 to read as follows: 11 1. The department of revenue shall calculate quarterly the 12 amount of increased sales tax revenues for each governmental 13 entity approved to use sales tax increment revenues and the 14 amount of such revenues to be transferred to the sales tax 15 increment fund pursuant to section 423.2, subsection 11 , 16 paragraph “b” 423.2A, subsection 2 . 17 Sec. 51. Section 418.12, subsection 1, Code 2018, is amended 18 to read as follows: 19 1. A sales tax increment fund is established as a separate 20 and distinct fund in the state treasury under the control of 21 the department of revenue consisting of the amount of the 22 increased state sales and services tax revenues collected by 23 the department of revenue within each applicable area specified 24 in section 418.11, subsection 3 , and deposited in the fund 25 pursuant to section 423.2, subsection 11 , paragraph “b” 423.2A, 26 subsection 2 . Moneys deposited in the fund are appropriated 27 to the department of revenue for the purposes of this section . 28 Moneys in the fund shall only be used for the purposes of this 29 section . 30 Sec. 52. Section 421.26, Code 2018, is amended to read as 31 follows: 32 421.26 Personal liability for tax due. 33 If a licensee or other person under section 452A.65 , a 34 retailer or purchaser under chapter 423A , 423B , or 423E , or 35 -35- LSB 5613XL (25) 87 mm/jh 35/ 106
S.F. _____ H.F. _____ section sections 423.14, 423.14A, 423.29, 423.31 , 423.32, or 1 423.33 , or a retailer or purchaser under section 423.32 , or 2 a user under section 423.34 , or a permit holder or licensee 3 under section 453A.13 , 453A.16 , or 453A.44 fails to pay a tax 4 under those sections when due, an officer of a corporation 5 or association, notwithstanding section 489.304 , a member or 6 manager of a limited liability company, or a partner of a 7 partnership, having control or supervision of or the authority 8 for remitting the tax payments and having a substantial legal 9 or equitable interest in the ownership of the corporation, 10 association, limited liability company, or partnership, who has 11 intentionally failed to pay the tax is personally liable for 12 the payment of the tax, interest, and penalty due and unpaid. 13 However, this section shall not apply to taxes on accounts 14 receivable. The dissolution of a corporation, association, 15 limited liability company, or partnership shall not discharge a 16 person’s liability for failure to remit the tax due. 17 Sec. 53. Section 423.1, Code 2018, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 22A. “Information services” means every 20 activity, process, or function by which a seller accumulates, 21 prepares, organizes, conveys, analyzes, or delivers data, 22 facts, knowledge, procedures, information, and other similar 23 services to a purchaser through any tangible, intangible, 24 or electronic medium. Information accumulated, prepared, 25 or organized for a purchaser is an information service even 26 though it may incorporate preexisting components of data or 27 other information. “Information services” includes but is not 28 limited to database files, research information, genealogical 29 information, and other similar services. 30 Sec. 54. Section 423.1, subsection 24, paragraph a, Code 31 2018, is amended to read as follows: 32 a. “Lease or rental” means any transfer of possession 33 or control of , or access to, tangible personal property or 34 specified digital products for a fixed or indeterminate term 35 -36- LSB 5613XL (25) 87 mm/jh 36/ 106
S.F. _____ H.F. _____ for consideration. A “lease or rental” may include future 1 options to purchase or extend. 2 Sec. 55. Section 423.1, subsection 37, Code 2018, is amended 3 to read as follows: 4 37. “Place of business” means any warehouse, store, 5 place, office, building, or structure where goods, wares, or 6 merchandise tangible personal property, specified digital 7 products, or services are offered for sale at retail or where 8 any taxable amusement is conducted, or each office where gas, 9 water, heat, communication, or electric services are offered 10 for sale at retail. When a retailer or amusement operator 11 sells merchandise by means of vending machines or operates 12 music or amusement devices by coin-operated machines at more 13 than one location within the state, the office, building, or 14 place where the books, papers, and records of the taxpayer are 15 kept shall be deemed to be the taxpayer’s place of business. 16 Sec. 56. Section 423.1, Code 2018, is amended by adding the 17 following new subsection: 18 NEW SUBSECTION . 36A. “Personal property” includes but is 19 not limited to tangible personal property and specified digital 20 products. 21 Sec. 57. Section 423.1, subsection 43, paragraph a, 22 subparagraph (3), Code 2018, is amended to read as follows: 23 (3) Taking possession or making first use of digital goods 24 specified digital products , whichever comes first. 25 Sec. 58. Section 423.1, subsection 47, Code 2018, is amended 26 to read as follows: 27 47. “Retailer” means and includes every person engaged 28 in the business of selling tangible personal property , 29 specified digital products, or taxable services at retail, or 30 the furnishing of gas, electricity, water, or communication 31 service, and tickets or admissions to places of amusement 32 and athletic events or operating amusement devices or other 33 forms of commercial amusement from which revenues are derived. 34 However, when in the opinion of the director it is necessary 35 -37- LSB 5613XL (25) 87 mm/jh 37/ 106
S.F. _____ H.F. _____ for the efficient administration of this chapter to regard 1 any salespersons, representatives, truckers, peddlers, or 2 canvassers as agents of the dealers, distributors, supervisors, 3 employers, or persons under whom they operate or from whom 4 they obtain tangible personal property , services, or specified 5 digital products sold by them irrespective of whether or not 6 they are making sales on their own behalf or on behalf of such 7 dealers, distributors, supervisors, employers, or persons, 8 the director may so regard them, and may regard such dealers, 9 distributors, supervisors, employers, or persons as retailers 10 for the purposes of this chapter . “Retailer” includes a seller 11 obligated to collect sales or use tax , including any person 12 obligated to collect sales and use tax pursuant to section 13 423.14A . 14 Sec. 59. Section 423.1, subsection 48, paragraph a, Code 15 2018, is amended to read as follows: 16 a. “Retailer maintaining a place of business in this state” 17 or any like term includes any of the following: 18 (1) A retailer having or maintaining within this state, 19 directly or by a subsidiary, an office, distribution house, 20 sales house, warehouse, or other place of business, or any 21 representative operating within this state under the authority 22 of the retailer or its subsidiary, irrespective of whether that 23 place of business or representative is located here permanently 24 or temporarily, or whether the retailer or subsidiary is 25 admitted to do business within this state pursuant to chapter 26 490 . 27 (2) A person obligated to collect sales and use tax pursuant 28 to section 423.14A. 29 Sec. 60. Section 423.1, subsection 48, paragraph b, 30 subparagraph (1), unnumbered paragraph 1, Code 2018, is amended 31 to read as follows: 32 A retailer shall be presumed to be maintaining a place of 33 business in this state , as defined in for purposes of paragraph 34 “a” , subparagraph (1), if any person that has substantial nexus 35 -38- LSB 5613XL (25) 87 mm/jh 38/ 106
S.F. _____ H.F. _____ in this state, other than a person acting in its capacity as a 1 common carrier, does any of the following: 2 Sec. 61. Section 423.1, subsection 48, paragraph b, 3 subparagraph (1), subparagraph division (b), Code 2018, is 4 amended to read as follows: 5 (b) Maintains an office, distribution facility, warehouse, 6 storage place, or similar place of business in this state to 7 facilitate the delivery of personal property or services sold 8 by the retailer to the retailer’s customers. 9 Sec. 62. Section 423.1, subsection 50, Code 2018, is amended 10 to read as follows: 11 50. “Sales” or “sale” means any transfer, exchange, or 12 barter, conditional or otherwise, in any manner or by any means 13 whatsoever, for consideration , including but not limited to any 14 such transfer, exchange, or barter on a subscription basis . 15 Sec. 63. Section 423.1, Code 2018, is amended by adding the 16 following new subsection: 17 NEW SUBSECTION . 55A. “Sold at retail in the state” and 18 other references to sales “in the state” or “in this state” 19 includes but is not limited to sales sourced to this state 20 under this chapter. 21 Sec. 64. Section 423.1, Code 2018, is amended by adding the 22 following new subsection: 23 NEW SUBSECTION . 55B. a. “Specified digital products” means 24 electronically transferred digital audio-visual works, digital 25 audio works, digital books, or other digital products. 26 b. For purposes of this subsection: 27 (1) “Digital audio-visual works” means a series of related 28 images which, when shown in succession, impart an impression of 29 motion, together with accompanying sounds, if any. 30 (2) “Digital audio works” means works that result from 31 the fixation of a series of musical, spoken, or other sounds, 32 including but not limited to ringtones. For purposes of this 33 subparagraph, “ringtones” means digitized sound files that are 34 downloaded onto a device and that may be used to alert the 35 -39- LSB 5613XL (25) 87 mm/jh 39/ 106
S.F. _____ H.F. _____ customer with respect to a communication. 1 (3) “Digital books” means works that are generally 2 recognized in the ordinary and usual sense as books. 3 (4) “Electronically transferred” means obtained or accessed 4 by the purchaser by means other than tangible storage media, 5 including but not limited to a specified digital product 6 purchased through a computer software application, commonly 7 referred to as an in-app purchase, or through another specified 8 digital product, or through any other means. 9 (5) “Other digital products” means greeting cards, images, 10 video or electronic games or entertainment, news or information 11 products, and computer software applications. 12 Sec. 65. Section 423.1, Code 2018, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 57A. “Subscription” means any arrangement 15 in which a person has the right or ability to access, 16 receive, use, obtain, purchase, or otherwise acquire tangible 17 personal property, specified digital products, or services 18 on a permanent or less than permanent basis, regardless of 19 whether the person actually accesses, receives, uses, obtains, 20 purchases, or otherwise acquires such tangible personal 21 property, specified digital product, or service. 22 Sec. 66. Section 423.1, subsections 62, 63, and 64, Code 23 2018, are amended to read as follows: 24 62. “Use” means and includes the exercise by any person of 25 any right or power over or access to tangible personal property 26 or a specified digital product incident to the ownership of 27 that property , or any right or power over or access to the 28 product or result of a service . A retailer’s or building 29 contractor’s sale of manufactured housing for use in this 30 state, whether in the form of tangible personal property or 31 of realty, is a use of that property for the purposes of this 32 chapter . 33 63. “Use tax” means the tax levied under subchapter III of 34 this chapter for which the retailer collects and remits tax to 35 -40- LSB 5613XL (25) 87 mm/jh 40/ 106
S.F. _____ H.F. _____ the department . 1 64. “User” means the immediate recipient of the personal 2 property or services who is entitled to exercise a right of or 3 power over or access to the personal property, or the product 4 or result of such services. 5 Sec. 67. Section 423.2, subsection 1, paragraph a, 6 subparagraph (1), Code 2018, is amended to read as follows: 7 (1) Sales of engraving, photography, retouching, printing, 8 and binding services. 9 Sec. 68. Section 423.2, subsection 6, Code 2018, is amended 10 to read as follows: 11 6. a. The sales price of any of the following enumerated 12 services is subject to the tax imposed by subsection 5 : 13 a. alteration Alteration and garment repair ; armored . 14 b. Armored car ; vehicle . 15 c. Vehicle repair ; battery . 16 d. Battery , tire, and allied ; investment . 17 e. Investment counseling ; service . 18 f. Service charges of all financial institutions ; barber . 19 For the purposes of this paragraph, “financial institutions” 20 means all national banks, federally chartered savings and loan 21 associations, federally chartered savings banks, federally 22 chartered credit unions, banks organized under chapter 524, 23 credit unions organized under chapter 533, and all banks, 24 savings banks, credit unions, and savings and loan associations 25 chartered or otherwise created under the laws of any state and 26 doing business in Iowa. 27 g. Barber and beauty ; boat . 28 h. Boat repair ; vehicle . 29 i. Vehicle wash and wax ; campgrounds; carpentry; roof . 30 j. Campgrounds. 31 k. Carpentry. 32 l. Roof , shingle, and glass repair ; dance . 33 m. Dance schools and dance studios ; dating . 34 n. Dating services ; dry . 35 -41- LSB 5613XL (25) 87 mm/jh 41/ 106
S.F. _____ H.F. _____ o. Dry cleaning, pressing, dyeing, and laundering excluding 1 the use of self-pay washers and dryers ; electrical . 2 p. Electrical and electronic repair and installation ; 3 excavating . 4 q. Excavating and grading ; farm . 5 r. Farm implement repair of all kinds ; flying . 6 s. Flying service ; furniture . 7 t. Furniture , rug, carpet, and upholstery repair and 8 cleaning ; fur . 9 u. Fur storage and repair ; golf . 10 v. Golf and country clubs and all commercial recreation ; 11 gun . 12 w. Gun and camera repair ; house . 13 x. House and building moving ; household . 14 y. Household appliance, television, and radio repair ; 15 janitorial . 16 z. Janitorial and building maintenance or cleaning ; jewelry . 17 aa. Jewelry and watch repair ; lawn . 18 ab. Lawn care, landscaping, and tree trimming and removal ; . 19 ac. Personal transportation service, including but not 20 limited to taxis, driver service, ride sharing service, rides 21 for hire, and limousine service , including driver; machine . 22 ad. Machine operator ; machine . 23 ae. Machine repair of all kinds ; motor . 24 af. Motor repair ; motorcycle . 25 ag. Motorcycle , scooter, and bicycle repair ; oilers . 26 ah. Oilers and lubricators ; office . 27 ai. Office and business machine repair ; painting . 28 aj. Painting , papering, and interior decorating ; parking . 29 ak. Parking facilities ; pay . 30 al. Pay television ; pet , including but not limited to 31 streaming video, video on-demand, and pay-per-view. 32 am. Pet grooming ; pipe . 33 an. Pipe fitting and plumbing ; wood . 34 ao. Wood preparation ; executive . 35 -42- LSB 5613XL (25) 87 mm/jh 42/ 106
S.F. _____ H.F. _____ ap. Executive search agencies ; private . 1 aq. Private employment agencies, excluding services for 2 placing a person in employment where the principal place of 3 employment of that person is to be located outside of the 4 state ; reflexology; security . 5 ar. Reflexology. 6 as. Security and detective services, excluding private 7 security and detective services furnished by a peace officer 8 with the knowledge and consent of the chief executive officer 9 of the peace officer’s law enforcement agency ; sewage . 10 at. Sewage services for nonresidential commercial 11 operations ; sewing . 12 au. Sewing and stitching ; shoe . 13 av. Shoe repair and shoeshine ; sign . 14 aw. Sign construction and installation ; storage . 15 ax. Storage of household goods, mini-storage, and 16 warehousing of raw agricultural products ; swimming . 17 ay. Swimming pool cleaning and maintenance ; tanning . 18 az. Tanning beds or salons ; taxidermy . 19 ba. Taxidermy services ; telephone . 20 bb. Telephone answering service ; test . 21 bc. Test laboratories, including mobile testing laboratories 22 and field testing by testing laboratories, and excluding tests 23 on humans or animals and excluding environmental testing 24 services ; termite . 25 bd. Termite , bug, roach, and pest eradicators ; tin . 26 be. Tin and sheet metal repair ; transportation . 27 bf. Transportation service consisting of the rental of 28 recreational vehicles or recreational boats, or the rental of 29 vehicles subject to registration which are registered for a 30 gross weight of thirteen tons or less for a period of sixty 31 days or less, or the rental of aircraft for a period of sixty 32 days or less ; . 33 bg. Turkish baths, massage, and reducing salons, excluding 34 services provided by massage therapists licensed under chapter 35 -43- LSB 5613XL (25) 87 mm/jh 43/ 106
S.F. _____ H.F. _____ 152C ; water . 1 bh. Water conditioning and softening ; weighing; welding; 2 well . 3 bi. Weighing. 4 bj. Welding. 5 bk. Well drilling ; wrapping . 6 bl. Wrapping , packing, and packaging of merchandise other 7 than processed meat, fish, fowl, and vegetables ; wrecking . 8 bm. Wrecking service ; wrecker . 9 bn. Wrecker and towing. 10 b. For the purposes of this subsection , “financial 11 institutions” means all national banks, federally chartered 12 savings and loan associations, federally chartered savings 13 banks, federally chartered credit unions, banks organized under 14 chapter 524 , credit unions organized under chapter 533 , and 15 all banks, savings banks, credit unions, and savings and loan 16 associations chartered or otherwise created under the laws of 17 any state and doing business in Iowa. 18 bo. Photography. 19 bp. Retouching. 20 bq. Storage of tangible or electronic files, documents, or 21 other records. 22 br. Information services. 23 bs. Services arising from or related to installing, 24 maintaining, servicing, repairing, operating, upgrading, or 25 enhancing specified digital products. 26 bt. Video game services and tournaments. 27 bu. Software as a service. 28 Sec. 69. Section 423.2, subsection 8, Code 2018, is amended 29 by adding the following new paragraph: 30 NEW PARAGRAPH . d. A transaction that otherwise meets 31 the definition of “bundled transaction” as defined in this 32 subsection is not a bundled transaction if it is any of the 33 following: 34 (1) The retail sale of tangible personal property and a 35 -44- LSB 5613XL (25) 87 mm/jh 44/ 106
S.F. _____ H.F. _____ service where the tangible personal property is essential 1 to the use of the service, and is provided exclusively in 2 connection with the service, and the true object of the 3 transaction is the service. 4 (2) The retail sale of services where one service is 5 provided that is essential to the use or receipt of a second 6 service and the first service is provided exclusively in 7 connection with the second service and the true object of the 8 transaction is the second service. 9 (3) (a) A transaction that includes taxable products and 10 nontaxable products and the purchase price or sales price of 11 the taxable products is de minimis. 12 (b) For purposes of this subparagraph, “de minimis” means 13 the seller’s purchase or sales price of the taxable products 14 is ten percent or less of the total purchase price or sales 15 price of the bundled products. Sellers shall use either the 16 purchase price or the sale price of the products to determine 17 if the taxable products are de minimis. Sellers may not use 18 a combination of the purchase price and sales price of the 19 products to determine if the taxable products are de minimis. 20 (4) The retail sale of exempt tangible personal property and 21 taxable tangible personal property where all of the following 22 apply: 23 (a) The transaction includes food and food ingredients, 24 drugs, durable medical equipment, mobility enhancing equipment, 25 prosthetic devices, or medical supplies. 26 (b) The seller’s purchase price or sales price of the 27 taxable tangible personal property is fifty percent or less 28 of the total purchase price or sales price of the bundled 29 tangible personal property. Sellers may not use a combination 30 of the purchase price and sales price of the tangible personal 31 property when making the fifty percent determination for a 32 transaction. 33 Sec. 70. Section 423.2, Code 2018, is amended by adding the 34 following new subsection: 35 -45- LSB 5613XL (25) 87 mm/jh 45/ 106
S.F. _____ H.F. _____ NEW SUBSECTION . 9A. a. A tax of six percent is imposed on 1 the sales price of specified digital products sold at retail 2 in the state. The tax applies whether the purchaser obtains 3 permanent use or less than permanent use of the specified 4 digital product, whether the sale is conditioned or not 5 conditioned upon continued payment from the purchaser, and 6 whether the sale is on a subscription basis or is not on a 7 subscription basis. 8 b. The sale of a digital code that may be used to obtain 9 or access a specified digital product shall be taxed in the 10 same manner as the specified digital product. For purposes 11 of this paragraph, “digital code” means a method that permits 12 a purchaser to obtain or access at a later date a specified 13 digital product. 14 Sec. 71. Section 423.2, subsections 10, 11, and 12, Code 15 2018, are amended by striking the subsections. 16 Sec. 72. NEW SECTION . 423.2A Deposit and transfer of 17 revenues. 18 1. a. All revenues arising under the operation of the 19 provisions of this subchapter II shall be deposited into the 20 general fund of the state. 21 b. Subsequent to the deposit into the general fund of 22 the state, the director shall credit an amount equal to the 23 product of the sales tax rate imposed in section 423.2 times 24 the sales price of the tangible personal property or services 25 furnished to purchasers at a baseball and softball complex that 26 has received an award under section 15F.207 and that meets 27 the qualifications of section 423.4, subsection 10, into the 28 baseball and softball complex sales tax rebate fund created 29 under section 423.4, subsection 10, paragraph “e” . The director 30 shall credit the moneys beginning the first day of the quarter 31 following July 1, 2016. This paragraph is repealed thirty 32 days following the date on which five million dollars in total 33 rebates have been provided under section 423.4, subsection 10. 34 2. Subsequent to the deposit into the general fund of the 35 -46- LSB 5613XL (25) 87 mm/jh 46/ 106
S.F. _____ H.F. _____ state pursuant to subsection 1, the department shall do the 1 following in the order prescribed: 2 a. Transfer the revenues collected under chapter 423B. 3 b. Transfer from the remaining revenues the amounts required 4 under Article VII, section 10, of the Constitution of the State 5 of Iowa to the natural resources and outdoor recreation trust 6 fund created in section 461.31, if applicable. 7 c. Transfer one-sixth of the remaining revenues to the 8 secure an advanced vision for education fund created in section 9 423F.2. This paragraph “c” is repealed December 31, 2029. 10 d. Transfer to the baseball and softball complex sales tax 11 rebate fund that portion of the sales tax receipts described 12 in subsection 1, paragraph “b” , remaining after the transfers 13 required under paragraphs “a” , “b” , and “c” of this subsection 14 2. This paragraph is repealed thirty days following the date 15 on which five million dollars in total rebates have been 16 provided under section 423.4, subsection 10. 17 e. Beginning the first day of the calendar quarter 18 beginning on the reinvestment district’s commencement date, 19 subject to remittance limitations established by the economic 20 development authority board pursuant to section 15J.4, 21 subsection 3, transfer to a district account created in the 22 state reinvestment district fund for each reinvestment district 23 established under chapter 15J, the amount of new state sales 24 tax revenue, determined in section 15J.5, subsection 1, 25 paragraph “b” , in the district, that remains after the prior 26 transfers required under this subsection 2. Such transfers 27 shall cease pursuant to section 15J.8. 28 f. Subject to the limitation on the calculation and 29 deposit of sales tax increment revenues in section 418.12, 30 beginning the first day of the quarter following adoption 31 of the resolution pursuant to section 418.4, subsection 3, 32 paragraph “d” , transfer to the account created in the sales tax 33 increment fund for each governmental entity approved to use 34 sales tax increment revenues under chapter 418, that portion 35 -47- LSB 5613XL (25) 87 mm/jh 47/ 106
S.F. _____ H.F. _____ of the increase in sales tax revenue, determined in section 1 418.11, subsection 2, paragraph “d” , in the applicable area of 2 the governmental entity, that remains after the other transfers 3 required under this subsection 2. 4 g. Beginning the first day of the quarter following July 5 1, 2014, transfer to the raceway facility tax rebate fund 6 created in section 423.4, subsection 11, paragraph “e” , that 7 portion of the sales tax receipts collected and remitted upon 8 sales of tangible personal property or services furnished by 9 retailers at a raceway facility meeting the qualifications of 10 section 423.4, subsection 11, that remains after the transfers 11 required in paragraphs “a” through “f” of this subsection 12 2. This subparagraph is repealed June 30, 2025, or thirty 13 days following the date on which an amount of total rebates 14 specified in section 423.4, subsection 11, paragraph “c” , 15 subparagraph (4), subparagraph division (a) or (b), whichever 16 is applicable, has been provided or thirty days following the 17 date on which rebates cease as provided in section 423.4, 18 subsection 11, paragraph “c” , subparagraph (5), whichever is 19 earliest. 20 3. Of the amount of sales tax revenue actually transferred 21 per quarter pursuant to subsection 2, paragraphs “e” and “f” , 22 the department shall retain an amount equal to the actual cost 23 of administering the transfers under subsection 2, paragraphs 24 “e” and “f” , or twenty-five thousand dollars, whichever is 25 less. The amount retained by the department pursuant to this 26 subsection shall be divided pro rata each quarter between 27 the amounts that would have been transferred pursuant to 28 subsection 2, paragraphs “e” and “f” , without the deduction 29 made by operation of this subsection. Revenues retained by 30 the department pursuant to this subsection shall be considered 31 repayment receipts as defined in section 8.2. 32 Sec. 73. Section 423.3, subsections 1 and 17, Code 2018, are 33 amended to read as follows: 34 1. The sales price from sales of tangible personal property , 35 -48- LSB 5613XL (25) 87 mm/jh 48/ 106
S.F. _____ H.F. _____ specified digital products, and services furnished which this 1 state is prohibited from taxing under the Constitution or laws 2 of the United States or under the Constitution of this state. 3 17. The sales price of all goods, wares, or merchandise, 4 tangible personal property, specified digital products, or 5 services, used for educational purposes sold to any private 6 nonprofit educational institution in this state. For the 7 purpose of this subsection , “educational institution” means an 8 institution which primarily functions as a school, college, 9 or university with students, faculty, and an established 10 curriculum. The faculty of an educational institution must be 11 associated with the institution and the curriculum must include 12 basic courses which are offered every year. “Educational 13 institution” includes an institution primarily functioning as 14 a library. 15 Sec. 74. Section 423.3, subsection 18, unnumbered paragraph 16 1, Code 2018, is amended to read as follows: 17 The sales price of tangible personal property or specified 18 digital products sold, or of services furnished, to the 19 following nonprofit