H.F. 896 DIVISION I 1 SALES AND USE TAXES AND THE NATURAL RESOURCES AND OUTDOOR 2 RECREATION TRUST FUND 3 Section 1. Section 423.2, subsection 1, unnumbered 4 paragraph 1, Code 2021, is amended to read as follows: 5 There is imposed a tax of six percent at a rate specified 6 in subsection 12 upon the sales price of all sales of tangible 7 personal property, consisting of goods, wares, or merchandise, 8 sold at retail in the state to consumers or users except as 9 otherwise provided in this subchapter . 10 Sec. 2. Section 423.2, subsections 2 and 3, Code 2021, are 11 amended to read as follows: 12 2. A tax of six percent at a rate specified in subsection 13 12 is imposed upon the sales price of the sale or furnishing 14 of gas, electricity, water, heat, pay television service, and 15 communication service, including the sales price from such 16 sales by any municipal corporation or joint water utility 17 furnishing gas, electricity, water, heat, pay television 18 service, and communication service to the public in its 19 proprietary capacity, except as otherwise provided in this 20 subchapter , when sold at retail in the state to consumers or 21 users. 22 3. A tax of six percent at a rate specified in subsection 23 12 is imposed upon the sales price of all sales of tickets 24 or admissions to places of amusement, fairs, and athletic 25 events except those of elementary and secondary educational 26 institutions. A tax of six percent at a rate specified in 27 subsection 12 is imposed on the sales price of an entry fee or 28 like charge imposed solely for the privilege of participating 29 in an activity at a place of amusement, fair, or athletic event 30 unless the sales price of tickets or admissions charges for 31 observing the same activity are taxable under this subchapter . 32 A tax of six percent at a rate specified in subsection 12 33 is imposed upon that part of private club membership fees or 34 charges paid for the privilege of participating in any athletic 35 -1- LSB 2317YH (2) 89 jm/jh 1/ 7

H.F. 896 sports provided club members. 1 Sec. 3. Section 423.2, subsection 4, paragraph a, Code 2021, 2 is amended to read as follows: 3 a. A tax of six percent at a rate specified in subsection 4 12 is imposed upon the sales price derived from the operation 5 of all forms of amusement devices and games of skill, games of 6 chance, raffles, and bingo games as defined in chapter 99B , and 7 card game tournaments conducted under section 99B.27 , that are 8 operated or conducted within the state, the tax to be collected 9 from the operator in the same manner as for the collection of 10 taxes upon the sales price of tickets or admission as provided 11 in this section . Nothing in this subsection shall legalize any 12 games of skill or chance or slot-operated devices which are now 13 prohibited by law. 14 Sec. 4. Section 423.2, subsection 5, Code 2021, is amended 15 to read as follows: 16 5. There is imposed a tax of six percent at a rate specified 17 in subsection 12 upon the sales price from the furnishing of 18 services as defined in section 423.1 . 19 Sec. 5. Section 423.2, subsection 7, paragraph a, 20 unnumbered paragraph 1, Code 2021, is amended to read as 21 follows: 22 A tax of six percent at a rate specified in subsection 12 23 is imposed upon the sales price from the sales, furnishing, or 24 service of solid waste collection and disposal service. 25 Sec. 6. Section 423.2, subsection 8, paragraph a, Code 2021, 26 is amended to read as follows: 27 a. A tax of six percent at a rate specified in subsection 28 12 is imposed on the sales price from sales of bundled 29 transactions. For the purposes of this subsection , a “bundled 30 transaction” is the retail sale of two or more distinct and 31 identifiable products, except real property and services to 32 real property, which are sold for one nonitemized price. A 33 “bundled transaction” does not include the sale of any products 34 in which the sales price varies, or is negotiable, based on 35 -2- LSB 2317YH (2) 89 jm/jh 2/ 7

H.F. 896 the selection by the purchaser of the products included in the 1 transaction. 2 Sec. 7. Section 423.2, subsection 9, Code 2021, is amended 3 to read as follows: 4 9. A tax of six percent at a rate specified in subsection 5 12 is imposed upon the sales price from any mobile 6 telecommunications service, including all paging services, 7 that this state is allowed to tax pursuant to the provisions 8 of the federal Mobile Telecommunications Sourcing Act, Pub. 9 L. No. 106-252, 4 U.S.C. §116 et seq. For purposes of this 10 subsection , taxes on mobile telecommunications service, as 11 defined under the federal Mobile Telecommunications Sourcing 12 Act that are deemed to be provided by the customer’s home 13 service provider, shall be paid to the taxing jurisdiction 14 whose territorial limits encompass the customer’s place of 15 primary use, regardless of where the mobile telecommunications 16 service originates, terminates, or passes through and 17 shall in all other respects be taxed in conformity with 18 the federal Mobile Telecommunications Sourcing Act. All 19 other provisions of the federal Mobile Telecommunications 20 Sourcing Act are adopted by the state of Iowa and incorporated 21 into this subsection by reference. With respect to mobile 22 telecommunications service under the federal Mobile 23 Telecommunications Sourcing Act, the director shall, if 24 requested, enter into agreements consistent with the provisions 25 of the federal Act. 26 Sec. 8. Section 423.2, subsection 10, paragraph a, Code 27 2021, is amended to read as follows: 28 a. A tax of six percent at a rate specified in subsection 29 12 is imposed on the sales price of specified digital products 30 sold at retail in the state. The tax applies whether the 31 purchaser obtains permanent use or less than permanent use of 32 the specified digital product, whether the sale is conditioned 33 or not conditioned upon continued payment from the purchaser, 34 and whether the sale is on a subscription basis or is not on a 35 -3- LSB 2317YH (2) 89 jm/jh 3/ 7

H.F. 896 subscription basis. 1 Sec. 9. Section 423.2, subsection 12, Code 2021, is amended 2 by striking the subsection and inserting in lieu thereof the 3 following: 4 12. a. For the period beginning January 1, 2022, and ending 5 December 31, 2050, the sales tax rate is six and three-eighths 6 percent. 7 b. Beginning January 1, 2051, the sales tax rate is five and 8 three-eighths percent. 9 Sec. 10. Section 423.2A, subsection 2, paragraph b, Code 10 2021, is amended to read as follows: 11 b. Transfer from the remaining revenues the amounts required 12 under Article VII, section 10, of the Constitution of the State 13 of Iowa to the natural resources and outdoor recreation trust 14 fund created in section 461.31 , if applicable . 15 Sec. 11. Section 423.5, subsection 1, unnumbered paragraph 16 1, Code 2021, is amended to read as follows: 17 Except as provided in paragraph “b” , an excise tax at the 18 rate of six and three-eighths percent of the purchase price or 19 installed purchase price is imposed on the following: 20 Sec. 12. Section 423.5, subsection 4, Code 2021, is amended 21 to read as follows: 22 4. The use tax rate of six and three-eighths percent is 23 reduced to five and three-eighths percent on January 1, 2051. 24 Sec. 13. Section 423.43, subsection 1, paragraph b, Code 25 2021, is amended to read as follows: 26 b. Subsequent to the deposit into the general fund of the 27 state and after the transfer of such revenues collected under 28 chapter 423B , the department shall transfer one-sixth of such 29 an amount equal to fifteen and six thousand eight hundred 30 sixty-three ten-thousandths percent of the remaining revenues 31 to the secure an advanced vision for education fund created in 32 section 423F.2 . This paragraph is repealed January 1, 2051. 33 Sec. 14. EFFECTIVE DATE. This division of this Act takes 34 effect July 1, 2022. 35 -4- LSB 2317YH (2) 89 jm/jh 4/ 7

H.F. 896 DIVISION II 1 INDIVIDUAL INCOME TAXES 2 Sec. 15. Section 216B.3, subsection 15, Code 2021, is 3 amended to read as follows: 4 15. Develop a plan to provide telephone yellow pages 5 information without charge to persons declared to be blind 6 under the standards in section 422.12, subsection 2, paragraph 7 “a” , subparagraph (5) 422.10C, subsection 1, paragraph “e” . The 8 department may apply for federal funds to support the service. 9 The program shall be limited in scope by the availability of 10 funds. 11 Sec. 16. NEW SECTION . 422.10C Personal exemption credits. 12 1. The taxes imposed under this subchapter less the credits 13 allowed under this subchapter except for the credits for 14 withheld tax and estimated tax paid in section 422.16, shall 15 be reduced by a personal exemption credit in the following 16 amounts: 17 a. For an estate or trust, a single individual, or a married 18 person filing a separate return, ninety-five dollars. 19 b. For a head of household, or a husband and wife filing a 20 joint return, one hundred ninety dollars. 21 c. For each dependent, an additional seventy dollars. 22 d. For a single individual, husband, wife, or head of 23 household, an additional exemption of twenty dollars for each 24 of said individuals who has attained the age of sixty-five 25 years before the close of the tax year or on the first day 26 following the end of the tax year. 27 e. For a single individual, husband, wife, or head of 28 household, an additional exemption of twenty dollars for each 29 of said individuals who is blind at the close of the tax year. 30 For the purposes of this paragraph, an individual is blind 31 only if the individual’s central visual acuity does not exceed 32 twenty-two hundredths in the better eye with correcting lenses, 33 or if the individual’s visual acuity is greater than twenty-two 34 hundredths but is accompanied by a limitation in the fields 35 -5- LSB 2317YH (2) 89 jm/jh 5/ 7

H.F. 896 of vision such that the widest diameter of the visual field 1 subtends an angle no greater than twenty degrees. 2 2. Any credit in excess of the tax liability is refundable. 3 However, for nonresidents or part-year residents the amount of 4 the credit in excess of the tax liability that may be refunded 5 shall be in the ratio of their Iowa source net income to their 6 all source net income under rules prescribed by the director. 7 3. For purposes of this section, “dependent” has the same 8 meaning as provided by the Internal Revenue Code. 9 Sec. 17. Section 422.12, subsection 2, paragraph a, Code 10 2021, is amended by striking the paragraph. 11 Sec. 18. EFFECTIVE DATE. This division of this Act takes 12 effect January 1, 2022. 13 Sec. 19. APPLICABILITY. This division of this Act applies 14 to tax years beginning on or after January 1, 2022. 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanation’s substance by the members of the general assembly. 18 DIVISION I —— SALES AND USE TAXES. Division I of this bill 19 relates to state sales and use taxes and to an amendment to 20 the Iowa Constitution ratified on November 2, 2010, which 21 created a natural resources and outdoor recreation trust fund 22 (fund) and dedicated a portion of state revenues to the fund 23 for the purposes of protecting and enhancing water quality and 24 natural areas in the state including parks, trails, and fish 25 and wildlife habitat, and conserving agricultural soils in 26 the state (Article VII, section 10). The fund is codified in 27 Code section 461.31. Pursuant to the amendment, the amount 28 credited to the fund will be equal to the amount generated 29 by an increase in the state sales tax rate occurring after 30 the effective date of the constitutional amendment, but shall 31 not exceed the amount that a state sales tax rate of 0.375 32 percent would generate. The state sales tax rate has not 33 been increased since the effective date of the constitutional 34 amendment, so no amounts have been credited to the fund. The 35 -6- LSB 2317YH (2) 89 jm/jh 6/ 7

H.F. 896 division increases from 6 percent to 6.375 percent the state 1 sales tax rate and the state use tax rate, and provides for 2 the transfer of sales tax revenues to the fund. The division 3 also amends the transfer of use tax revenues to the secure 4 an advanced vision for education fund (SAVE) in Code section 5 423F.2 from 1/6th (approximately 16.66 percent) of the revenues 6 to 15.6863 percent of the revenues to ensure that SAVE receives 7 approximately the same amount of use tax revenue as it did 8 prior to the use tax rate increase provided in the division. 9 The division takes effect July 1, 2022. 10 DIVISION II —— INDIVIDUAL INCOME TAXES. Division II 11 relates to the individual income tax by increasing the 12 personal exemption credit and by making the credit refundable. 13 Under current law, the personal exemption credit, which is 14 a composite of five separate credits, is nonrefundable and 15 may not exceed the computed tax. The division increases 16 from $40 to $95 the personal exemption credit for an estate 17 or trust, a single individual, or a married person filing 18 a separate return; increases from $80 to $190 the personal 19 exemption credit for a head of household, or a husband and 20 wife filing a joint return; and increases from $40 to $70 21 the additional exemption credit for each dependent of the 22 taxpayer. The division makes these credits, as well as the 23 existing additional exemption credits of $20 for an individual 24 who is at least 65 years of age and $20 for a blind individual, 25 refundable to the extent they exceed the tax remaining after 26 subtracting all refundable and nonrefundable credits except the 27 credits for withheld tax and estimated tax paid. However, for 28 a nonresident or part-year resident, the amount of the credit 29 in excess of the tax liability that shall be refunded is in the 30 proportion that the taxpayer’s net income allocated to Iowa 31 bears to the taxpayer’s total net income, under rules to be 32 prescribed by the director of revenue. 33 The division takes effect January 1, 2022, and applies to tax 34 years beginning on or after that date. 35 -7- LSB 2317YH (2) 89 jm/jh 7/ 7