House Study Bill 191 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON HEIN) A BILL FOR An Act relating to the establishment of a new deduction for 1 any income of an employee resulting from the payment by an 2 employer on the employee’s qualified education loan and 3 including applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2363YC (4) 89 jm/jh

H.F. _____ Section 1. Section 422.7, Code 2021, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 19. a. Subtract, to the extent included, 3 income resulting from the payment by an employer of the 4 taxpayer, whether paid to the taxpayer or to a lender, of 5 principal or interest on any qualified education loan incurred 6 by the taxpayer. 7 b. If the taxpayer has a deduction in computing federal 8 taxable income under section 221 of the Internal Revenue Code 9 for interest on a qualified education loan, the taxpayer shall 10 recompute for purposes of this subsection the amount of the 11 deduction under paragraph “a” by not subtracting any amount of 12 income resulting from the employer’s payment of interest on a 13 qualified education loan that was also deducted by the taxpayer 14 under section 221 of the Internal Revenue Code. 15 c. For purposes of this subsection, “qualified education 16 loan” means the same as defined in section 221 of the Internal 17 Revenue Code. 18 Sec. 2. 2018 Iowa Acts, chapter 1161, section 112, is 19 amended by striking the section and inserting in lieu thereof 20 the following: 21 SEC. 112. Section 422.7, Code 2018, is amended by adding the 22 following new subsection: 23 NEW SUBSECTION . 18. Add, to the extent deducted for federal 24 tax purposes, charitable contributions under section 170 of 25 the Internal Revenue Code to the extent such contribution was 26 made to an organization for the purpose of deposit in the Iowa 27 education savings plan trust established in chapter 12D , and 28 the taxpayer designated that any part of the contribution be 29 used for the direct benefit of any dependent of the taxpayer or 30 any other single beneficiary designated by the taxpayer. 31 Sec. 3. APPLICABILITY. The following applies to tax years 32 beginning on or after January 1, 2022: 33 The section of this Act amending section 422.7. 34 EXPLANATION 35 -1- LSB 2363YC (4) 89 jm/jh 1/ 2

H.F. _____ The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 This bill changes the effective date for a new deduction 3 for any income of an employee resulting from the payment by 4 an employer, whether paid to the employee or a lender, of 5 principal or interest on the employee’s qualified education 6 loan. Currently, the new deduction is set to begin in tax year 7 2023 or in a later tax year, contingent upon the satisfaction 8 of certain net general fund revenue amount and growth targets. 9 The bill moves up the effective date for this new deduction 10 to tax years beginning on or after January 1, 2022. To move 11 up the effective date for the new deduction, the bill strikes 12 2018 Iowa Acts, chapter 1161, section 112. However, there is 13 an unrelated provision to the new deduction in 2018 Iowa Acts, 14 chapter 1161, section 112, and the bill reinserts the unrelated 15 provision to preserve this provision. 16 Federal income tax law does provide a limited deduction for 17 a taxpayer’s payment of interest on qualified education loans, 18 and the bill disallows the new Iowa deduction for any amount 19 of income that represents an interest payment that was also 20 deducted by the employee in computing federal taxable income. 21 The bill defines “qualified education loan” to mean the same 22 as defined in section 221 of the Internal Revenue Code. 23 The new deduction applies to tax years beginning on or after 24 January 1, 2022. 25 -2- LSB 2363YC (4) 89 jm/jh 2/ 2