S.F. 552 DIVISION I 1 FUTURE INDIVIDUAL INCOME TAX RATE CHANGES 2 Section 1. Section 422.5, subsection 2, paragraph b, 3 subparagraph (2), Code 2023, is amended to read as follows: 4 (2) (a) (i) (A) For the tax year beginning on or after 5 January 1, 2023, but before January 1, 2024, the alternate tax 6 rate is 6.00 percent. 7 (B) For the tax year beginning on or after January 1, 2024, 8 but before January 1, 2025, the alternate tax rate is 5.70 9 percent. 10 (C) For the tax year beginning on or after January 1, 2025, 11 but before January 1, 2026, the alternate tax rate is 5.20 4.80 12 percent. 13 (D) For the tax year beginning on or after January 1, 2026, 14 but before January 1, 2027, the alternate tax rate is 3.95 15 percent. 16 (E) For the tax year beginning on or after January 1, 2027, 17 but before January 1, 2028, the alternate tax rate is 3.35 18 percent. 19 (ii) This subparagraph division (a) is repealed January 1, 20 2026 2028 . 21 (b) For tax years beginning on or after January 1, 2026 22 2028 , the alternate tax rate is 4.40 3.00 percent. 23 Sec. 2. Section 422.5, subsection 3, paragraph b, 24 subparagraph (2), Code 2023, is amended to read as follows: 25 (2) (a) (i) (A) For the tax year beginning on or after 26 January 1, 2023, but before January 1, 2024, the alternate tax 27 rate is 6.00 percent. 28 (B) For the tax year beginning on or after January 1, 2024, 29 but before January 1, 2025, the alternate tax rate is 5.70 30 percent. 31 (C) For the tax year beginning on or after January 1, 2025, 32 but before January 1, 2026, the alternate tax rate is 5.20 4.80 33 percent. 34 (D) For the tax year beginning on or after January 1, 2026, 35 -1- LSB 1993SV (3) 90 jm/jh 1/ 11

S.F. 552 but before January 1, 2027, the alternate tax rate is 3.95 1 percent. 2 (E) For the tax year beginning on or after January 1, 2027, 3 but before January 1, 2028, the alternate tax rate is 3.35 4 percent. 5 (ii) This subparagraph division (a) is repealed January 1, 6 2026 2028 . 7 (b) For tax years beginning on or after January 1, 2026 8 2028 , the alternate tax rate is 4.40 3.00 percent. 9 Sec. 3. Section 422.5A, subsection 1, paragraph a, 10 subparagraph (3), Code 2023, is amended to read as follows: 11 (3) For the tax year beginning on or after January 1, 2025, 12 but before January 1, 2026: 13 (a) On taxable income from 0 through $12,000, the rate of 14 4.40 4.00 percent. 15 (b) On taxable income exceeding $12,000, the rate of 4.82 16 4.40 percent. 17 Sec. 4. Section 422.5A, subsection 1, paragraph b, 18 subparagraph (3), Code 2023, is amended to read as follows: 19 (3) For the tax year beginning on or after January 1, 2025, 20 but before January 1, 2026: 21 (a) On taxable income from 0 through $6,000, the rate of 22 4.40 4.00 percent. 23 (b) On taxable income exceeding $6,000, the rate of 4.82 24 4.40 percent. 25 Sec. 5. 2022 Iowa Acts, chapter 1002, section 20, is amended 26 to read as follows: 27 SEC. 20. Section 422.5, subsection 1 , paragraph a, Code 28 2022, is amended to read as follows: 29 a. (1) A tax is imposed upon every resident and nonresident 30 of the state which tax shall be levied, collected, and paid 31 annually upon and with respect to the entire taxable income as 32 defined in this subchapter at a rate of three and nine-tenths 33 percent. the following rates in the following tax years: 34 (a) For the tax year beginning on or after January 1, 2026, 35 -2- LSB 1993SV (3) 90 jm/jh 2/ 11

S.F. 552 but before January 1, 2027, the rate of 3.55 percent. 1 (b) For the tax year beginning on or after January 1, 2027, 2 but before January 1, 2028, the rate of 2.95 percent. 3 (c) For tax years beginning on or after January 1, 2028, the 4 rate of 2.50 percent. 5 (2) (a) Notwithstanding the rate in subparagraph (1), the 6 department of revenue shall determine the individual income 7 tax rate as provided in this subparagraph. The tax rate in 8 subparagraph (1) shall remain in effect until the rate is 9 adjusted pursuant to this subparagraph. A rate adjusted in 10 this subparagraph shall remain in effect until the rate is 11 adjusted again pursuant to this subparagraph. 12 (b) By November 1, 2029, and by November 1 each year 13 thereafter, until the individual income tax rate equals zero, 14 the department of management shall determine the amount of 15 moneys available in the taxpayer relief fund in section 8.57E, 16 and the net individual income tax receipts at the close of the 17 preceding fiscal year. The department of revenue shall adjust 18 and apply a new rate based upon the amount of moneys available 19 in the taxpayer relief fund as provided in subparagraph 20 division (c). 21 (c) (i) The rate shall be adjusted in such a way that the 22 rate would have generated an amount equal to the net receipts 23 generated from the rate in the preceding fiscal year less the 24 amount available in the taxpayer relief fund in section 8.57E 25 that is used in the calculation in this subparagraph division. 26 (ii) The rate shall not be adjusted unless the rate is able 27 to be adjusted at least one-tenth of one percent. The rate, 28 when adjusted, shall be rounded down to the nearest one-tenth 29 of one percent. 30 (iii) If a determination is made by the department of 31 revenue that the rate is subject to adjustment, the department 32 of revenue shall adjust the rate specified in subparagraph 33 (1), or if the rate has been previously adjusted, adjust the 34 previously adjusted rate. 35 -3- LSB 1993SV (3) 90 jm/jh 3/ 11

S.F. 552 (d) If an adjustment is made pursuant to subparagraph 1 division (c), the amount of moneys in the taxpayer relief fund 2 used in the calculation in subparagraph division (c) shall be 3 transferred to the general fund of the state in the fiscal year 4 the rate is adjusted. 5 (e) If a rate is adjusted pursuant to subparagraph division 6 (c), the director of revenue shall cause an advisory notice 7 containing the new individual income tax rate to be published 8 in the Iowa administrative bulletin and on the internet site 9 of the department of revenue. The calculation and publication 10 of the adjusted tax rate by the director of revenue is exempt 11 from chapter 17A, and shall be submitted for publication by the 12 first December 31 following the determination date to adjust 13 the rate. 14 DIVISION II 15 FUTURE CORPORATE INCOME TAX RATE CHANGES 16 Sec. 6. Section 422.33, subsection 1, paragraph b, 17 subparagraph (1), subparagraph division (b), Code 2023, is 18 amended to read as follows: 19 (b) By November 1, 2022, and by November 1 each year 20 thereafter, the department of management shall determine 21 the net corporate income tax receipts for the fiscal year 22 preceding the determination date. If net corporate income 23 tax receipts for the preceding fiscal year exceed seven six 24 hundred eighty million dollars, the department of revenue shall 25 adjust and apply new corporate income tax rates as provided in 26 subparagraph (2). 27 Sec. 7. Section 422.33, subsection 1, paragraph b, 28 subparagraph (2), subparagraph division (a), Code 2023, is 29 amended to read as follows: 30 (a) If a determination has been made that net corporate 31 income tax receipts for the preceding fiscal year exceeded 32 seven six hundred eighty million dollars, the department of 33 revenue shall adjust the tax rates specified in paragraph “a” , 34 subparagraphs (3) and (4), and apply the adjusted rates for tax 35 -4- LSB 1993SV (3) 90 jm/jh 4/ 11

S.F. 552 years beginning on or after the next January 1 following the 1 determination date. 2 Sec. 8. Section 422.33, subsection 1, paragraph b, 3 subparagraph (2), subparagraph division (b), subparagraph 4 subdivision (i), Code 2023, is amended to read as follows: 5 (i) The tax rates subject to adjustment shall be adjusted 6 in such a way that when combined with all the other rates 7 specified in paragraph “a” , the tax rates would have generated 8 net corporate income tax receipts that equal seven six hundred 9 eighty million dollars in the preceding fiscal year. 10 Sec. 9. Section 422.33, subsection 1, paragraph b, 11 subparagraph (2), subparagraph division (b), subparagraph 12 subdivision (iii), Code 2023, is amended to read as follows: 13 (iii) The tax rates adjusted pursuant to this paragraph 14 shall not be adjusted below five and one-half four and 15 three-fourths percent. 16 Sec. 10. 2022 Iowa Acts, chapter 1002, sections 57 and 58, 17 are amended to read as follows: 18 SEC. 57. Section 422.33, subsection 1 , Code 2022, is amended 19 by striking the subsection and inserting in lieu thereof the 20 following: 21 1. A tax is imposed annually upon each corporation doing 22 business in this state, or deriving income from sources within 23 this state, in an amount computed by applying the rate of five 24 and one-half four and three-fourths percent to the net income 25 received by the corporation during the income year. 26 SEC. 58. CONTINGENT EFFECTIVE DATE. This division of 27 this Act takes effect on the first January 1 after each rate 28 of taxation on the net income received by a corporation is 29 equalized to equal five and one-half four and three-fourths 30 percent pursuant to section 422.33, subsection 1 , paragraph 31 “b”, as amended by this Act. The director of revenue shall 32 inform the Code editor upon the occurrence of this contingency. 33 DIVISION III 34 INSURANCE PREMIUM TAX 35 -5- LSB 1993SV (3) 90 jm/jh 5/ 11

S.F. 552 Sec. 11. Section 432.1, subsection 2, Code 2023, is amended 1 to read as follows: 2 2. The “applicable percent” for purposes of subsection 1 of 3 this section and section 432.2 is the following: 4 a. For calendar years beginning before the 2003 calendar 5 year, two percent. 6 b. For the 2003 calendar year, one and three-fourths 7 percent. 8 c. For the 2004 calendar year, one and one-half percent. 9 d. For the 2005 calendar year, one and one-fourth percent. 10 e. For the 2006 and subsequent calendar years year through 11 the 2024 calendar year , one percent. 12 f. For the 2025 calendar year, ninety-five hundredths of one 13 percent. 14 g. For the 2026 and subsequent calendar years, nine-tenths 15 of one percent. 16 Sec. 12. Section 432.1, subsection 4, Code 2023, is amended 17 to read as follows: 18 4. The “applicable percent” for purposes of subsection 3 is 19 the following: 20 a. For calendar years beginning before the 2004 calendar 21 year, two percent. 22 b. For the 2004 calendar year, one and three-fourths 23 percent. 24 c. For the 2005 calendar year, one and one-half percent. 25 d. For the 2006 calendar year, one and one-fourth percent. 26 e. For the 2007 and subsequent calendar years year through 27 the 2024 calendar year , one percent. 28 f. For the 2025 calendar year, ninety-five hundredths of one 29 percent. 30 g. For the 2026 and subsequent calendar years, nine-tenths 31 of one percent. 32 DIVISION IV 33 SALE OF CERTAIN QUALIFIED STOCK —— NET CAPITAL GAIN EXCLUSION 34 Sec. 13. Section 422.7, subsection 43, paragraph c, 35 -6- LSB 1993SV (3) 90 jm/jh 6/ 11

S.F. 552 subparagraph (2), Code 2023, is amended to read as follows: 1 (2) “Employee-owner” means an individual who owns capital 2 stock in a qualified corporation for at least ten years, which 3 capital stock was acquired by the individual while employed and 4 on account of employment by such any qualified corporation for 5 at least ten cumulative years. 6 Sec. 14. Section 422.7, subsection 43, paragraph c, 7 subparagraph (4), subparagraph division (b), Code 2023, is 8 amended to read as follows: 9 (b) “Qualified corporation” includes any member of an Iowa 10 affiliated group if the Iowa affiliated group includes a member 11 that has employed individuals in this state for at least ten 12 years. For purposes of this subparagraph division, “Iowa 13 affiliated group” means an affiliated group that has made is 14 eligible to make a valid election to file an Iowa consolidated 15 income tax return under section 422.37 in the year in which 16 the deduction under this subsection is claimed. “Member” 17 includes any entity that is eligible to be included in the a 18 consolidated return under section 422.37, subsection 2 , for the 19 tax year in which the deduction is claimed. 20 Sec. 15. EFFECTIVE DATE. This division of this Act, being 21 deemed of immediate importance, takes effect upon enactment. 22 Sec. 16. RETROACTIVE APPLICABILITY. This division of this 23 Act applies retroactively to January 1, 2023, for tax years 24 beginning on or after that date. 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanation’s substance by the members of the general assembly. 28 This bill reduces the individual and corporate income tax 29 rates and the insurance premium tax rates. 30 DIVISION I —— FUTURE INDIVIDUAL INCOME TAX RATE CHANGES. 31 The bill reduces the individual income tax rates for the tax 32 year beginning January 1, 2025, but before January 1, 2026, as 33 follows: 34 Married filing jointly 35 -7- LSB 1993SV (3) 90 jm/jh 7/ 11

S.F. 552 Income over: But not over: Tax rate: 1 1) $0 $12,000 4.00% 2 2) $12,000 4.40% 3 All other filers other than married filing jointly 4 Income over: But not over: Tax rate: 5 1) $0 $6,000 4.00% 6 2) $6,000 4.40% 7 The bill further reduces the 3.90 percent individual flat 8 income tax rate established for tax years beginning on or after 9 January 1, 2026, in 2022 Iowa Acts, chapter 1002, section 20. 10 For the tax year beginning on or after January 1, 2026, but 11 before January 1, 2027, the bill reduces the individual tax 12 rate to 3.55 percent. For the tax year beginning on or after 13 January 1, 2027, but before January 1, 2028, the bill reduces 14 the individual income tax rate to 2.95 percent. For tax years 15 beginning on or after January 1, 2028, the bill reduces the 16 individual income tax rate to 2.50 percent. 17 Currently, an alternate income tax calculation exists in 18 Code section 422.5. The alternate income tax is an alternate 19 method of calculating income tax liability in lieu of the 20 regular income tax calculation for taxpayers with income 21 slightly above the income tax filing thresholds. The alternate 22 method multiplies the taxpayer’s taxable income above the 23 income tax filing thresholds in Code section 422.5(2)(b) or 24 422.5(3)(b) by the highest existing individual income tax 25 rate until the taxpayer’s tax liability is equal to the tax 26 liability that would have been calculated under the regular 27 income tax calculation method, then after such point the 28 regular income tax calculation with the regular income tax 29 rates are used. The bill phases in changes to the alternate 30 tax rate until the rate is set at 3.00 percent commencing with 31 tax years beginning on or after January 1, 2028. 32 After reducing the individual income tax rate to 2.50 33 percent, the bill establishes a procedure where the individual 34 income tax rate may be adjusted commencing with tax years 35 -8- LSB 1993SV (3) 90 jm/jh 8/ 11

S.F. 552 beginning on or after January 1, 2030. The bill specifies 1 the individual income tax rate shall be adjusted each tax 2 year until the rate is zero, if sufficient funds to make the 3 adjustment are available in the taxpayer relief fund. 4 By November 1, 2029, and by November 1 each year thereafter, 5 the department of management shall determine the amount of 6 moneys available in the taxpayer relief fund, and the net 7 individual income tax receipts at the close of the preceding 8 fiscal year. The department of revenue shall adjust and apply 9 a new individual income tax rate based upon the amount of money 10 available in the taxpayer relief fund. The bill specifies the 11 department of revenue shall adjust and apply a new individual 12 income tax rate in such a way that the rate would have 13 generated an amount equal to the net receipts generated from 14 the rate in the preceding fiscal year less the amount used in 15 the calculation in the taxpayer relief fund. 16 The bill prohibits the rate from being adjusted unless the 17 rate is able to be adjusted at least one-tenth of 1 percent. 18 The rate, when adjusted, shall be rounded down to the nearest 19 one-tenth of 1 percent. 20 The bill requires the moneys in the taxpayer relief fund be 21 transferred to the general fund of the state in the fiscal year 22 the rate is adjusted. 23 If a tax rate is adjusted, the bill requires the director 24 of revenue to cause an advisory notice containing the new 25 individual income tax rate to be published in the Iowa 26 administrative bulletin and on the internet site of the 27 department of revenue. The calculation and publication of the 28 adjusted tax rate by the director of revenue is exempt from 29 Code chapter 17A, and shall be submitted for publication by the 30 first December 31 following the determination date to adjust 31 the tax rates. 32 DIVISION II —— FUTURE CORPORATE INCOME TAX RATE CHANGES. 33 Under current law, by November 1 of each year, the department 34 of management shall determine the net corporate income tax 35 -9- LSB 1993SV (3) 90 jm/jh 9/ 11

S.F. 552 receipts for the previous fiscal year, if a determination 1 has been made that net corporate income tax receipts for the 2 preceding fiscal year exceeded $700 million, the department 3 of revenue shall reduce the corporate tax rates and apply the 4 adjusted rates for tax years beginning on or after the next 5 January 1 following such a determination, but the tax rate 6 shall not be adjusted below 5.50 percent. The bill reduces the 7 threshold amount for determining if taxes are to be reduced 8 from $700 million net corporate income tax receipts to $680 9 million net corporate income tax receipts, and reduces the 10 lowest possible adjusted corporate tax rate to 4.75 percent. 11 DIVISION III —— INSURANCE PREMIUMS TAX. The bill reduces 12 the insurance premium tax on the gross amount of premiums 13 received by an insurance company from 1 percent to .95 percent 14 in calendar year 2025, and from .95 percent to .90 percent for 15 the 2026 calendar year and subsequent calendar years. 16 DIVISION IV —— SALE OF QUALIFIED STOCK —— CAPITAL GAIN 17 EXCLUSION. The bill amends Code section 422.7(43), which 18 excludes the net capital gain on the sale of certain qualified 19 stock and was enacted during the 2022 legislative session. 20 Under the bill, the definition of “employee-owner” is 21 modified to include employment at any qualified corporation 22 rather than an individual who owns capital stock in a qualified 23 corporation for at least 10 years while employed and on account 24 of that corporation. The bill modifies the definition of 25 “Iowa affiliated group” within the definition of “qualified 26 corporation” to include an affiliated group that is eligible to 27 make a valid election to file an Iowa consolidated income tax 28 return rather than an affiliated group that has made a valid 29 election to file an Iowa consolidated income tax return. The 30 bill modifies the definition of “member” within the definition 31 of “qualified corporation” to include any entity that is 32 eligible to be included in a consolidated return rather than 33 any entity included in the consolidated return. 34 The division takes effect upon enactment and applies 35 -10- LSB 1993SV (3) 90 jm/jh 10/ 11