S.F. 164 Section 1. Section 422.7, Code 2019, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 60. a. Subtract, to the extent included, 3 the amount of wages received by an individual domiciled in this 4 state from a high-demand job. 5 b. For purposes of this subsection: 6 (1) (a) “High-demand job” means the same as defined in 7 section 84A.1B, subsection 13A, as enacted by 2018 Iowa Acts, 8 chapter 1067, section 7. 9 (b) “High-demand job” also includes additional job 10 categories in a city or county identified by the city or county 11 where work opportunities are available and qualified applicants 12 are lacking. A city or county shall petition the community 13 college in the region in which the city or county is located to 14 designate such a job category a high-demand job. For purposes 15 of this subsection only, a community college may designate up 16 to ten job categories as high-demand jobs in the region of the 17 community college based upon a petition from a city or county 18 by July 31 of each year. If the community college does not 19 designate a job category as a high-demand job, the community 20 college shall inform the city or county of the reasons for not 21 making such a designation by July 31. For each tax year, a 22 community college shall annually verify to the department the 23 job categories designated high-demand jobs pursuant to this 24 subparagraph division by August 31. 25 (2) “Small city” means a city with a population of less than 26 fifteen thousand based upon the most recent federal decennial 27 census. 28 (3) “Small county” means one of the ten least populated 29 counties in this state based upon the most recent federal 30 decennial census. 31 c. (1) An individual may elect to take the exemption 32 during the first tax year the individual receives wages from 33 a high-demand job or in the second tax year of receiving such 34 wages. 35 -1- LSB 1068XS (9) 88 jm/jh 1/ 5

S.F. 164 (2) After the election in subparagraph (1), the individual 1 shall take the exemption if residing in a small city or small 2 county for a total of five consecutive tax years, or if the 3 individual is not residing in a small city or small county, 4 the individual shall take the exemption for a total of three 5 consecutive tax years. 6 (3) After taking the exemption in consecutive years as 7 provided in subparagraph (2), the individual is prohibited from 8 taking the exemption in future tax years. 9 d. (1) Add the amount to the extent previously exempted 10 pursuant to this subsection under any of the following 11 circumstances: 12 (a) The individual does not have wages from a high-demand 13 job and is unable to take the exemption in consecutive tax 14 years as required under paragraph “c” , subparagraph (2). 15 (b) The individual becomes a nonresident of this state 16 within three or five years of first taking the exemption, as 17 applicable. 18 (2) This paragraph does not apply to an individual who 19 becomes disabled and is unable to work in a high-demand job. 20 e. (1) This subsection shall not apply to an individual 21 who has been a resident taxpayer during the tax year prior to 22 the first tax year of taking the exemption in this subsection, 23 unless all of the following apply: 24 (a) The individual graduated from a community college, 25 private college, private university, or regents institution in 26 this state after the effective date of this Act. 27 (b) The individual is receiving wages from a high-demand job 28 in this state. 29 (c) The individual is a resident taxpayer. 30 (2) An individual who becomes a resident of this state 31 in order to take a high-demand job and elects to take the 32 exemption during the second tax year as provided in paragraph 33 “c” shall be considered a resident taxpayer during the tax 34 year prior to the first tax year of taking the exemption for 35 -2- LSB 1068XS (9) 88 jm/jh 2/ 5

S.F. 164 purposes of this paragraph. 1 f. The employer during each tax year an individual takes an 2 exemption for a high-demand job shall provide verification to 3 the department that the individual is employed in such a job. 4 g. The department of revenue shall report to the general 5 assembly the types of job categories available for the 6 high-demand job program in this subsection, where the 7 high-demand jobs are located, and the number of individuals 8 who have elected to take the exemption under this subsection 9 beginning October 1, 2021, and every October 1 thereafter. 10 h. The director shall adopt rules pursuant to chapter 17A 11 to administer this subsection and develop forms for the proper 12 administration of this subsection. 13 Sec. 2. FIRST YEAR DESIGNATION AND VERIFICATION BY 14 COMMUNITY COLLEGES. For the first year after the effective 15 date of this Act, a community college shall be considered to be 16 in compliance with section 422.7, subsection 60, paragraph “b”, 17 subparagraph (1), subparagraph division (b), if the community 18 college designates the high-demand job categories by September 19 1, 2019, and verifies such job categories to the department of 20 revenue by October 1, 2019. 21 Sec. 3. EFFECTIVE DATE. This Act, being deemed of immediate 22 importance, takes effect upon enactment. 23 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 24 retroactively to January 1, 2019, for tax years beginning on 25 or after that date. 26 EXPLANATION 27 The inclusion of this explanation does not constitute agreement with 28 the explanation’s substance by the members of the general assembly. 29 This bill exempts from the individual income tax wages of 30 individuals who are employed in high-demand jobs. 31 Under the bill, “high-demand job” is defined in Code section 32 84A.1B(13A), which becomes effective July 1, 2019 (see 2018 33 Iowa Acts, chapter 1067, sections 7 and 15). The bill also 34 defines “high-demand job” to include a job category in a 35 -3- LSB 1068XS (9) 88 jm/jh 3/ 5

S.F. 164 city or county identified by the city or county where work 1 opportunities are available and qualified applicants are 2 lacking. The bill requires a city or county to petition the 3 community college in the region in which the city or county 4 is located to designate such a job category as a high-demand 5 job. For each tax year a community college may designate up to 6 10 job categories as “high-demand jobs” in the region of the 7 community college based upon a petition from a city or county. 8 An individual may elect to take the exemption during the 9 first tax year the individual receives wages from a high-demand 10 job designated in the bill or in the second tax year of 11 receiving such wages. After the election as to what tax year 12 to begin the exemption, the bill requires the individual to 13 take the exemption for a total of five consecutive tax years 14 if the person resides in a small city or small county, or three 15 consecutive tax years if the person does not reside in such a 16 city or county. 17 The bill defines “small city” to mean a city with a 18 population of less than 15,000 based upon the most recent 19 federal decennial census. The bill defines “small county” to 20 mean 1 of the 10 least populated counties in this state based 21 upon the most recent federal decennial census. 22 Generally, the bill provides that high-demand job wages are 23 to be included in income to the extent previously exempted 24 under any of the following circumstances: the individual 25 ceases to have wages from a high-demand job in any tax year 26 during the consecutive years the individual is required to work 27 in a high-demand job; or the individual becomes a nonresident 28 of this state within three or five years of first taking the 29 exemption, as applicable. 30 However, if an individual becomes disabled after taking 31 the exemption and does not work in a high-demand job for the 32 consecutive years as required by the bill, the individual is 33 not required to include high-demand job wages as income to the 34 extent previously exempted. 35 -4- LSB 1068XS (9) 88 jm/jh 4/ 5

S.F. 164 The bill does not apply to an individual who has been a 1 resident taxpayer during the tax year prior to the first tax 2 year of taking the exemption, unless all of the following 3 apply: the individual graduated from a community college, 4 private college, private university, or regents institution in 5 this state after the effective date of the bill; the individual 6 is receiving wages from a high-demand job in this state; and 7 the individual is a resident taxpayer. 8 The bill requires the employer during each tax year an 9 individual takes an exemption for a high-demand job to provide 10 verification to the department of revenue that the individual 11 is employed in such a job. 12 The bill requires the department of revenue to report to the 13 general assembly the types of job categories available for the 14 high-demand job program in the bill, where the high-demand jobs 15 are located, and the number of individuals who have elected to 16 take the exemption under the bill beginning October 1, 2021. 17 The bill requires the department of revenue to adopt rules to 18 administer the provisions of the bill. 19 The bill takes effect upon enactment and applies 20 retroactively to January 1, 2019, for tax years beginning on 21 or after that date. 22 -5- LSB 1068XS (9) 88 jm/jh 5/ 5