HF 2504 (LSB 5550YH (7) 90)

HOUSE FILE 2504

BY  LOHSE

A BILL FOR

An Act providing a deduction from the individual and corporate income taxes for the amount of certain income derived from indigent representation by an attorney, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2024, is amended by adding the following new subsection:
   NEW SUBSECTION.  44.  a.  A taxpayer who is a partner, member, or shareholder of a law firm may subtract, to the extent included, the aggregated amount calculated in paragraph “c” for the tax year.
   b.  As used in this subsection, “law firm” means a law firm in this state consisting of two or more attorneys that has not entered into a contract authorized pursuant to section 13B.4, subsection 3, when an attorney from the law firm who has been licensed to practice law in this state or any other state for less than five years is appointed by the court to represent a person in a case pursuant to section 814.11 or 815.10 on or after July 1, 2024.
   c.  An amount equal to the difference between the total hours billed by the attorney in the case multiplied by one hundred fifty dollars or the total hours billed in the case multiplied by the actual hourly rate charged by the law firm for that attorney for such a case, whichever is less, and the total hours billed in the case multiplied by the hourly rate in effect for the case in section 815.7.
   d.  A taxpayer who is a partner of a partnership or a shareholder of a subchapter S corporation, or a member of a limited liability company, may deduct the portion of the amount calculated pursuant to paragraph “c” based on the taxpayer’s pro rata share of the profits or losses from the partnership, subchapter S corporation, or limited liability company.
    Sec. 2.  Section 422.35, Code 2024, is amended by adding the following new subsection:
   NEW SUBSECTION.  14.  a.  A taxpayer who is a partner, member, or shareholder of a law firm may subtract, to the extent included, the aggregated amount calculated in paragraph “c” for the tax year.
   b.  As used in this subsection, “law firm” means a law firm in this state consisting of two or more attorneys that has not entered into a contract authorized pursuant to section 13B.4, subsection 3, when an attorney from the law firm who has been licensed to practice law in this state or any other state for less than five years is appointed by the court to represent a person in a case pursuant to section 814.11 or 815.10 on or after July 1, 2024.
   c.  An amount equal to the difference between the total hours billed by the attorney in the case multiplied by one hundred fifty dollars or the total hours billed in the case multiplied by the actual hourly rate charged by the law firm for that attorney for such a case, whichever is less, and the total hours billed in the case multiplied by the hourly rate in effect for the case in section 815.7.
    Sec. 3.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2024, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill provides a deduction from the individual income or corporate income tax for the amount of certain income derived from indigent representation by an attorney.
   The bill defines “law firm” to mean a law firm in this state consisting of two or more attorneys that has not entered into a contract authorized pursuant to Code section 13B.4(3) when an attorney from the law firm who has been licensed to practice law in this state or any other state for less than five years is appointed by the court to represent an indigent person on or after July 1, 2024.
   The amount of the deduction for each case, which may be deducted by a partner, member, or shareholder of the law firm, shall be equal to the difference between the total hours billed in the case multiplied by $150, or the total hours billed in the case multiplied by the actual hourly rate charged by the law firm for such a case, whichever is less, and the total hours billed in the case multiplied by the hourly rate in effect for the case in Code section 815.7. The current hourly rate is $83 per hour for a class “A” felony, $78 per hour for a class “B” felony, and $73 per hour for all other cases.
   A taxpayer who is a partner of a partnership, a shareholder of a subchapter S corporation, or a member of a limited liability corporation may deduct the portion of the amount of the deduction calculated under the bill based on the taxpayer’s pro rata share of the profits or losses from the partnership or subchapter S corporation.
   The bill applies retroactively to tax years beginning on or after January 1, 2024.