Senate Study Bill 3074 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON DAWSON) A BILL FOR An Act relating to state and local revenue and finances by 1 modifying sales and use taxes, individual and corporate 2 income taxes, the franchise tax, the insurance premiums tax, 3 the equipment tax, the automobile rental excise tax, the 4 water service tax, and local option taxes, crediting moneys 5 to the natural resources and outdoor recreation trust fund, 6 and including effective date and applicability provisions. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 5099XC (21) 89 jm/jh
S.F. _____ DIVISION I 1 SALES AND USE TAX RATES AND DISTRIBUTION 2 Section 1. Section 423.2, subsection 1, unnumbered 3 paragraph 1, Code 2022, is amended to read as follows: 4 There is imposed a tax of six percent at the rate specified 5 in subsection 12 upon the sales price of all sales of tangible 6 personal property, sold at retail in the state to consumers or 7 users except as otherwise provided in this subchapter . 8 Sec. 2. Section 423.2, subsections 2 and 3, Code 2022, are 9 amended to read as follows: 10 2. A tax of six percent at the rate specified in subsection 11 12 is imposed upon the sales price of the sale or furnishing 12 of gas, electricity, water, heat, pay television service, and 13 communication service, including the sales price from such 14 sales by any municipal corporation or joint water utility 15 furnishing gas, electricity, water, heat, pay television 16 service, and communication service to the public in its 17 proprietary capacity, except as otherwise provided in this 18 subchapter , when sold at retail in the state to consumers or 19 users. 20 3. A tax of six percent at the rate specified in subsection 21 12 is imposed upon the sales price of all sales of tickets 22 or admissions to places of amusement, fairs, and athletic 23 events except those of elementary and secondary educational 24 institutions. A tax of six percent at the rate specified in 25 subsection 12 is imposed on the sales price of an entry fee or 26 like charge imposed solely for the privilege of participating 27 in an activity at a place of amusement, fair, or athletic event 28 unless the sales price of tickets or admissions charges for 29 observing the same activity are taxable under this subchapter . 30 A tax of six percent at the rate specified in subsection 12 31 is imposed upon that part of private club membership fees or 32 charges paid for the privilege of participating in any athletic 33 sports provided club members. 34 Sec. 3. Section 423.2, subsection 4, paragraph a, Code 2022, 35 -1- LSB 5099XC (21) 89 jm/jh 1/ 117
S.F. _____ is amended to read as follows: 1 a. A tax of six percent at the rate specified in subsection 2 12 is imposed upon the sales price derived from the operation 3 of all forms of amusement devices and games of skill, games of 4 chance, raffles, and bingo games as defined in chapter 99B , and 5 card game tournaments conducted under section 99B.27 , that are 6 operated or conducted within the state, the tax to be collected 7 from the operator in the same manner as for the collection of 8 taxes upon the sales price of tickets or admission as provided 9 in this section . Nothing in this subsection shall legalize any 10 games of skill or chance or slot-operated devices which are now 11 prohibited by law. 12 Sec. 4. Section 423.2, subsection 5, Code 2022, is amended 13 to read as follows: 14 5. There is imposed a tax of six percent at the rate 15 specified in subsection 12 upon the sales price from the 16 furnishing of services as defined in section 423.1 . 17 Sec. 5. Section 423.2, subsection 7, paragraph a, 18 unnumbered paragraph 1, Code 2022, is amended to read as 19 follows: 20 A tax of six percent at the rate specified in subsection 12 21 is imposed upon the sales price from the sales, furnishing, or 22 service of solid waste collection and disposal service. 23 Sec. 6. Section 423.2, subsection 8, paragraph a, Code 2022, 24 is amended to read as follows: 25 a. A tax of six percent at the rate specified in subsection 26 12 is imposed on the sales price from sales of bundled 27 transactions. For the purposes of this subsection , a “bundled 28 transaction” is the retail sale of two or more distinct and 29 identifiable products, except real property and services to 30 real property, which are sold for one nonitemized price. A 31 “bundled transaction” does not include the sale of any products 32 in which the sales price varies, or is negotiable, based on 33 the selection by the purchaser of the products included in the 34 transaction. 35 -2- LSB 5099XC (21) 89 jm/jh 2/ 117
S.F. _____ Sec. 7. Section 423.2, subsection 9, Code 2022, is amended 1 to read as follows: 2 9. A tax of six percent at the rate specified in 3 subsection 12 is imposed upon the sales price from any mobile 4 telecommunications service, including all paging services, 5 that this state is allowed to tax pursuant to the provisions 6 of the federal Mobile Telecommunications Sourcing Act, Pub. 7 L. No. 106-252, 4 U.S.C. §116 et seq. For purposes of this 8 subsection , taxes on mobile telecommunications service, as 9 defined under the federal Mobile Telecommunications Sourcing 10 Act that are deemed to be provided by the customer’s home 11 service provider, shall be paid to the taxing jurisdiction 12 whose territorial limits encompass the customer’s place of 13 primary use, regardless of where the mobile telecommunications 14 service originates, terminates, or passes through and 15 shall in all other respects be taxed in conformity with 16 the federal Mobile Telecommunications Sourcing Act. All 17 other provisions of the federal Mobile Telecommunications 18 Sourcing Act are adopted by the state of Iowa and incorporated 19 into this subsection by reference. With respect to mobile 20 telecommunications service under the federal Mobile 21 Telecommunications Sourcing Act, the director shall, if 22 requested, enter into agreements consistent with the provisions 23 of the federal Act. 24 Sec. 8. Section 423.2, subsection 10, paragraph a, Code 25 2022, is amended to read as follows: 26 a. A tax of six percent at the rate specified in subsection 27 12 is imposed on the sales price of specified digital products 28 sold at retail in the state. The tax applies whether the 29 purchaser obtains permanent use or less than permanent use of 30 the specified digital product, whether the sale is conditioned 31 or not conditioned upon continued payment from the purchaser, 32 and whether the sale is on a subscription basis or is not on a 33 subscription basis. 34 Sec. 9. Section 423.2, subsection 12, Code 2022, is amended 35 -3- LSB 5099XC (21) 89 jm/jh 3/ 117
S.F. _____ by striking the subsection and inserting in lieu thereof the 1 following: 2 12. a. For the period beginning January 1, 2023, through 3 December 31, 2050, the sales tax rate is seven percent. 4 b. Beginning January 1, 2051, the sales tax rate is six 5 percent. 6 Sec. 10. Section 423.2A, subsection 2, paragraphs a, b, and 7 c, Code 2022, are amended to read as follows: 8 a. (1) Transfer For the period beginning January 1, 2023, 9 through December 31, 2050, transfer one-seventh of the revenues 10 collected under deposited into the general fund of the state 11 under subsection 1 to the appropriate county accounts under 12 chapter 423B for the counties from which the tax was collected . 13 (2) Beginning January 1, 2051, transfer one-sixth of the 14 revenues deposited into the general fund of the state under 15 subsection 1 to the appropriate county accounts under chapter 16 423B for the counties from which the tax was collected. 17 b. Transfer from the remaining revenues the amounts required 18 under Article VII, section 10, of the Constitution of the State 19 of Iowa to the natural resources and outdoor recreation trust 20 fund created in section 461.31 , if applicable . 21 c. Transfer one-sixth of from the remaining revenues an 22 amount equal to one-seventh of the revenues deposited into the 23 general fund of the state under subsection 1 to the secure an 24 advanced vision for education fund created in section 423F.2 . 25 This paragraph “c” is repealed January 1, 2051. 26 Sec. 11. Section 423.5, subsection 1, unnumbered paragraph 27 1, Code 2022, is amended to read as follows: 28 Except as provided in paragraph “b” , an excise tax at the 29 rate of six percent specified in subsection 4 of the purchase 30 price or installed purchase price is imposed on the following: 31 Sec. 12. Section 423.5, subsection 4, Code 2022, is amended 32 by striking the subsection and inserting in lieu thereof the 33 following: 34 4. a. For the period beginning January 1, 2023, through 35 -4- LSB 5099XC (21) 89 jm/jh 4/ 117
S.F. _____ December 31, 2050, the use tax rate is seven percent. 1 b. Beginning January 1, 2051, the use tax rate is six 2 percent. 3 Sec. 13. Section 423.43, subsection 1, paragraph b, Code 4 2022, is amended by striking the paragraph and inserting in 5 lieu thereof the following: 6 b. Subsequent to the deposit into the general fund of 7 the state the department shall do the following in the order 8 prescribed: 9 (1) (a) For the period beginning January 1, 2023, through 10 December 31, 2050, transfer one-seventh of such revenues to the 11 appropriate county accounts under chapter 423B for the counties 12 from which the tax was paid. 13 (b) Beginning January 1, 2051, transfer one-sixth of such 14 revenues to the appropriate county accounts under chapter 423B 15 for the counties from which the tax was paid. 16 (2) Transfer one-sixth of such remaining revenues to the 17 secure an advanced vision for education fund created in section 18 423F.2. This subparagraph is repealed January 1, 2051. 19 Sec. 14. EFFECTIVE DATE. This division of this Act takes 20 effect January 1, 2023. 21 DIVISION II 22 SALES AND USE TAX ON SERVICES AND EXEMPTIONS 23 Sec. 15. Section 423.2, subsection 6, paragraph bu, Code 24 2022, is amended to read as follows: 25 bu. Software as a service Cloud computing . 26 Sec. 16. Section 423.2, subsection 6, Code 2022, is amended 27 by adding the following new paragraphs: 28 NEW PARAGRAPH . bv. Web hosting. 29 NEW PARAGRAPH . bw. Digital automated services. 30 NEW PARAGRAPH . bx. Scooter rentals. 31 Sec. 17. Section 423.3, subsection 47, paragraph a, 32 subparagraph (4), Code 2022, is amended by striking the 33 subparagraph. 34 Sec. 18. Section 423.3, subsection 104, paragraph b, 35 -5- LSB 5099XC (21) 89 jm/jh 5/ 117
S.F. _____ subparagraph (1), Code 2022, is amended to read as follows: 1 (1) “Commercial enterprise” means the same as defined in 2 section 423.3, subsection 47 , paragraph “d” , subparagraph (1) , 3 but also includes professions and occupations . 4 Sec. 19. EFFECTIVE DATE. This division of this Act takes 5 effect January 1, 2023. 6 DIVISION III 7 SALES, USE, AND EXCISE TAX —— RETURNS DUE 8 Sec. 20. Section 9C.3, subsection 3, Code 2022, is amended 9 to read as follows: 10 3. The application shall state whether or not the applicant 11 has an Iowa retailers sales or use tax permit and if the 12 applicant has such permit, shall state the number of such 13 permit. 14 Sec. 21. Section 9C.5, Code 2022, is amended to read as 15 follows: 16 9C.5 Issuance of license. 17 Upon receiving an application for a transient merchant’s 18 license, the secretary of state shall investigate or cause to 19 be investigated, the reputation and character of the applicant. 20 If, upon making such investigation, the secretary of state is 21 satisfied that the statements and representations contained in 22 the application are true, and that the applicant is of good 23 reputation and character, and the holder of an Iowa retailer’s 24 sales or use tax permit, and if a foreign corporation, has 25 authority to do business in the state of Iowa, the secretary 26 shall issue to the applicant a license as a transient merchant 27 upon payment of the fee as herein prescribed for the period of 28 time requested in said application and for use at the location 29 and place where it is stated in said application the sale will 30 be held or the business conducted, both of which shall be set 31 out in said license. Such license shall be valid only for the 32 period of time and at the location and place described therein. 33 Sec. 22. Section 99G.30A, subsection 2, paragraph c, Code 34 2022, is amended to read as follows: 35 -6- LSB 5099XC (21) 89 jm/jh 6/ 117
S.F. _____ c. Frequency of deposits and quarterly monthly reports of 1 the monitor vending machine excise tax with the department of 2 revenue are governed by the tax provisions in section 423.31 . 3 Monitor vending machine excise tax collections shall not be 4 included in computation of the total tax to determine frequency 5 of filing under section 423.31 . 6 Sec. 23. Section 321.105A, subsection 4, paragraph b, Code 7 2022, is amended to read as follows: 8 b. Section 422.25, subsection 4 , sections 422.30 , 422.67 , 9 and 422.68 , section 422.69, subsection 1 , sections 422.70 , 10 422.71 , 422.72 , 422.74 , and 422.75 , section 423.14, subsection 11 2 , and sections 423.23 , 423.24 , 423.25 , 423.32 , 423.33 , 423.35 , 12 423.37 through 423.42 , 423.45 , and 423.47 , consistent with the 13 provisions of this section , apply with respect to the fees 14 for new registration authorized under this section in the 15 same manner and with the same effect as if the fees for new 16 registration were retail use taxes within the meaning of those 17 statutes. 18 Sec. 24. Section 421.26, Code 2022, is amended to read as 19 follows: 20 421.26 Personal liability for tax due. 21 If a licensee or other person under section 452A.65 , a 22 retailer or purchaser under chapter 423A , 423B , 423C , 423D , 23 or 423E , or section 423.14 , 423.14A , 423.29 , 423.31 , 423.32 , 24 or 423.33 , or a user under section 423.34 , or a permit holder 25 or licensee under section 453A.13 , 453A.16 , or 453A.44 fails 26 to pay a tax under those sections when due, an officer of a 27 corporation or association, notwithstanding section 489.304 , 28 a member or manager of a limited liability company, or a 29 partner of a partnership, having control or supervision of 30 or the authority for remitting the tax payments and having 31 a substantial legal or equitable interest in the ownership 32 of the corporation, association, limited liability company, 33 or partnership, who has intentionally failed to pay the tax 34 is personally liable for the payment of the tax, interest, 35 -7- LSB 5099XC (21) 89 jm/jh 7/ 117
S.F. _____ and penalty due and unpaid. However, this section shall 1 not apply to taxes on accounts receivable. The dissolution 2 of a corporation, association, limited liability company, 3 or partnership shall not discharge a person’s liability for 4 failure to remit the tax due. 5 Sec. 25. Section 423.2, subsection 1, paragraph b, Code 6 2022, is amended to read as follows: 7 b. Sales of building materials, supplies, and equipment 8 to owners, contractors, subcontractors, or builders for the 9 erection of buildings or the alteration, repair, or improvement 10 of real property are retail sales of tangible personal property 11 in whatever quantity sold. Where the owner, contractor, 12 subcontractor, or builder is also a retailer holding a retail 13 sales or use tax permit and transacting retail sales of 14 building materials, supplies, and equipment, the person shall 15 purchase such items of tangible personal property without 16 liability for the tax if such property will be subject to the 17 tax at the time of resale or at the time it is withdrawn from 18 inventory for construction purposes. The sales tax shall be 19 due in the reporting period when the materials, supplies, 20 and equipment are withdrawn from inventory for construction 21 purposes or when sold at retail. The tax shall not be due when 22 materials are withdrawn from inventory for use in construction 23 outside of Iowa and the tax shall not apply to tangible 24 personal property purchased and consumed by the manufacturer as 25 building materials in the performance by the manufacturer or 26 its subcontractor of construction outside of Iowa. The sale 27 of carpeting is not a sale of building materials. The sale of 28 carpeting to owners, contractors, subcontractors, or builders 29 shall be treated as the sale of ordinary tangible personal 30 property and subject to the tax imposed under this subsection 31 and the use tax. 32 Sec. 26. Section 423.3, subsection 39, paragraph a, 33 subparagraph (2), Code 2022, is amended to read as follows: 34 (2) The sale of all or substantially all of the tangible 35 -8- LSB 5099XC (21) 89 jm/jh 8/ 117
S.F. _____ personal property, or specified digital products, or services 1 held or used by a seller in the course of the seller’s trade 2 or business for which the seller is required to hold a sales 3 or use tax permit when the seller sells or otherwise transfers 4 the trade or business to another person who shall engage in a 5 similar trade or business. 6 Sec. 27. Section 423.3, subsection 80, paragraph d, Code 7 2022, is amended to read as follows: 8 d. Subject to the limitations in paragraph “c” , where the 9 owner, contractor, subcontractor, or builder is also a retailer 10 holding a retail sales or use tax permit and transacting 11 retail sales of building materials, supplies, and equipment, 12 the tax shall not be due when materials are withdrawn from 13 inventory for use in construction performed for a designated 14 exempt entity if an exemption certificate is received from such 15 entity. 16 Sec. 28. Section 423.5, subsection 2, Code 2022, is amended 17 to read as follows: 18 2. The excise tax is imposed upon every person using 19 the property within this state until the tax has been paid 20 directly to the county treasurer, the state department of 21 transportation, a retailer, or the department. This tax is 22 imposed on every person using the services or the product of 23 the services in this state until the user has paid the tax 24 either to an Iowa sales or use tax permit holder or to the 25 department. 26 Sec. 29. Section 423.14, subsection 2, paragraph b, Code 27 2022, is amended to read as follows: 28 b. The tax upon the use of all tangible personal property 29 and specified digital products other than that enumerated in 30 paragraph “a” , which is sold by a seller who is a retailer or 31 its agent that is not otherwise required to collect sales tax 32 under the provisions of this chapter , may be collected by the 33 retailer or agent and remitted to the department, pursuant to 34 the provisions of paragraph “e” , and sections 423.24 , 423.29 , 35 -9- LSB 5099XC (21) 89 jm/jh 9/ 117
S.F. _____ 423.30 , 423.32 423.31 , and 423.33 . 1 Sec. 30. Section 423.14A, subsection 3, paragraph c, 2 subparagraph (2), Code 2022, is amended to read as follows: 3 (2) A marketplace facilitator shall collect sales and 4 use tax on the entire sales price or purchase price paid by 5 a purchaser on each Iowa sale subject to sales and use tax 6 that is made or facilitated by the marketplace facilitator, 7 regardless of whether the marketplace seller for whom an Iowa 8 sale is made or facilitated has or is required to have a retail 9 sales or use tax permit or would have been required to collect 10 sales and use tax had the sale not been facilitated by the 11 marketplace facilitator, and regardless of the amount of the 12 sales price or purchase price that will ultimately accrue 13 to or benefit the marketplace facilitator, the marketplace 14 seller, or any other person. This sales and use tax collection 15 responsibility of a marketplace facilitator applies but shall 16 not be limited to sales facilitated through a computer software 17 application, commonly referred to as in-app purchases, or 18 through another specified digital product. 19 Sec. 31. Section 423.31, subsections 1, 3, 5, and 6, Code 20 2022, are amended to read as follows: 21 1. a. Each Except as provided in paragraph “b” , each person 22 subject to this section and section 423.36 and in accordance 23 with the provisions of this section and section 423.36 shall, 24 on or before the last day of the month following the close of 25 each calendar quarter month during which such person is or 26 has become or ceased being subject to the provisions of this 27 section and section 423.36 , make, sign, and file electronically 28 a return for the calendar quarter month in the form as may be 29 required. Returns shall show information relating to sales 30 prices including tangible personal property, specified digital 31 products, and services converted to the use of such person, 32 the amounts of sales prices excluded and exempt from the tax, 33 the amounts of sales prices subject to tax, a calculation of 34 tax due, and any other information for the period covered by 35 -10- LSB 5099XC (21) 89 jm/jh 10/ 117
S.F. _____ the return as may be required. Returns shall be signed by 1 the retailer or the retailer’s authorized agent and must be 2 certified by the retailer to be correct in accordance with 3 forms and rules prescribed by the director. A person required 4 to file a sales or use tax return who is unable to do so may 5 request permission from the director to file a return by 6 another method. 7 b. Notwithstanding paragraph “a” , each person subject to 8 this section who collects and remits less than one thousand 9 two hundred dollars in sales or use tax to the department per 10 calendar year may file a return on or before the last day of the 11 month following the close of the calendar year. 12 3. The sales tax forms prescribed by the director shall be 13 referred to as “retailers tax deposit”. Deposit forms shall 14 be signed by the retailer or the retailer’s duly authorized 15 agent, and shall be duly certified by the retailer or agent to 16 be correct. The director may authorize incorporated banks and 17 trust companies or other depositories authorized by law which 18 are depositories or financial agents of the United States, 19 or of this state, to receive any sales or use tax imposed 20 under this chapter , in the manner, at the times, and under 21 the conditions the director prescribes. The director shall 22 prescribe the manner, times, and conditions under which the 23 receipt of the tax by those depositories is to be treated as 24 payment of the tax to the department. 25 5. a. Upon making application and receiving approval 26 from the director, a person and its affiliates that make 27 retail sales of tangible personal property, specified digital 28 products, or taxable enumerated services may make deposits and 29 file a consolidated sales or use tax return for the affiliated 30 group, pursuant to rules adopted by the director. A person and 31 each affiliate that files a consolidated return are jointly and 32 severally liable for all tax, penalty, and interest found due 33 for the tax period for which a consolidated return is filed or 34 required to be filed. 35 -11- LSB 5099XC (21) 89 jm/jh 11/ 117
S.F. _____ b. A business required to file a consolidated sales or use 1 tax return shall file a form entitled “schedule of consolidated 2 business locations” with its quarterly sales or use tax 3 return that shows the taxpayer’s consolidated permit number, 4 the permit number for each Iowa business location, the state 5 sales tax amount by business location, and the amount of state 6 sales tax due on goods consumed that are not assigned to a 7 specific business location. Consolidated quarterly sales or 8 use tax returns that are not accompanied by the schedule of 9 consolidated business locations form are considered incomplete 10 and are subject to penalty under section 421.27 . 11 6. If necessary or advisable in order to insure ensure 12 the payment of the tax, the director may require returns and 13 payment of the tax to be made for other than quarterly monthly 14 periods, the provisions of this section or other provision to 15 the contrary notwithstanding. 16 Sec. 32. Section 423.31, subsection 2, Code 2022, is amended 17 by striking the subsection. 18 Sec. 33. Section 423.33, subsection 1, paragraph a, Code 19 2022, is amended to read as follows: 20 a. If a purchaser fails to pay sales tax to the retailer 21 required to collect the tax, then in addition to all of the 22 rights, obligations, and remedies provided, a use tax is 23 payable by the purchaser directly to the department, and 24 sections 423.31 , 423.32 , 423.37 , 423.38 , 423.39 , 423.40 , 25 423.41 , and 423.42 apply to the purchaser. 26 Sec. 34. Section 423.33, subsection 3, Code 2022, is amended 27 to read as follows: 28 3. Event sponsor’s liability for sales tax. A person 29 sponsoring a flea market or a craft, antique, coin, or stamp 30 show or similar event shall obtain from every retailer selling 31 tangible personal property, specified digital products, or 32 taxable services at the event proof that the retailer possesses 33 a valid sales or use tax permit or secure from the retailer 34 a statement, taken in good faith, that tangible personal 35 -12- LSB 5099XC (21) 89 jm/jh 12/ 117
S.F. _____ property, specified digital products, or services offered for 1 sale are not subject to sales tax. Failure to do so renders 2 a sponsor of the event liable for payment of any sales tax, 3 interest, and penalty due and owing from any retailer selling 4 property or services at the event. Sections 423.31 , 423.32 , 5 423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and 423.42 apply to the 6 sponsors. For purposes of this subsection , a “person sponsoring 7 a flea market or a craft, antique, coin, or stamp show or similar 8 event” does not include a marketplace facilitator as defined in 9 section 423.14A, subsection 1, an organization which sponsors 10 an event determined to qualify as an event involving casual 11 sales pursuant to section 423.3, subsection 39 , or the state 12 fair or a fair as defined in section 174.1 . 13 Sec. 35. Section 423.34, Code 2022, is amended to read as 14 follows: 15 423.34 Liability of user. 16 Any person who uses any tangible personal property, 17 specified digital products, or services enumerated in section 18 423.2 upon which the use tax has not been paid, either to the 19 county treasurer or to a retailer or direct to the department 20 as required by this subchapter , shall be liable for the payment 21 of tax, and shall on or before the last day of the month next 22 succeeding each quarterly monthly period pay the use tax upon 23 all tangible personal property, specified digital products, 24 or services used by the person during the preceding quarterly 25 monthly period in the manner and accompanied by such returns 26 as the director shall prescribe. All of the provisions of 27 sections 423.32 423.31 and 423.33 with reference to the returns 28 and payments shall be applicable to the returns and payments 29 required by this section . 30 Sec. 36. Section 423.36, subsection 4, paragraph b, Code 31 2022, is amended to read as follows: 32 b. If an applicant is making sales outside Iowa for use in 33 this state or furnishing services outside Iowa, the product 34 or result of which will be used in this state, that applicant 35 -13- LSB 5099XC (21) 89 jm/jh 13/ 117
S.F. _____ shall be issued one sales or use tax permit by the department 1 applicable to these out-of-state sales or services. 2 Sec. 37. Section 423.36, subsection 4, Code 2022, is amended 3 by adding the following new paragraph: 4 NEW PARAGRAPH . c. If an applicant is required to collect 5 sales or use tax and is not included in the definition of a 6 retailer maintaining a place of business in this state in 7 section 423.1, subsection 48, paragraph “a” , subparagraph (1), 8 the applicant shall be issued one sales or use tax permit by 9 the department regardless of the number of locations from which 10 sales are made. 11 Sec. 38. Section 423.36, subsections 7 and 8, Code 2022, are 12 amended to read as follows: 13 7. a. Sellers who are not regularly engaged in selling 14 at retail and do not have a permanent place of business, but 15 who are temporarily engaged in selling from trucks, portable 16 roadside stands, concessionaires at state, county, district, 17 or local fairs, carnivals, or the like, shall report and remit 18 the sales tax on a temporary seasonal basis, under rules 19 the director shall provide for the efficient collection of 20 the sales tax. This subsection applies to sellers who are 21 temporarily engaged in furnishing services. 22 b. Persons engaged in selling tangible personal property, 23 specified digital products, or furnishing services shall not 24 be required to obtain or retain a sales or use tax permit for a 25 place of business at which taxable sales of tangible personal 26 property, specified digital products, or taxable performance of 27 services will not occur. 28 8. The provisions of subsection 1 , dealing with the lawful 29 right of a retailer to transact business, as applicable, apply 30 to persons having receipts from furnishing services enumerated 31 in section 423.2 , except that a person holding a permit 32 pursuant to subsection 1 shall not be required to obtain any 33 separate sales or use tax permit for the purpose of engaging in 34 business involving the services. 35 -14- LSB 5099XC (21) 89 jm/jh 14/ 117
S.F. _____ Sec. 39. Section 423.40, subsections 1, 2, 3, and 5, Code 1 2022, are amended to read as follows: 2 1. In addition to the sales or use tax or additional sales 3 or use tax, the taxpayer shall pay a penalty as provided in 4 section 421.27 . The taxpayer shall also pay interest on the 5 sales or use tax or additional sales or use tax at the rate 6 in effect under section 421.7 for each month counting each 7 fraction of a month as an entire month, computed from the date 8 the semimonthly or monthly tax deposit form or return was 9 required to be filed. The penalty and interest shall be paid 10 to the department and disposed of in the same manner as other 11 receipts under this subchapter . Unpaid penalties and interest 12 may be enforced in the same manner as the taxes imposed by this 13 chapter . 14 2. a. Any person who knowingly sells tangible personal 15 property, specified digital products, tickets or admissions 16 to places of amusement and athletic events, or gas, water, 17 electricity, or communication service at retail, or engages in 18 the furnishing of services enumerated in section 423.2 , in this 19 state without procuring a permit to collect tax, as provided 20 in section 423.36 , or who violates section 423.24 and the 21 officers of any corporation who so act are guilty of a serious 22 misdemeanor. 23 b. A person who knowingly sells tangible personal property, 24 specified digital products, tickets or admissions to places of 25 amusement and athletic events, or gas, water, electricity, or 26 communication service at retail, or engages in the furnishing 27 of services enumerated in section 423.2 , in this state after 28 the person’s sales or use tax permit has been revoked and 29 before it has been restored as provided in section 423.36, 30 subsection 6 , and the officers of any corporation who so act 31 are guilty of an aggravated misdemeanor. 32 3. A person who willfully attempts in any manner to evade 33 any tax imposed by this chapter or the payment of the tax or 34 a person who makes or causes to be made a false or fraudulent 35 -15- LSB 5099XC (21) 89 jm/jh 15/ 117
S.F. _____ semimonthly or monthly tax deposit form or return with intent 1 to evade any tax imposed by subchapter II or III or the payment 2 of the tax is guilty of a class “D” felony. 3 5. A person required to pay sales or use tax, or to make, 4 sign, or file a tax deposit form or return or supplemental 5 return, who willfully makes a false or fraudulent tax deposit 6 form or return, or willfully fails to pay at least ninety 7 percent of the tax or willfully fails to make, sign, or file 8 the tax deposit form or return, at the time required by law, is 9 guilty of a fraudulent practice. 10 Sec. 40. Section 423.45, subsection 4, paragraph b, Code 11 2022, is amended to read as follows: 12 b. The sales tax liability for all sales of tangible 13 personal property and specified digital products and all sales 14 of services is upon the seller and the purchaser unless the 15 seller takes from the purchaser a valid exemption certificate 16 stating under penalty of perjury that the purchase is for a 17 nontaxable purpose and is not a retail sale as defined in 18 section 423.1 , or the seller is not obligated to collect tax 19 due, or unless the seller takes a fuel exemption certificate 20 pursuant to subsection 5 . If the tangible personal property, 21 specified digital products, or services are purchased tax free 22 pursuant to a valid exemption certificate and the tangible 23 personal property, specified digital products, or services are 24 used or disposed of by the purchaser in a nonexempt manner, the 25 purchaser is solely liable for the taxes and shall remit the 26 taxes directly to the department and sections 423.31 , 423.32 , 27 423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and 423.42 shall apply 28 to the purchaser. 29 Sec. 41. Section 423.45, subsection 5, paragraph c, Code 30 2022, is amended to read as follows: 31 c. The seller may accept a completed fuel exemption 32 certificate, as prepared by the purchaser, for three 33 years unless the purchaser files a new completed exemption 34 certificate. If the fuel is purchased tax free pursuant to a 35 -16- LSB 5099XC (21) 89 jm/jh 16/ 117
S.F. _____ fuel exemption certificate which is taken by the seller, and 1 the fuel is used or disposed of by the purchaser in a nonexempt 2 manner, the purchaser is solely liable for the taxes, and shall 3 remit the taxes directly to the department and sections 423.31 , 4 423.32 , 423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and 423.42 5 shall apply to the purchaser. 6 Sec. 42. Section 423.50, subsection 1, Code 2022, is amended 7 to read as follows: 8 1. Only one remittance of tax per return is required except 9 as provided in this subsection . Sellers that collect more 10 than thirty thousand dollars in sales and use taxes for this 11 state during the preceding calendar year shall be required to 12 make additional remittances as required under rules adopted by 13 the director. The filing of a return is not required with an 14 additional remittance. 15 Sec. 43. Section 423.57, Code 2022, is amended to read as 16 follows: 17 423.57 Statutes applicable. 18 The director shall administer this subchapter as it relates 19 to the taxes imposed in this chapter in the same manner and 20 subject to all the provisions of, and all of the powers, 21 duties, authority, and restrictions contained in sections 22 423.14 , 423.14A , 423.14B , 423.15 , 423.16 , 423.17 , 423.19 , 23 423.20 , 423.21 , 423.22 , 423.23 , 423.24 , 423.25 , 423.29 , 423.31 , 24 423.32 , 423.33 , 423.34 , 423.34A , 423.35 , 423.37 , 423.38 , 25 423.39 , 423.40 , 423.41 , and 423.42 , section 423.43, subsection 26 1 , and sections 423.45 , 423.46 , and 423.47 . 27 Sec. 44. Section 423.58, Code 2022, is amended to read as 28 follows: 29 423.58 Collection, permit, and tax return exemption for 30 certain out-of-state businesses. 31 Notwithstanding sections 423.14 , 423.14A , 423.14B , 423.29 , 32 423.31 , 423.32 , and 423.36 , a person meeting the requirements 33 of section 29C.24 is not required to obtain a sales or use tax 34 permit, collect and remit sales and use tax, or make and file 35 -17- LSB 5099XC (21) 89 jm/jh 17/ 117
S.F. _____ applicable sales or use tax returns, as provided in section 1 29C.24, subsection 3 , paragraph “a” , subparagraph (2). 2 Sec. 45. Section 423A.6, subsection 4, Code 2022, is amended 3 to read as follows: 4 4. Section 422.25, subsection 4 , sections 422.30 , 422.67 , 5 and 422.68 , section 422.69, subsection 1 , sections 422.70 , 6 422.71 , 422.72 , 422.74 , and 422.75 , section 423.14, subsection 7 1 , and sections 423.23 , 423.24 , 423.25 , 423.31 , 423.33 , 8 423.35 , 423.37 through 423.42 , and 423.47 , consistent with the 9 provisions of this chapter , apply with respect to the taxes 10 authorized under this chapter , in the same manner and with the 11 same effect as if the state and local hotel and motel taxes 12 were retail sales taxes within the meaning of those statutes. 13 Notwithstanding this subsection , the director shall provide 14 for quarterly monthly filing of returns and for other than 15 quarterly monthly filing of returns both as prescribed in 16 section 423.31 . The director may require all persons who are 17 engaged in the business of deriving any sales price subject 18 to tax under this chapter to register with the department. 19 All taxes collected under this chapter by a retailer, lodging 20 provider, lodging facilitator, lodging platform, or any other 21 person are deemed to be held in trust for the state of Iowa and 22 the local jurisdictions imposing the taxes. 23 Sec. 46. Section 423B.5, subsection 3, Code 2022, is amended 24 to read as follows: 25 3. A tax permit other than the state sales or use tax permit 26 required under section 423.36 shall not be required by local 27 authorities. 28 Sec. 47. Section 423B.6, subsection 2, paragraph c, Code 29 2022, is amended to read as follows: 30 c. Frequency of deposits and quarterly monthly reports of a 31 local sales and services tax with the department of revenue are 32 governed by the tax provisions in section 423.31 . Local tax 33 collections shall not be included in computation of the total 34 tax to determine frequency of filing under section 423.31 . 35 -18- LSB 5099XC (21) 89 jm/jh 18/ 117
S.F. _____ Sec. 48. Section 423C.4, Code 2022, is amended to read as 1 follows: 2 423C.4 Administration and enforcement. 3 All powers and requirements of the director of revenue 4 to administer the state sales tax law under chapter 423 are 5 applicable to the administration of the tax imposed under 6 section 423C.3 , including but not limited to section 422.25, 7 subsection 4 , sections 422.30 , 422.67 , and 422.68 , section 8 422.69, subsection 1 , sections 422.70 through 422.75 , section 9 423.14, subsection 1 , and sections 423.15 , 423.23 , 423.24 , 10 423.25 , 423.31 , 423.33 , 423.35 and 423.37 through 423.42 , 11 423.45 , 423.46 , and 423.47 . However, as an exception to the 12 powers specified in section 423.31 , the director shall only 13 require the filing of quarterly monthly reports. 14 Sec. 49. Section 423D.4, subsection 3, Code 2022, is amended 15 to read as follows: 16 3. Section 422.25, subsection 4 , sections 422.30 , 422.67 , 17 and 422.68 , section 422.69, subsection 1 , sections 422.70 , 18 422.71 , 422.72 , 422.74 , and 422.75 , section 423.14, subsection 19 1 , and sections 423.23 , 423.24 , 423.25 , 423.31 through 20 423.35 , 423.37 through 423.42 , and 423.47 , consistent with 21 the provisions of this chapter , apply with respect to the tax 22 authorized under this chapter , in the same manner and with the 23 same effect as if the excise taxes on equipment sales or use 24 were retail sales taxes within the meaning of those statutes. 25 Notwithstanding this subsection , the director shall provide 26 for quarterly monthly filing of returns and for other than 27 quarterly monthly filing of returns both as prescribed in 28 section 423.31 . All taxes collected under this chapter by a 29 retailer or any user are deemed to be held in trust for the 30 state of Iowa. 31 Sec. 50. Section 423G.5, subsection 3, Code 2022, is amended 32 to read as follows: 33 3. Section 422.25, subsection 4 , sections 422.30 , 422.67 , 34 and 422.68 , section 422.69, subsection 1 , sections 422.70 , 35 -19- LSB 5099XC (21) 89 jm/jh 19/ 117
S.F. _____ 422.71 , 422.72 , 422.74 , and 422.75 , section 423.14, subsection 1 1 , and sections 423.23 , 423.24 , 423.25 , 423.31 through 2 423.35 , 423.37 through 423.42 , and 423.47 , consistent with the 3 provisions of this chapter , shall apply with respect to the tax 4 authorized under this chapter , in the same manner and with the 5 same effect as if the excise taxes on the sale or furnishing of 6 a water service were retail sales taxes within the meaning of 7 those statutes. Notwithstanding this subsection , the director 8 shall provide for quarterly monthly filing of returns and 9 for other than quarterly monthly filing of returns both as 10 prescribed in section 423.31 . All taxes collected under this 11 chapter by a retailer or any user are deemed to be held in trust 12 for the state of Iowa. 13 Sec. 51. Section 728.1, subsection 6, Code 2022, is amended 14 to read as follows: 15 6. “Place of business” means the premises of a business 16 required to obtain a sales or use tax permit pursuant to 17 chapter 423 , the premises of a nonprofit or not-for-profit 18 organization, and the premises of an establishment which is 19 open to the public at large or where entrance is limited by a 20 cover charge or membership requirement. 21 Sec. 52. Section 728.5, subsection 1, unnumbered paragraph 22 1, Code 2022, is amended to read as follows: 23 An owner, manager, or person who exercises direct control 24 over a place of business required to obtain a sales or use tax 25 permit shall be guilty of a serious misdemeanor under any of 26 the following circumstances: 27 Sec. 53. REPEAL. Section 423.32, Code 2022, is repealed. 28 DIVISION IV 29 DISTRIBUTIONS OF REVENUE TO LOCAL GOVERNMENTS AND SCHOOL 30 DISTRICTS 31 Sec. 54. Section 423B.7, subsection 2, paragraph a, Code 32 2022, is amended to read as follows: 33 a. The director of revenue by August 15 of each fiscal 34 year the last day of each month shall send transfer to each 35 -20- LSB 5099XC (21) 89 jm/jh 20/ 117
S.F. _____ city or county where the local option tax is imposed , an 1 estimate of the amount of tax moneys remitted to the department 2 attributable to each city or county will receive for the year 3 and for each month of the year from the preceding month . At the 4 end of each month, the director may revise the estimates for 5 the year and remaining months. 6 Sec. 55. Section 423B.7, subsection 2, paragraphs b and c, 7 Code 2022, are amended by striking the paragraphs. 8 Sec. 56. Section 423F.2, subsection 4, paragraph a, Code 9 2022, is amended to read as follows: 10 a. The director of revenue by August 15 of each fiscal year 11 the last day of each month shall send transfer to each school 12 district an estimate of the amount of tax moneys remitted 13 to the department attributable to each school district will 14 receive for the year and for each month of the year from the 15 preceding month . At the end of each month, the director may 16 revise the estimates for the year and remaining months. 17 Sec. 57. Section 423F.2, subsection 4, paragraphs b and c, 18 Code 2022, are amended by striking the paragraphs. 19 Sec. 58. TRANSITION PROVISION FOR LOCAL OPTION SALES TAX 20 AND SECURING AN ADVANCED VISION FOR EDUCATION —— TRANSFER 21 AMOUNTS. Notwithstanding any other provision of law to the 22 contrary, the department of revenue shall estimate monthly 23 local option sales tax and securing an advanced vision for 24 education transfer amounts through the end of the 2022 calendar 25 year. The department of revenue shall transfer estimated 26 amounts to each local government or school district for the 27 months of July, August, and September 2022. Beginning with the 28 October 2022 transfer, the department shall not use estimated 29 amounts and shall transfer the amount of tax attributable to 30 each local government or school district for the tax remitted 31 in September 2022. Any adjustment amount that is necessary to 32 the July, August, or September 2022 estimated transfer amount 33 to reflect the accurate attributable amount shall be made by 34 the department of revenue or the local government or school 35 -21- LSB 5099XC (21) 89 jm/jh 21/ 117
S.F. _____ district by the close of business on December 30, 2022. 1 DIVISION V 2 SALE OF CERTAIN QUALIFIED STOCK —— NET CAPITAL GAIN EXCLUSION 3 Sec. 59. Section 422.7, Code 2022, is amended by adding the 4 following new subsection: 5 NEW SUBSECTION . 63. a. Subtract the following percentage 6 of the net capital gain from the sale or exchange of capital 7 stock of a qualified corporation for which an election is made 8 by an employee-owner: 9 (1) For the tax year beginning in the 2023 calendar year, 10 thirty-three percent. 11 (2) For the tax year beginning in the 2024 calendar year, 12 sixty-six percent. 13 (3) For tax years beginning on or after January 1, 2025, one 14 hundred percent. 15 b. (1) An employee-owner is entitled to make one 16 irrevocable lifetime election to exclude the net capital gain 17 from the sale or exchange of capital stock of one qualified 18 corporation which capital stock was acquired by the employee- 19 owner while employed and on account of employment by such 20 qualified corporation. 21 (2) The election shall apply to all subsequent sales 22 or exchanges of qualifying capital stock of the elected 23 corporation within fifteen years of the date of the election, 24 provided that the subsequent sales or exchanges were of capital 25 stock in the same qualified corporation and were acquired by 26 the employee-owner while employed and on account of employment 27 by such qualified corporation. 28 (3) The election shall apply to qualifying capital stock 29 that has been transferred by inter vivos gift from the 30 employee-owner to the employee-owner’s spouse or to a trust 31 for the benefit of the employee-owner’s spouse following the 32 transfer. This subparagraph (3) shall apply to a spouse 33 only if the spouse was married to the employee-owner on the 34 date of the sale or exchange or the date of death of the 35 -22- LSB 5099XC (21) 89 jm/jh 22/ 117
S.F. _____ employee-owner. 1 (4) If the employee-owner dies after having sold or 2 exchanged qualifying capital stock without having made an 3 election under this subsection, the surviving spouse or, if 4 there is no surviving spouse, the personal representative of 5 the employee-owner’s estate, may make the election that would 6 have qualified under this subsection. 7 (5) The election shall be made in the manner and form 8 prescribed by the department and shall be included with the 9 taxpayer’s state income tax return for the taxable year in 10 which the election is made. 11 c. For purposes of this subsection: 12 (1) “Capital stock” means common or preferred stock, either 13 voting or nonvoting. “Capital stock” does not include stock 14 rights, stock warrants, stock options, or debt securities. 15 (2) “Employee-owner” means an individual who owns capital 16 stock in a qualified corporation for at least ten years, which 17 capital stock was acquired by the individual while employed and 18 on account of employment by such corporation for at least ten 19 cumulative years. 20 (3) “Personal representative” means the same as defined in 21 section 633.3, or if there is no such personal representative 22 appointed, then the person legally authorized to perform 23 substantially the same functions. 24 (4) (a) “Qualified corporation” means, with respect to an 25 employee-owner, a corporation which, at the time of the first 26 sale or exchange for which an election is made by the employee- 27 owner under this subsection, meets all of the following 28 conditions: 29 (i) The corporation employed individuals in this state for 30 at least ten years. 31 (ii) The corporation has had at least five shareholders for 32 the ten years prior to the first sale or exchange under this 33 subsection. 34 (iii) The corporation has had at least two shareholders or 35 -23- LSB 5099XC (21) 89 jm/jh 23/ 117
S.F. _____ groups of shareholders who are not related for the ten years 1 prior to the first sale or exchange under this subsection. 2 Two persons are considered related when, under section 318 of 3 the Internal Revenue Code, one is a person who owns, directly 4 or indirectly, capital stock that if directly owned would be 5 attributed to the other person, or is the brother, sister, 6 aunt, uncle, cousin, niece, or nephew of the other person who 7 owns capital stock either directly or indirectly. 8 (b) “Qualified corporation” includes any member of an Iowa 9 affiliated group if the Iowa affiliated group includes a member 10 that has employed individuals in this state for at least ten 11 years. For purposes of this subparagraph division, “Iowa 12 affiliated group” means an affiliated group that has made a 13 valid election to file an Iowa consolidated income tax return 14 under section 422.37 in the year in which the deduction under 15 this subsection is claimed. “Member” includes any entity 16 included in the consolidated return under section 422.37, 17 subsection 2, for the tax year in which the deduction is 18 claimed. 19 (c) “Qualified corporation” also includes any corporation 20 that was a party to a reorganization that was entirely or 21 substantially tax free if such reorganization occurred during 22 or after the employment of the employee-owner. 23 Sec. 60. EFFECTIVE DATE. This division of this Act takes 24 effect January 1, 2023. 25 Sec. 61. APPLICABILITY. This division of this Act applies 26 to tax years beginning on or after January 1, 2023. 27 DIVISION VI 28 RETIRED FARMER LEASE INCOME EXCLUSION 29 Sec. 62. Section 422.7, Code 2022, is amended by adding the 30 following new subsection: 31 NEW SUBSECTION . 21A. a. Subtract, to the extent included, 32 net income received by an eligible individual pursuant to a 33 farm tenancy agreement covering real property held by the 34 eligible individual for ten or more years, if the eligible 35 -24- LSB 5099XC (21) 89 jm/jh 24/ 117
S.F. _____ individual materially participated in a farming business for 1 ten or more years. 2 b. An individual who elects to exclude income received 3 pursuant to a farm tenancy agreement under this subsection 4 shall not claim any of the following in the tax year in which 5 the election is made or in any succeeding year: 6 (1) The capital gain exclusion under section 422.7, 7 subsection 21. 8 (2) The beginning farmer tax credit under section 422.11E. 9 c. Married individuals who file separate state income tax 10 returns shall allocate their combined annual exclusion limit 11 to each spouse in the proportion that each spouse’s respective 12 net income from a farm tenancy agreement bears to the total net 13 income from a farm tenancy agreement. 14 d. The department shall establish criteria, by rule, 15 relating to whether and how a surviving spouse may claim the 16 income exclusion for which a deceased eligible individual would 17 have been eligible under this subsection. 18 e. Net income from a farm tenancy agreement earned, 19 received, or reported by an entity taxed as a partnership 20 for federal tax purposes, an S corporation, or a trust or 21 estate is not eligible for the election and deduction in this 22 subsection, even if such net income ultimately passes through 23 to an eligible individual. 24 f. For purposes of this subsection: 25 (1) “Eligible individual” means an individual who is 26 disabled or who is fifty-five years of age or older at the time 27 the election is made, who no longer materially participates in 28 a farming business at the time the election is made, and who, 29 as an owner-lessor, is party to a farm tenancy agreement. 30 (2) “Farm tenancy agreement” means a written agreement 31 outlining the rights and obligations of an owner-lessor and a 32 tenant-lessee where the tenant-lessee has a farm tenancy as 33 defined in section 562.1A. A “farm tenancy agreement” includes 34 cash leases, crop share leases, or livestock share leases. 35 -25- LSB 5099XC (21) 89 jm/jh 25/ 117
S.F. _____ (3) “Farming business” means the production, care, growing, 1 harvesting, preservation, handling, or storage of crops 2 or forest or fruit trees; the production, care, feeding, 3 management, and housing of livestock; or horticulture, all 4 intended for profit. 5 (4) “Livestock” means the same as defined in section 717.1. 6 (5) “Materially participated” means the same as “material 7 participation” in section 469(h) of the Internal Revenue Code. 8 Sec. 63. EFFECTIVE DATE. This division of this Act takes 9 effect January 1, 2023. 10 Sec. 64. APPLICABILITY. This division of this Act applies 11 to tax years beginning on or after January 1, 2023. 12 DIVISION VII 13 RETIRED FARMER CAPITAL GAIN EXCLUSION 14 Sec. 65. Section 422.7, subsection 21, Code 2022, is amended 15 by striking the subsection and inserting in lieu thereof the 16 following: 17 21. a. For purposes of this subsection: 18 (1) “Farming business” means the production, care, growing, 19 harvesting, preservation, handling, or storage of crops 20 or forest or fruit trees; the production, care, feeding, 21 management, and housing of livestock; or horticulture, all for 22 intended profit. 23 (2) “Held” shall be determined with reference to the holding 24 period provisions of section 1223 of the Internal Revenue Code 25 and the federal regulations pursuant thereto. 26 (3) “Livestock” means the same as defined in section 717.1. 27 (4) “Materially participated” means the same as “material 28 participation” in section 469(h) of the Internal Revenue Code. 29 (5) (a) “Real property used in a farming business” means 30 all tracts of land and the improvements and structures located 31 on such tracts which are in good faith used primarily for 32 a farming business. Buildings which are primarily used or 33 intended for human habitation are deemed to be used in a 34 farming business when the building is located on or adjacent 35 -26- LSB 5099XC (21) 89 jm/jh 26/ 117
S.F. _____ to the parcel used in the farming business. Land and the 1 nonresidential improvements and structures located on such land 2 that shall be considered to be used primarily in a farming 3 business include but are not limited to land, improvements 4 or structures used for the storage or maintenance of farm 5 machinery or equipment, for the drying, storage, handling, 6 or preservation of agricultural crops, or for the storage of 7 farm inputs, feed, or manure. Real property used in a farming 8 business shall also include woodland, wasteland, pastureland, 9 and idled land used for the conservation of natural resources 10 including soil and water. 11 (b) Real property classified as agricultural property for 12 Iowa property tax purposes, except real property described 13 in section 441.21, subsection 12, paragraph “a” or “b” , 14 shall be presumed to be real property used in a farming 15 business. This presumption is rebuttable by the department by 16 a preponderance of evidence that the real property did not meet 17 the requirements of subparagraph division (a). 18 (6) “Relative” means a person that satisfies one or more of 19 the following conditions: 20 (a) The individual is related to the taxpayer by 21 consanguinity or affinity within the second degree as 22 determined by common law. 23 (b) The individual is a lineal descendent of the taxpayer. 24 For purposes of this subparagraph division, “lineal descendent” 25 means children of the taxpayer, including legally adopted 26 children and biological children, stepchildren, grandchildren, 27 great-grandchildren, and any other lineal descendent of the 28 taxpayer. 29 (c) An entity in which an individual who satisfies the 30 conditions of either subparagraph division (a) or (b) has a 31 legal or equitable interest as an owner, member, partner, or 32 beneficiary. 33 (7) “Retired farmer” means an individual who is disabled 34 or who is fifty-five years of age or older and who no longer 35 -27- LSB 5099XC (21) 89 jm/jh 27/ 117
S.F. _____ materially participates in a farming business when an exclusion 1 and deduction is claimed under this subsection. 2 b. Subtract the net capital gain from the sale of real 3 property used in a farming business if one of the following 4 conditions are satisfied: 5 (1) The taxpayer has materially participated in a farming 6 business for a minimum of ten years and has held the real 7 property used in a farming business for a minimum of ten years. 8 If the taxpayer is a retired farmer, the taxpayer is considered 9 to meet the material participation requirement if the taxpayer 10 materially participated in a farming business for ten years or 11 more in the aggregate, prior to making an election under this 12 subsection. 13 (2) The taxpayer has held the real property used in a 14 farming business which is sold to a relative of the taxpayer. 15 c. For a taxpayer who is a retired farmer, subtract the 16 net capital gain from the sale of cattle or horses held by 17 the taxpayer for breeding, draft, dairy, or sporting purposes 18 for a period of twenty-four months or more from the date of 19 acquisition; but only if the taxpayer materially participated 20 in the farming business for five of the eight years preceding 21 the farmer’s retirement or disability and who has sold all or 22 substantially all of the taxpayer’s interest in the farming 23 business by the time the election under this paragraph is made. 24 d. For a taxpayer who is a retired farmer, subtract the net 25 capital gain from the sale of breeding livestock, other than 26 cattle and horses, if the livestock is held by the taxpayer for 27 a period of twelve months or more from the date of acquisition; 28 but only if the taxpayer materially participated in the farming 29 business for five of the eight years preceding the farmer’s 30 retirement or disability and who has sold all or substantially 31 all of the taxpayer’s interest in the farming business by the 32 time the election under this paragraph is made. 33 e. A taxpayer who is a retired farmer may make, subject to 34 the limitations described in paragraphs “f” and “g” , a single, 35 -28- LSB 5099XC (21) 89 jm/jh 28/ 117
S.F. _____ lifetime election to exclude all qualifying capital gains under 1 paragraphs “b” , “c” , and “d” . 2 f. A taxpayer who is a retired farmer who elects to exclude 3 capital gains under paragraph “b” , “c” , or “d” shall not claim 4 the beginning farmer tax credit under section 422.11E or the 5 exclusion for net income received pursuant to a farm tenancy 6 agreement in section 422.7, subsection 21A, in the tax year in 7 which this election is made or in any subsequent year. 8 g. A taxpayer who is a retired farmer who claims the 9 beginning farmer tax credit under section 422.11E shall not, 10 in the same year, make an election under this subsection. A 11 taxpayer who is a retired farmer and who elects to exclude 12 the net income received from a farm tenancy agreement under 13 section 422.7, subsection 21A, shall not, in the same tax year 14 or in any subsequent tax year, make the election under this 15 subsection. 16 h. Married individuals who file separate state income tax 17 returns shall allocate their combined annual net capital gain 18 exclusion under paragraphs “b” , “c” , and “d” to each spouse in 19 the proportion that each spouse’s respective net capital gain 20 bears to the total net capital gain. 21 i. The department shall establish criteria, by rule, 22 relating to whether and how a surviving spouse may claim the 23 income exclusion for which a deceased retired farmer would have 24 been eligible under this subsection. 25 Sec. 66. REPEAL. 2018 Iowa Acts, chapter 1161, section 113, 26 is repealed. 27 Sec. 67. REPEAL. 2019 Iowa Acts, chapter 162, section 1, 28 is repealed. 29 Sec. 68. EFFECTIVE DATE. This division of this Act takes 30 effect January 1, 2023. 31 Sec. 69. APPLICABILITY. 32 1. This division of this Act applies to tax years beginning 33 on or after January 1, 2023. 34 2. This division of this Act applies to sales consummated on 35 -29- LSB 5099XC (21) 89 jm/jh 29/ 117
S.F. _____ or after the effective date of this division of this Act, and 1 sales consummated prior to the effective date of this division 2 of this Act shall be governed by the law as it existed prior to 3 the effective date of this division of this Act. 4 DIVISION VIII 5 INDIVIDUAL INCOME TAX RATES —— PHASE IN 6 Sec. 70. Section 422.5, subsection 3, paragraph b, Code 7 2022, is amended to read as follows: 8 b. (1) In lieu of the computation in subsection 1 or 9 2 , or in paragraph “a” of this subsection , if the married 10 persons’ , filing jointly or filing separately on a combined 11 return , head of household’s, or surviving spouse’s net income 12 exceeds thirteen thousand five hundred dollars, the regular 13 tax imposed under this subchapter shall be the lesser of the 14 maximum alternate state individual income tax rate specified in 15 subparagraph (2) times the portion of the net income in excess 16 of thirteen thousand five hundred dollars or the regular tax 17 liability computed without regard to this sentence. Taxpayers 18 electing to file separately shall compute the alternate tax 19 described in this paragraph using the total net income of the 20 husband and wife spouses . The alternate tax described in this 21 paragraph does not apply if one spouse elects to carry back or 22 carry forward the loss as provided in section 422.9, subsection 23 3 . 24 (2) (a) (i) For the tax year beginning on or after January 25 1, 2023, but before January 1, 2024, the alternate tax rate is 26 6.00 percent. 27 (ii) For the tax year beginning on or after January 1, 2024, 28 but before January 1, 2025, the alternate tax rate is 5.70 29 percent. 30 (iii) For the tax year beginning on or after January 1, 31 2025, but before January 1, 2026, the alternate tax rate is 32 5.20 percent. 33 (iv) For the tax year beginning on or after January 1, 2026, 34 but before January 1, 2027, the alternate tax rate is 4.35 35 -30- LSB 5099XC (21) 89 jm/jh 30/ 117
S.F. _____ percent. 1 (b) For tax years beginning on or after January 1, 2027, 2 the alternate tax rate shall be one-half of one percent higher 3 than the maximum individual income tax rate unless the maximum 4 individual rate is zero, and in such a case the alternate tax 5 rate shall be zero. 6 Sec. 71. Section 422.5, subsection 3B, paragraph b, Code 7 2022, is amended to read as follows: 8 b. (1) In lieu of the computation in subsection 1, 2, or 3 , 9 if the married persons’ , filing jointly or filing separately on 10 a combined return , head of household’s, or surviving spouse’s 11 net income exceeds thirty-two thousand dollars, the regular 12 tax imposed under this subchapter shall be the lesser of the 13 maximum alternate state individual income tax rate specified in 14 subparagraph (2) times the portion of the net income in excess 15 of thirty-two thousand dollars or the regular tax liability 16 computed without regard to this sentence. Taxpayers electing 17 to file separately shall compute the alternate tax described in 18 this paragraph using the total net income of the husband and 19 wife spouses . The alternate tax described in this paragraph 20 does not apply if one spouse elects to carry back or carry 21 forward the loss as provided in section 422.9, subsection 3 . 22 (2) (a) (i) For the tax year beginning on or after January 23 1, 2023, but before January 1, 2024, the alternate tax rate is 24 6.00 percent. 25 (ii) For the tax year beginning on or after January 1, 2024, 26 but before January 1, 2025, the alternate tax rate is 5.70 27 percent. 28 (iii) For the tax year beginning on or after January 1, 29 2025, but before January 1, 2026, the alternate tax rate is 30 5.20 percent. 31 (iv) For the tax year beginning on or after January 1, 2026, 32 but before January 1, 2027, the alternate tax rate is 4.35 33 percent. 34 (b) For tax years beginning on or after January 1, 2027, 35 -31- LSB 5099XC (21) 89 jm/jh 31/ 117
S.F. _____ the alternate tax rate shall be one-half of one percent higher 1 than the maximum individual income tax rate unless the maximum 2 individual rate is zero, and in such a case the alternate tax 3 rate shall be zero. 4 Sec. 72. Section 422.5, subsection 6, Code 2022, is amended 5 to read as follows: 6 6. a. Upon determination of the latest cumulative inflation 7 factor, the director shall multiply each dollar amount set 8 forth in section 422.5A by this cumulative inflation factor, 9 shall round off the resulting product to the nearest one 10 dollar, and shall incorporate the result into the income tax 11 forms and instructions for each tax year. 12 b. This subsection is repealed on January 1, 2026. 13 Sec. 73. Section 422.5A, Code 2022, is amended by striking 14 the section and inserting in lieu thereof the following: 15 422.5A Tax rates. 16 1. The tax imposed in section 422.5 shall be calculated 17 using the following rates in the following tax years in the 18 case of married persons filing jointly: 19 a. For the tax year beginning on or after January 1, 2023, 20 but before January 1, 2024: 21 (1) On taxable income from 0 through $12,000, the rate of 22 4.40 percent. 23 (2) On taxable income exceeding $12,000 but not exceeding 24 $60,000, the rate of 4.82 percent. 25 (3) On taxable income exceeding $60,000 but not exceeding 26 $150,000, the rate of 5.70 percent. 27 (4) On taxable income exceeding $150,000, the rate of 6.00 28 percent. 29 b. For the tax year beginning on or after January 1, 2024, 30 but before January 1, 2025: 31 (1) On taxable income from 0 through $12,000, the rate of 32 4.40 percent. 33 (2) On taxable income exceeding $12,000 but not exceeding 34 $60,000, the rate of 4.82 percent. 35 -32- LSB 5099XC (21) 89 jm/jh 32/ 117
S.F. _____ (3) On taxable income exceeding $60,000, the rate of 5.70 1 percent. 2 c. For the tax year beginning on or after January 1, 2025, 3 but before January 1, 2026: 4 (1) On taxable income from 0 through $12,000, the rate of 5 4.40 percent. 6 (2) On taxable income exceeding $12,000, the rate of 4.82 7 percent. 8 2. The tax imposed in section 422.5 shall be calculated 9 using the following rates in the following tax years in the 10 case of any other taxpayer other than married persons filing 11 jointly: 12 a. For the tax year beginning on or after January 1, 2023, 13 but before January 1, 2024: 14 (1) On taxable income from 0 through $6,000, the rate of 15 4.40 percent. 16 (2) On taxable income exceeding $6,000 but not exceeding 17 $30,000, the rate of 4.82 percent. 18 (3) On taxable income exceeding $30,000 but not exceeding 19 $75,000, the rate of 5.70 percent. 20 (4) On taxable income exceeding $75,000, the rate of 6.00 21 percent. 22 b. For the tax year beginning on or after January 1, 2024, 23 but before January 1, 2025: 24 (1) On taxable income from 0 through $6,000, the rate of 25 4.40 percent. 26 (2) On taxable income exceeding $6,000 but not exceeding 27 $30,000, the rate of 4.82 percent. 28 (3) On taxable income exceeding $30,000, the rate of 5.70 29 percent. 30 c. For the tax year beginning on or after January 1, 2025, 31 but before January 1, 2026: 32 (1) On taxable income from 0 through $6,000, the rate of 33 4.40 percent. 34 (2) On taxable income exceeding $6,000, the rate of 4.82 35 -33- LSB 5099XC (21) 89 jm/jh 33/ 117
S.F. _____ percent. 1 Sec. 74. REPEAL. 2018 Iowa Acts, chapter 1161, section 107, 2 is repealed. 3 Sec. 75. EFFECTIVE DATE. This division of this Act takes 4 effect January 1, 2023. 5 Sec. 76. APPLICABILITY. This division of this Act applies 6 to tax years beginning on or after January 1, 2023. 7 DIVISION IX 8 INDIVIDUAL INCOME TAX —— FLAT RATE —— CONTINGENT ELIMINATION 9 Sec. 77. Section 421.27, subsection 9, paragraph a, 10 subparagraph (3), Code 2022, is amended to read as follows: 11 (3) In the case of all other entities, including 12 corporations described in section 422.36, subsection 5 , and all 13 other entities required to file an information return under 14 section 422.15, subsection 2 , the entity’s Iowa net income 15 after the application of the Iowa business activity ratio, 16 if applicable, multiplied by the top income tax rate imposed 17 under section 422.5A 422.5 for the tax year, less any Iowa tax 18 credits available to the entity. 19 Sec. 78. Section 422.5, subsection 1, paragraph a, Code 20 2022, is amended to read as follows: 21 a. (1) A tax is imposed upon every resident and nonresident 22 of the state which tax shall be levied, collected, and paid 23 annually upon and with respect to the entire taxable income 24 as defined in this subchapter at rates as provided in section 25 422.5A a rate of three and eighty-five hundredths percent for 26 the tax year beginning January 1, 2026, but before January 1, 27 2027, and at a rate of three and six-tenths percent for tax 28 years beginning on or after January 1, 2027 . 29 (2) (a) Notwithstanding the rate in subparagraph (1), the 30 department of revenue shall determine the individual income 31 tax rate as provided in this subparagraph. The tax rate in 32 subparagraph (1) shall remain in effect until the rate is 33 adjusted pursuant to this subparagraph. A rate adjusted in 34 this subparagraph shall remain in effect until the rate is 35 -34- LSB 5099XC (21) 89 jm/jh 34/ 117
S.F. _____ adjusted again pursuant to this subparagraph. 1 (b) By November 1, 2028, and by November 1 each year 2 thereafter, until the individual income tax rate equals zero, 3 the department of management shall determine the amount of 4 moneys available in the individual income tax elimination fund 5 in section 8.57E, and the net individual income tax receipts 6 at the close of the preceding fiscal year. The department of 7 revenue shall adjust and apply a new rate based upon the amount 8 of moneys available in the individual income tax elimination 9 fund as provided in subparagraph division (c). 10 (c) (i) The rate shall be adjusted in such a way that the 11 rate would have generated an amount equal to the net receipts 12 generated from the rate in the preceding fiscal year less the 13 amount available in the individual income tax elimination 14 fund in section 8.57E that is used in the calculation in this 15 subparagraph division. 16 (ii) The rate shall not be adjusted unless the rate is able 17 to be adjusted at least one-tenth of one percent. The rate, 18 when adjusted, shall be rounded down to the nearest one-tenth 19 of one percent. 20 (iii) If a determination is made by the department of 21 revenue that the rate is subject to adjustment, the department 22 of revenue shall adjust the rate specified in subparagraph 23 (1), or if the rate has been previously adjusted, adjust the 24 previously adjusted rate. 25 (d) If an adjustment is made pursuant to subparagraph 26 division (c), the amount of moneys in the individual income 27 tax elimination fund used in the calculation in subparagraph 28 division (c) shall be transferred to the general fund of the 29 state in the fiscal year the rate is adjusted. 30 (e) If a rate is adjusted pursuant to subparagraph division 31 (c), the director of revenue shall cause an advisory notice 32 containing the new individual income tax rate to be published 33 in the Iowa administrative bulletin and on the internet site 34 of the department of revenue. The calculation and publication 35 -35- LSB 5099XC (21) 89 jm/jh 35/ 117
S.F. _____ of the adjusted tax rate by the director of revenue is exempt 1 from chapter 17A, and shall be submitted for publication by the 2 first December 31 following the determination date to adjust 3 the rate. 4 Sec. 79. Section 422.16B, subsection 2, paragraph a, Code 5 2022, is amended to read as follows: 6 a. (1) A pass-through entity shall file a composite return 7 on behalf of all nonresident members and shall report and pay 8 the income or franchise tax imposed under this chapter at the 9 maximum state income or franchise tax rate applicable to the 10 member under section 422.5A 422.5 , 422.33 , or 422.63 on the 11 nonresident members’ distributive shares of the income from the 12 pass-through entity. 13 (2) The tax rate applicable to a tiered pass-through entity 14 shall be the maximum state income tax rate under section 422.5A 15 422.5 . 16 Sec. 80. Section 422.25A, subsection 5, paragraph c, 17 subparagraphs (3), (4), and (5), Code 2022, are amended to read 18 as follows: 19 (3) Determine the total distributive share of all final 20 federal partnership adjustments and positive reallocation 21 adjustments as modified by this title that are reported to 22 nonresident individual partners and nonresident fiduciary 23 partners and allocate and apportion such adjustments as 24 provided in section 422.33 at the partnership or tiered 25 partner level, and multiply the resulting amount by the maximum 26 individual income tax rate pursuant to section 422.5A 422.5 for 27 the reviewed year. 28 (4) For the total distributive share of all final federal 29 partnership adjustments and positive reallocation adjustments 30 as modified by this title that are reported to tiered partners: 31 (a) Determine the amount of such adjustments which are of a 32 type that would be subject to sourcing to Iowa under section 33 422.8, subsection 2 , paragraph “a” , as a nonresident, and then 34 determine the portion of this amount that would be sourced to 35 -36- LSB 5099XC (21) 89 jm/jh 36/ 117
S.F. _____ Iowa under those provisions as if the tiered partner were a 1 nonresident. 2 (b) Determine the amount of such adjustments which are of 3 a type that would not be subject to sourcing to Iowa under 4 section 422.8, subsection 2 , paragraph “a” , as a nonresident. 5 (c) Determine the portion of the amount in subparagraph 6 division (b) that can be established, as prescribed by the 7 department by rule, to be properly allocable to indirect 8 partners that are nonresident partners or other partners not 9 subject to tax on the adjustments. 10 (d) Multiply the total of the amounts determined in 11 subparagraph divisions (a) and (b), reduced by any amount 12 determined in subparagraph division (c), by the highest 13 individual income tax rate pursuant to section 422.5A 422.5 for 14 the reviewed year. 15 (5) For the total distributive share of all final federal 16 partnership adjustments and positive reallocation adjustments 17 as modified by this title that are reported to resident 18 individual partners and resident fiduciary partners, multiply 19 that amount by the highest individual income tax rate pursuant 20 to section 422.5A 422.5 for the reviewed year. 21 Sec. 81. EFFECTIVE DATE. This division of this Act takes 22 effect January 1, 2026. 23 Sec. 82. APPLICABILITY. This division of this Act applies 24 to tax years beginning on or after January 1, 2026. 25 DIVISION X 26 RETIREMENT INCOME 27 Sec. 83. Section 422.5, subsection 3, paragraph a, Code 28 2022, is amended to read as follows: 29 a. The tax shall not be imposed on a resident or nonresident 30 whose net income, as defined in section 422.7 , is thirteen 31 thousand five hundred dollars or less in the case of married 32 persons filing jointly or filing separately on a combined 33 return, heads of household, and surviving spouses or nine 34 thousand dollars or less in the case of all other persons; but 35 -37- LSB 5099XC (21) 89 jm/jh 37/ 117
S.F. _____ in the event that the payment of tax under this subchapter 1 would reduce the net income to less than thirteen thousand five 2 hundred dollars or nine thousand dollars as applicable, then 3 the tax shall be reduced to that amount which would result 4 in allowing the taxpayer to retain a net income of thirteen 5 thousand five hundred dollars or nine thousand dollars as 6 applicable. The preceding sentence does not apply to estates 7 or trusts. For the purpose of this subsection , the entire net 8 income, including any part of the net income not allocated 9 to Iowa, shall be taken into account. For purposes of this 10 subsection , net income includes all amounts of pensions or 11 other retirement income, except for military retirement pay 12 excluded under section 422.7, subsection 31A , paragraph “a” , or 13 section 422.7, subsection 31B , paragraph “a” , received from any 14 source which is not taxable under this subchapter as a result 15 of the government pension exclusions in section 422.7 , or any 16 other state law. If the combined net income of a husband and 17 wife exceeds thirteen thousand five hundred dollars, neither 18 of them shall receive the benefit of this subsection , and it 19 is immaterial whether they file a joint return or separate 20 returns. However, if a husband and wife file separate returns 21 and have a combined net income of thirteen thousand five 22 hundred dollars or less, neither spouse shall receive the 23 benefit of this paragraph, if one spouse has a net operating 24 loss and elects to carry back or carry forward the loss as 25 provided in section 422.9, subsection 3 . A person who is 26 claimed as a dependent by another person as defined in section 27 422.12 shall not receive the benefit of this subsection if 28 the person claiming the dependent has net income exceeding 29 thirteen thousand five hundred dollars or nine thousand dollars 30 as applicable or the person claiming the dependent and the 31 person’s spouse have combined net income exceeding thirteen 32 thousand five hundred dollars or nine thousand dollars as 33 applicable. 34 Sec. 84. Section 422.5, subsection 3B, paragraph a, Code 35 -38- LSB 5099XC (21) 89 jm/jh 38/ 117
S.F. _____ 2022, is amended to read as follows: 1 a. The tax shall not be imposed on a resident or nonresident 2 who is at least sixty-five years old on December 31 of 3 the tax year and whose net income, as defined in section 4 422.7 , is thirty-two thousand dollars or less in the case 5 of married persons filing jointly or filing separately on a 6 combined return, heads of household, and surviving spouses or 7 twenty-four thousand dollars or less in the case of all other 8 persons; but in the event that the payment of tax under this 9 subchapter would reduce the net income to less than thirty-two 10 thousand dollars or twenty-four thousand dollars as applicable, 11 then the tax shall be reduced to that amount which would result 12 in allowing the taxpayer to retain a net income of thirty-two 13 thousand dollars or twenty-four thousand dollars as applicable. 14 The preceding sentence does not apply to estates or trusts. 15 For the purpose of this subsection , the entire net income, 16 including any part of the net income not allocated to Iowa, 17 shall be taken into account. For purposes of this subsection , 18 net income includes all amounts of pensions or other retirement 19 income, except for military retirement pay excluded under 20 section 422.7, subsection 31A , paragraph “a” , or section 422.7, 21 subsection 31B , paragraph “a” , received from any source which is 22 not taxable under this subchapter as a result of the government 23 pension exclusions in section 422.7 , or any other state law. 24 If the combined net income of a husband and wife exceeds 25 thirty-two thousand dollars, neither of them shall receive the 26 benefit of this subsection , and it is immaterial whether they 27 file a joint return or separate returns. However, if a husband 28 and wife file separate returns and have a combined net income 29 of thirty-two thousand dollars or less, neither spouse shall 30 receive the benefit of this paragraph, if one spouse has a net 31 operating loss and elects to carry back or carry forward the 32 loss as provided in section 422.9, subsection 3 . A person 33 who is claimed as a dependent by another person as defined in 34 section 422.12 shall not receive the benefit of this subsection 35 -39- LSB 5099XC (21) 89 jm/jh 39/ 117
S.F. _____ if the person claiming the dependent has net income exceeding 1 thirty-two thousand dollars or twenty-four thousand dollars 2 as applicable or the person claiming the dependent and the 3 person’s spouse have combined net income exceeding thirty-two 4 thousand dollars or twenty-four thousand dollars as applicable. 5 Sec. 85. Section 422.7, subsection 31, Code 2022, is amended 6 to read as follows: 7 31. a. For a person who is disabled, or is fifty-five years 8 of age or older, or is the surviving spouse of an individual or 9 a survivor having an insurable interest in an individual who 10 would have qualified for the exemption under this subsection 11 for the tax year, subtract Subtract , to the extent included, 12 the total amount of received from a governmental or other 13 pension or retirement pay plan , including , but not limited 14 to, defined benefit or defined contribution plans, annuities, 15 individual retirement accounts, plans maintained or contributed 16 to by an employer, or maintained or contributed to by a 17 self-employed person as an employer, and deferred compensation 18 plans or any earnings attributable to the deferred compensation 19 plans , up to a maximum of six thousand dollars for a person, 20 other than a husband or wife, who files a separate state income 21 tax return and up to a maximum of twelve thousand dollars 22 for a husband and wife who file a joint state income tax 23 return. However, a surviving spouse who is not disabled or 24 fifty-five years of age or older can only exclude the amount 25 of pension or retirement pay received as a result of the death 26 of the other spouse. A husband and wife filing separate state 27 income tax returns or separately on a combined state return 28 are allowed a combined maximum exclusion under this subsection 29 of up to twelve thousand dollars. The twelve thousand dollar 30 exclusion shall be allocated to the husband or wife in the 31 proportion that each spouse’s respective pension and retirement 32 pay received bears to total combined pension and retirement 33 pay received received by a person who is disabled, or is 34 fifty-five years of age or older, or is the surviving spouse of 35 -40- LSB 5099XC (21) 89 jm/jh 40/ 117
S.F. _____ an individual or is a survivor having an insurable interest in 1 an individual who would have qualified for the exemption under 2 this subsection for the tax year . 3 b. Married taxpayers who file separate state income tax 4 returns shall allocate their combined annual exclusion amount 5 to each spouse in the proportion that each spouse’s respective 6 income received from a pension or retirement plan bears to the 7 total combined pension or retirement pay received. 8 c. A taxpayer who is not disabled or fifty-five years of 9 age or older and who receives pension or retirement pay as a 10 surviving spouse or as a survivor with an insurable interest 11 in an individual who would have qualified for the exemption 12 for the tax year may only exclude the amount received from a 13 pension or retirement plan in the tax year as a result of the 14 death of the decedent. 15 Sec. 86. EFFECTIVE DATE. This division of this Act takes 16 effect January 1, 2023. 17 Sec. 87. APPLICABILITY. This division of this Act applies 18 to tax years beginning on or after January 1, 2023. 19 DIVISION XI 20 CORPORATE INCOME TAX 21 Sec. 88. Section 422.33, subsection 1, paragraphs a, b, c, 22 and d, Code 2022, are amended to read as follows: 23 a. On the first twenty-five thousand dollars of taxable 24 income, or any part thereof, the rate of six percent for tax 25 years beginning prior to January 1, 2021, and the rate of 26 five and one-half percent for tax years beginning on or after 27 January 1, 2021 , but before January 1, 2024 . 28 b. On taxable income between twenty-five thousand dollars 29 and one hundred thousand dollars or any part thereof, the rate 30 of eight percent for tax years beginning prior to January 1, 31 2021, and the rate of five and one-half percent for tax years 32 beginning on or after January 1, 2021 , but before January 1, 33 2024 . 34 c. On taxable income between one hundred thousand dollars 35 -41- LSB 5099XC (21) 89 jm/jh 41/ 117
S.F. _____ and two hundred fifty thousand dollars or any part thereof, the 1 rate of ten percent for tax years beginning prior to January 1, 2 2021, and the rate of nine percent for tax years beginning on 3 or after January 1, 2021 , but before January 1, 2024 . 4 d. On taxable income of two hundred fifty thousand dollars 5 or more, the rate of twelve percent for tax years beginning 6 prior to January 1, 2021, and the rate of nine and eight-tenths 7 percent for tax years beginning on or after January 1, 2021 , 8 but before January 1, 2024 . 9 DIVISION XII 10 FUTURE CORPORATE INCOME TAX RATES 11 Sec. 89. Section 422.33, subsection 1, Code 2022, as 12 amended by this Act, is amended by striking the subsection and 13 inserting in lieu thereof the following: 14 1. a. A tax is imposed annually upon each corporation doing 15 business in this state, or deriving income from sources within 16 this state, in an amount computed by applying the following 17 rates of taxation to the net income received by the corporation 18 during the income year: 19 (1) For the tax year beginning on or after January 1, 2023, 20 but before January 1, 2024: 21 (a) On taxable income from zero through one hundred thousand 22 dollars, or any part thereof, the rate of five and one-half 23 percent. 24 (b) On taxable income between one hundred thousand dollars 25 and two hundred fifty thousand dollars, or any part thereof, 26 the rate of nine percent. 27 (c) On taxable income of two hundred fifty thousand dollars 28 or more, the rate of nine and eight-tenths percent. 29 (2) For the tax year beginning on or after January 1, 2024, 30 but before January 1, 2025: 31 (a) On taxable income from zero through one hundred thousand 32 dollars, or any part thereof, the rate of five and one-half 33 percent. 34 (b) On taxable income between one hundred thousand dollars 35 -42- LSB 5099XC (21) 89 jm/jh 42/ 117
S.F. _____ and two hundred fifty thousand dollars, or any part thereof, 1 the rate of nine percent. 2 (c) On taxable income of two hundred fifty thousand dollars 3 or more, the rate of nine and four-tenths percent. 4 (3) For the tax year beginning on or after January 1, 2025, 5 but before January 1, 2026: 6 (a) On taxable income from zero through one hundred thousand 7 dollars, or any part thereof, the rate of five and one-half 8 percent. 9 (b) On taxable income exceeding one hundred thousand 10 dollars, the rate of nine percent. 11 (4) For the tax year beginning on or after January 1, 2026, 12 but before January 1, 2027: 13 (a) On taxable income from zero through one hundred thousand 14 dollars, or any part thereof, the rate of five and four-tenths 15 percent. 16 (b) On taxable income exceeding one hundred thousand 17 dollars, the rate of eight and six-tenths percent. 18 (5) For the tax year beginning on or after January 1, 2027, 19 but before January 1, 2028: 20 (a) On taxable income from zero through one hundred thousand 21 dollars, or any part thereof, the rate of five and four-tenths 22 percent. 23 (b) On taxable income exceeding one hundred thousand 24 dollars, the rate of eight and two-tenths percent. 25 b. For tax years beginning on or after January 1, 2028, a 26 tax is imposed annually upon each corporation doing business 27 in this state, or deriving income from sources within this 28 state, in an amount computed by applying the following rates of 29 taxation to the net income received by the corporation during 30 the income year: 31 (1) On taxable income from zero through one hundred thousand 32 dollars, or any part thereof, the rate of five and three-tenths 33 percent. 34 (2) On taxable income exceeding one hundred thousand 35 -43- LSB 5099XC (21) 89 jm/jh 43/ 117
S.F. _____ dollars, the rate of seven and eight-tenths percent. 1 Sec. 90. EFFECTIVE DATE. This division of this Act takes 2 effect January 1, 2024. 3 DIVISION XIII 4 FRANCHISE TAX 5 Sec. 91. Section 422.63, Code 2022, is amended to read as 6 follows: 7 422.63 Amount of tax. 8 1. The franchise tax is imposed annually in an amount equal 9 to five the percent specified in subsection 2 of the net income 10 received or accrued during the taxable year. If the net income 11 of the financial institution is derived from its business 12 carried on entirely within the state, the tax shall be imposed 13 on the entire net income, but if the business is carried on 14 partly within and partly without the state, the portion of net 15 income reasonably attributable to the business within the state 16 shall be specifically allocated or equitably apportioned within 17 and without the state under rules of the director. 18 2. a. For tax years beginning prior to January 1, 2023, 19 five percent. 20 b. For tax years beginning on or after January 1, 2023, but 21 before January 1, 2024, four and four-fifths percent. 22 c. For tax years beginning on or after January 1, 2024, but 23 before January 1, 2025, four and three-fifths percent. 24 d. For tax years beginning on or after January 1, 2025, but 25 before January 1, 2026, four and two-fifths percent. 26 e. For tax years beginning on or after January 1, 2026, but 27 before January 1, 2027, four and one-fifth percent. 28 f. For tax years beginning on or after January 1, 2027, four 29 percent. 30 DIVISION XIV 31 INSURANCE PREMIUM TAX 32 Sec. 92. Section 432.1, subsection 2, Code 2022, is amended 33 to read as follows: 34 2. The “applicable percent” for purposes of subsection 1 of 35 -44- LSB 5099XC (21) 89 jm/jh 44/ 117
S.F. _____ this section and section 432.2 is the following: 1 a. For calendar years beginning before the 2003 calendar 2 year, two percent. 3 b. For the 2003 calendar year, one and three-fourths 4 percent. 5 c. For the 2004 calendar year, one and one-half percent. 6 d. For the 2005 calendar year, one and one-fourth percent. 7 e. For the 2006 and subsequent calendar years year through 8 the 2022 calendar year , one percent. 9 f. For the 2023 calendar year, ninety-five hundredths of one 10 percent. 11 g. For the 2024 and subsequent calendar years, nine-tenths 12 of one percent. 13 Sec. 93. Section 432.1, subsection 4, Code 2022, is amended 14 to read as follows: 15 4. The “applicable percent” for purposes of subsection 3 is 16 the following: 17 a. For calendar years beginning before the 2004 calendar 18 year, two percent. 19 b. For the 2004 calendar year, one and three-fourths 20 percent. 21 c. For the 2005 calendar year, one and one-half percent. 22 d. For the 2006 calendar year, one and one-fourth percent. 23 e. For the 2007 and subsequent calendar years year through 24 the 2022 calendar year , one percent. 25 f. For the 2023 calendar year, ninety-five hundredths of one 26 percent. 27 g. For the 2024 and subsequent calendar years, nine-tenths 28 of one percent. 29 DIVISION XV 30 AUTOMOBILE RENTAL EXCISE TAX 31 Sec. 94. Section 423C.2, subsection 7, Code 2022, is amended 32 by striking the subsection. 33 Sec. 95. Section 423C.3, subsection 1, Code 2022, is amended 34 to read as follows: 35 -45- LSB 5099XC (21) 89 jm/jh 45/ 117
S.F. _____ 1. A tax of five seven percent is imposed upon the rental 1 price of an automobile if the rental transaction is subject 2 to the sales tax under chapter 423, subchapter II , or the use 3 tax under chapter 423, subchapter III . The tax shall not be 4 imposed on any rental transaction not taxable under the state 5 sales tax, as provided in section 423.3 , or the state use tax, 6 as provided in section 423.6 , on automobile rental receipts. 7 Sec. 96. Section 423C.3, subsection 3, Code 2022, is amended 8 by striking the subsection. 9 Sec. 97. Section 423.14A, subsection 1, paragraph b, 10 subparagraph (3), Code 2022, is amended by striking the 11 subparagraph. 12 Sec. 98. EFFECTIVE DATE. This division of this Act takes 13 effect January 1, 2023. 14 DIVISION XVI 15 EQUIPMENT TAX 16 Sec. 99. Section 423D.2, Code 2022, is amended to read as 17 follows: 18 423D.2 Tax imposed. 19 A tax of five six percent is imposed on the sales price 20 or purchase price of all equipment sold or used in the state 21 of Iowa. This tax shall be collected and paid over to the 22 department by any retailer, retailer maintaining a place of 23 business in this state, or user who would be responsible for 24 collection and payment of the tax if it were a sales or use tax 25 imposed under chapter 423 . 26 Sec. 100. EFFECTIVE DATE. This division of this Act takes 27 effect January 1, 2023. 28 DIVISION XVII 29 WATER SERVICE TAX 30 Sec. 101. Section 421.71, subsection 3, Code 2022, is 31 amended to read as follows: 32 3. Private cause of action immunity for overpayment of 33 certain taxes. 34 a. A taxpayer, or any person required to collect taxes 35 -46- LSB 5099XC (21) 89 jm/jh 46/ 117
S.F. _____ imposed under chapters 423 , 423A , 423B , 423C , and 423D , and 1 chapter 423G , Code 2022 , shall be immune from any private cause 2 of action arising from or related to the overpayment of taxes 3 imposed under chapters 423 , 423A , 423B , 423C , and 423D , and 4 chapter 423G , Code 2022, that are collected and remitted to the 5 department. 6 b. Nothing in this subsection shall apply to or otherwise 7 limit any of the following: 8 (1) Any claim, action, mandate, power, remedy, or 9 discretion of the department, or an agent or designee of the 10 department. 11 (2) A taxpayer’s right to seek a refund from the department 12 related to taxes imposed under chapters 423 , 423A , 423B , 423C , 13 and 423D , and chapter 423G , Code 2022, that are collected from 14 or paid by the taxpayer. 15 Sec. 102. Section 423.3, subsection 103, Code 2022, is 16 amended by striking the subsection. 17 Sec. 103. REPEAL. Chapter 423G, Code 2022, is repealed. 18 Sec. 104. EFFECTIVE DATE. This division of this Act takes 19 effect January 1, 2023. 20 DIVISION XVIII 21 TAX CREDITS 22 Sec. 105. Section 15.119, subsection 2, paragraph a, Code 23 2022, is amended by adding the following new subparagraph: 24 NEW SUBPARAGRAPH . (3) In allocating tax credits pursuant 25 to this subsection, the authority shall prioritize issuing 26 additional research and development tax credits pursuant to 27 section 15.335. 28 Sec. 106. Section 15.293A, subsection 1, paragraph c, 29 subparagraph (2), unnumbered paragraph 1, Code 2022, is amended 30 to read as follows: 31 A For the tax year beginning on or after January 1, 2023, 32 but before January 1, 2024, seventy-five percent of the tax 33 credit in excess of the taxpayer’s liability for the tax year 34 is refundable , and for tax years beginning on or after January 35 -47- LSB 5099XC (21) 89 jm/jh 47/ 117
S.F. _____ 1, 2024, fifty percent of the tax credit in excess of the 1 taxpayer’s liability for the tax year is refundable, if all of 2 the following conditions are met: 3 Sec. 107. Section 15.319, subsection 5, Code 2022, is 4 amended to read as follows: 5 5. Any For the tax year beginning on or after January 1, 6 2023, but before January 1, 2024, seventy-five percent of any 7 tax credit in excess of the tax liability is refundable. For 8 tax years beginning on or after January 1, 2024, fifty percent 9 of any tax credit in excess of the tax liability is refundable. 10 In lieu of claiming a refund, the taxpayer may elect to have 11 the overpayment shown on the taxpayer’s final, completed return 12 credited to the tax liability for the following tax year. 13 Sec. 108. Section 15E.305, subsection 2, paragraph a, Code 14 2022, is amended to read as follows: 15 a. The maximum amount of tax credits granted to a taxpayer 16 shall not exceed five percent one hundred thousand dollars of 17 the aggregate amount of tax credits authorized. 18 Sec. 109. Section 422.5, subsection 1, paragraph b, 19 subparagraph (2), Code 2022, is amended by striking the 20 subparagraph. 21 Sec. 110. Section 422.5, subsection 2, paragraph d, Code 22 2022, is amended to read as follows: 23 d. In the case of a resident, including a resident 24 estate or trust, the state’s apportioned share of the state 25 alternative minimum tax is one hundred percent of the state 26 alternative minimum tax computed in this subsection 2 . In the 27 case of a resident or part-year resident shareholder in an S 28 corporation which has in effect for the tax year an election 29 under subchapter S of the Internal Revenue Code and carries 30 on business within and without the state, a nonresident, 31 including a nonresident estate or trust, or an individual, 32 estate, or trust that is domiciled in the state for less than 33 the entire tax year, the state’s apportioned share of the 34 state alternative minimum tax is the amount of tax computed 35 -48- LSB 5099XC (21) 89 jm/jh 48/ 117
S.F. _____ under this subsection 2 , reduced by the applicable credits in 1 sections 422.10 through 422.12 and this result multiplied by 2 a fraction with a numerator of the sum of state net income 3 allocated to Iowa as determined in section 422.8, subsection 2 , 4 paragraph “a” or “b” as applicable , plus tax preference items, 5 adjustments, and losses under subparagraph (1) attributable 6 to Iowa and with a denominator of the sum of total net income 7 computed under section 422.7 plus all tax preference items, 8 adjustments, and losses under subparagraph (1). In computing 9 this fraction, those items excludable under subparagraph (1) 10 shall not be used in computing the tax preference items. 11 Married taxpayers electing to file separate returns or 12 separately on a combined return must allocate the minimum 13 tax computed in this subsection in the proportion that each 14 spouse’s respective preference items, adjustments, and losses 15 under subparagraph (1) bear to the combined preference items, 16 adjustments, and losses under subparagraph (1) of both spouses. 17 Sec. 111. Section 422.8, subsection 2, paragraph b, Code 18 2022, is amended by striking the paragraph. 19 Sec. 112. Section 422.8, subsection 6, Code 2022, is amended 20 by striking the subsection. 21 Sec. 113. Section 422.10, subsection 1, paragraph a, Code 22 2022, is amended by adding the following new subparagraph: 23 NEW SUBPARAGRAPH . (3) The credit provided in this section 24 is claimed on a return filed by the due date for filing the 25 return, including extensions of time. If timely claimed, the 26 business shall not increase the credit claim on an amended 27 return or otherwise unless the increase results from an 28 audit or examination by the internal revenue service or the 29 department. 30 Sec. 114. Section 422.10, subsection 1, paragraph b, 31 subparagraph (1), subparagraph divisions (a) and (b), Code 32 2022, are amended to read as follows: 33 (a) Six and one-half Four percent of the excess of qualified 34 research expenses during the tax year over the base amount for 35 -49- LSB 5099XC (21) 89 jm/jh 49/ 117
S.F. _____ the tax year based upon the state’s apportioned share of the 1 qualifying expenditures for increasing research activities. 2 (b) Six and one-half Four percent of the basic research 3 payments determined under section 41(e)(1)(A) of the Internal 4 Revenue Code during the tax year based upon the state’s 5