House File 668 - Introduced HOUSE FILE 668 BY PRICHARD , McCONKEY , HANSEN , COHOON , KURTH , JAMES , KONFRST , B. MEYER , SUNDE , HALL , BOHANNAN , JUDGE , GJERDE , ANDERSON , WILBURN , WESSEL-KROESCHELL , OLSON , MASCHER , JACOBY , EHLERT , CAHILL , WINCKLER , STAED , OLDSON , BROWN-POWERS , THEDE , DONAHUE , RUNNING-MARQUARDT , FORBES , BENNETT , WOLFE , and STECKMAN A BILL FOR An Act relating to the Iowa child and dependent care credit 1 by increasing the Iowa net income threshold levels for 2 purposes of calculating the Iowa child and dependent care 3 credit available against the individual income tax, making 4 appropriations, and including retroactive applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 2293YH (4) 89 jm/jh

H.F. 668 DIVISION I 1 CHILD AND DEPENDENT CARE CREDIT 2 Section 1. Section 422.12C, subsection 1, Code 2021, is 3 amended by striking the subsection and inserting in lieu 4 thereof the following: 5 1. The taxes imposed under this subchapter, less the amounts 6 of nonrefundable credits allowed under this subchapter, shall 7 be reduced by a child and dependent care credit equal to the 8 following percentages of the federal child and dependent care 9 credit provided in section 21 of the Internal Revenue Code, 10 without regard to whether or not the federal credit was limited 11 by the taxpayer’s federal tax liability: 12 a. For a taxpayer with net income of less than forty-five 13 thousand dollars, one hundred percent. 14 b. For a taxpayer with net income of forty-five thousand 15 dollars or more but less than ninety thousand dollars, thirty 16 percent. 17 c. For a taxpayer with net income of ninety thousand dollars 18 or more but less than one hundred thousand dollars, twenty-five 19 percent. 20 d. For a taxpayer with net income of one hundred thousand 21 dollars or more but less than one hundred twenty-five thousand 22 dollars, twenty percent. 23 e. For a taxpayer with net income of one hundred twenty-five 24 thousand dollars or more but less than one hundred fifty 25 thousand dollars, fifteen percent. 26 f. For a taxpayer with net income of one hundred fifty 27 thousand dollars or more but less than one hundred seventy-five 28 thousand dollars, ten percent. 29 g. For a taxpayer with net income of one hundred 30 seventy-five thousand dollars or more but less than two hundred 31 fifty thousand dollars, five percent. 32 h. For a taxpayer with net income of two hundred fifty 33 thousand dollars or more, zero percent. 34 Sec. 2. RETROACTIVE APPLICABILITY. This division of this 35 -1- LSB 2293YH (4) 89 jm/jh 1/ 3

H.F. 668 Act applies retroactively to January 1, 2021, for tax years 1 beginning on or after that date. 2 DIVISION II 3 APPROPRIATION 4 Sec. 3. TAXPAYER RELIEF FUND —— APPROPRIATION. There is 5 appropriated from the taxpayer relief fund created in section 6 8.57E to the general fund of the state for the fiscal year 7 beginning July 1, 2021, and ending June 30, 2022, the following 8 amount, or so much thereof as is necessary, to be used for the 9 purposes designated: 10 For the child and dependent care credit pursuant to section 11 422.12C: 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000,000 13 EXPLANATION 14 The inclusion of this explanation does not constitute agreement with 15 the explanation’s substance by the members of the general assembly. 16 This bill increases the Iowa net income threshold levels 17 for purposes of calculating the Iowa child and dependent care 18 credit available against the individual income tax, and makes 19 an appropriation. 20 DIVISION I —— CHILD AND DEPENDENT CARE CREDIT. The Iowa 21 child and dependent care tax credit is a refundable credit 22 calculated as a percentage of the nonrefundable federal child 23 and dependent care tax credit, depending on the Iowa net income 24 of the taxpayer. 25 Currently, there are seven graduated Iowa net income 26 thresholds used to calculate the credit. The bill increases 27 these graduated thresholds from seven threshold levels to 28 eight threshold levels, and changes the percentage of the 29 nonrefundable federal child and dependent care tax credit 30 used to calculate the Iowa child and dependent child care tax 31 credit. 32 Currently, the credit percentages in these seven Iowa 33 net income thresholds range from a high of 75 percent of 34 the federal credit for taxpayers with net income of less 35 -2- LSB 2293YH (4) 89 jm/jh 2/ 3

H.F. 668 than $10,000, to a low of 30 percent of the federal credit 1 for taxpayers with net income of $40,000 or more but less 2 than $45,000. Under the bill, the credit percentages in the 3 thresholds range from a high of 100 percent of the federal 4 credit for taxpayers with a net income of less than $45,000 to 5 a low of 5 percent of the federal credit for taxpayers with net 6 income of $175,000 or more but less than $250,000. 7 The division applies retroactively to January 1, 2021, for 8 tax years beginning on or after that date. 9 DIVISION II. The bill makes an appropriation from the 10 taxpayer relief fund to the general fund of the state for 11 fiscal year 2022 to account for the increase in the amount of 12 child and dependent care credits allowed in tax year 2021 due 13 to the bill. 14 -3- LSB 2293YH (4) 89 jm/jh 3/ 3