House File 2078 - Introduced HOUSE FILE 2078 BY FETT A BILL FOR An Act relating to resident dependents not enrolled in a 1 public school or receiving an educational savings account 2 payment by creating an opportunity tax credit available 3 against the individual income tax, creating a fund, making 4 appropriations, and including effective date and retroactive 5 applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5532YH (7) 91 jm/jh

H.F. 2078 Section 1. SHORT TITLE. This Act shall be known as the 1 “Opportunity Tax Credit Act”. 2 Sec. 2. NEW SECTION . 422.12R Opportunity tax credit. 3 1. As used in this section, “dependent” has the same meaning 4 as provided by the Internal Revenue Code. 5 2. a. The taxes imposed under this subchapter, less the 6 credits allowed under section 422.12, shall be reduced by an 7 opportunity tax credit equal to four thousand dollars for 8 each resident dependent of the taxpayer eligible to enroll in 9 a school district in this state and who is not enrolled in 10 a school district or receiving an education savings account 11 payment pursuant to section 257.11B, if any of the following 12 apply to the resident dependent in the tax year the credit is 13 claimed: 14 (1) Eligibility to attend kindergarten in a public school 15 in this state. 16 (2) Attendance at a public school in this state for at least 17 one semester in the immediately preceding academic year. 18 (3) Receipt of an educational savings account payment 19 pursuant to section 257.11B for the immediately preceding 20 academic year by the parent or guardian. 21 (4) Receipt of the credit by the parent or guardian in 22 the previous tax year and resident dependent remains eligible 23 to enroll in a school district in this state but who is not 24 enrolled in a school district in the tax year the credit 25 is claimed and the parent or guardian is not receiving an 26 education savings account payment pursuant to section 257.11B 27 in the tax year the credit is claimed. 28 b. A taxpayer is ineligible to claim the credit for the tax 29 year if the taxpayer received an educational savings account 30 payment pursuant to section 257.11B that covers the same 31 academic year as the tax credit award. 32 3. a. Any credit in excess of tax liability is refundable. 33 b. In lieu of claiming the credit on a return the taxpayer 34 may make application to the department to have the credit 35 -1- LSB 5532YH (7) 91 jm/jh 1/ 4

H.F. 2078 payable to the taxpayer in advance prior to the close of the 1 tax year in the same form and manner as payments made under 2 section 257.11B. An opportunity fund is created in the state 3 treasury under the control of the department consisting of 4 moneys appropriated to the department for the purpose of 5 providing advanced payments made under this paragraph. For the 6 fiscal year commencing July 1, 2026, and each succeeding fiscal 7 year, there is appropriated from the general fund of the state 8 to the opportunity fund an amount necessary to pay all advanced 9 payments approved for that fiscal year. 10 4. By making a claim for the credit pursuant to this 11 section, whether by return or application, the taxpayer shall 12 be considered to have granted the department permission to 13 review any enrollment status or educational account payments 14 with the department of education to determine eligibility for 15 the credit. 16 5. Beginning January 15, 2028, and each January 15 17 thereafter, the department shall prepare and file a report with 18 the general assembly on the credit, detailing the number of 19 claims including any known fraudulent claims, and any other 20 relevant information the department deems necessary. 21 6. The department shall adopt rules pursuant to chapter 17A 22 to administer this section. 23 Sec. 3. EFFECTIVE DATE. This Act, being deemed or immediate 24 importance, takes effect upon enactment. 25 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 26 retroactively to January 1, 2026, for tax years beginning on 27 or after that date. 28 EXPLANATION 29 The inclusion of this explanation does not constitute agreement with 30 the explanation’s substance by the members of the general assembly. 31 This bill relates to resident dependents not enrolled in 32 a public school or receiving an educational savings account 33 payment by creating an opportunity tax credit available 34 against the individual income tax, creating a fund, and making 35 -2- LSB 5532YH (7) 91 jm/jh 2/ 4

H.F. 2078 appropriations. The bill shall be known as the “Opportunity 1 Tax Credit Act”. 2 The tax credit is equal to $4,000 for each resident dependent 3 of a taxpayer (parent or guardian) who is eligible to enroll 4 in a school district in this state and who is not enrolled 5 in a school district or the taxpayer is not receiving an ESA 6 payment, and any of the following apply to the dependent: (1) 7 eligibility to attend kindergarten; (2) attendance at a public 8 school in this state for at least one semester in the previous 9 academic year; (3) receipt of an ESA payment by the taxpayer 10 in the previous academic year; or (4) receipt of the credit 11 in the previous tax year by the taxpayer and the dependent 12 remains eligible to be enrolled in a school district but is not 13 enrolled in the tax year the credit is claimed and the taxpayer 14 is not receiving an ESA payment in the tax year. 15 A taxpayer is ineligible to claim the credit if the taxpayer 16 received an ESA payment that covers the same academic year as 17 the opportunity tax credit awarded under the bill. 18 Any credit in excess of tax liability is refundable under the 19 bill. In lieu of claiming the credit on a return, the taxpayer 20 may make application to the department of revenue (department) 21 to have the credit payable to the taxpayer in advance prior to 22 the close of the tax year in the same form and manner as ESA 23 payments. 24 The bill creates an opportunity fund in the state treasury 25 under the control of the department for the purpose of 26 providing advanced payments. For the fiscal year commencing 27 July 1, 2026, and each succeeding fiscal year, there is 28 appropriated from the general fund of the state to the 29 opportunity fund an amount necessary to pay all advanced 30 payments approved for that fiscal year. 31 By making a claim for the credit, the taxpayer shall be 32 considered to have granted the department permission to review 33 the enrollment status or ESA payments with the department of 34 education to determine eligibility for the credit. 35 -3- LSB 5532YH (7) 91 jm/jh 3/ 4

H.F. 2078 Beginning January 15, 2028, and each January 15 thereafter, 1 the department shall prepare and file a report with the 2 general assembly on the credit, detailing the number of claims 3 including any known fraudulent claims and any other relevant 4 information the department deems necessary. 5 The bill requires the department to adopt rules to 6 administer the credit. 7 The bill takes effect upon enactment and applies 8 retroactively to tax years beginning on or after January 1, 9 2026. 10 -4- LSB 5532YH (7) 91 jm/jh 4/ 4