HF 2078 (LSB 5532YH (7) 91)

HOUSE FILE 2078

BY  FETT

A BILL FOR

An Act relating to resident dependents not enrolled in a public school or receiving an educational savings account payment by creating an opportunity tax credit available against the individual income tax, creating a fund, making appropriations, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  SHORT TITLE.  This Act shall be known as the “Opportunity Tax Credit Act”.
    Sec. 2.  NEW SECTION.  422.12R  Opportunity tax credit.
   1.  As used in this section, “dependent” has the same meaning as provided by the Internal Revenue Code.
   2.  a.  The taxes imposed under this subchapter, less the credits allowed under section 422.12, shall be reduced by an opportunity tax credit equal to four thousand dollars for each resident dependent of the taxpayer eligible to enroll in a school district in this state and who is not enrolled in a school district or receiving an education savings account payment pursuant to section 257.11B, if any of the following apply to the resident dependent in the tax year the credit is claimed:
   (1)  Eligibility to attend kindergarten in a public school in this state.
   (2)  Attendance at a public school in this state for at least one semester in the immediately preceding academic year.
   (3)  Receipt of an educational savings account payment pursuant to section 257.11B for the immediately preceding academic year by the parent or guardian.
   (4)  Receipt of the credit by the parent or guardian in the previous tax year and resident dependent remains eligible to enroll in a school district in this state but who is not enrolled in a school district in the tax year the credit is claimed and the parent or guardian is not receiving an education savings account payment pursuant to section 257.11B in the tax year the credit is claimed.
   b.  A taxpayer is ineligible to claim the credit for the tax year if the taxpayer received an educational savings account payment pursuant to section 257.11B that covers the same academic year as the tax credit award.
   3.  a.  Any credit in excess of tax liability is refundable.
   b.  In lieu of claiming the credit on a return the taxpayer may make application to the department to have the credit payable to the taxpayer in advance prior to the close of the tax year in the same form and manner as payments made under section 257.11B. An opportunity fund is created in the state treasury under the control of the department consisting of moneys appropriated to the department for the purpose of providing advanced payments made under this paragraph. For the fiscal year commencing July 1, 2026, and each succeeding fiscal year, there is appropriated from the general fund of the state to the opportunity fund an amount necessary to pay all advanced payments approved for that fiscal year.
   4.  By making a claim for the credit pursuant to this section, whether by return or application, the taxpayer shall be considered to have granted the department permission to review any enrollment status or educational account payments with the department of education to determine eligibility for the credit.
   5.  Beginning January 15, 2028, and each January 15 thereafter, the department shall prepare and file a report with the general assembly on the credit, detailing the number of claims including any known fraudulent claims, and any other relevant information the department deems necessary.
   6.  The department shall adopt rules pursuant to chapter 17A to administer this section.
    Sec. 3.  EFFECTIVE DATE.  This Act, being deemed or immediate importance, takes effect upon enactment.
    Sec. 4.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2026, 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 relates to resident dependents not enrolled in a public school or receiving an educational savings account payment by creating an opportunity tax credit available against the individual income tax, creating a fund, and making appropriations. The bill shall be known as the “Opportunity Tax Credit Act”.
   The tax credit is equal to $4,000 for each resident dependent of a taxpayer (parent or guardian) who is eligible to enroll in a school district in this state and who is not enrolled in a school district or the taxpayer is not receiving an ESA payment, and any of the following apply to the dependent: (1) eligibility to attend kindergarten; (2) attendance at a public school in this state for at least one semester in the previous academic year; (3) receipt of an ESA payment by the taxpayer in the previous academic year; or (4) receipt of the credit in the previous tax year by the taxpayer and the dependent remains eligible to be enrolled in a school district but is not enrolled in the tax year the credit is claimed and the taxpayer is not receiving an ESA payment in the tax year.
   A taxpayer is ineligible to claim the credit if the taxpayer received an ESA payment that covers the same academic year as the opportunity tax credit awarded under the bill.
   Any credit in excess of tax liability is refundable under the bill. In lieu of claiming the credit on a return, the taxpayer may make application to the department of revenue (department) to have the credit payable to the taxpayer in advance prior to the close of the tax year in the same form and manner as ESA payments.
   The bill creates an opportunity fund in the state treasury under the control of the department for the purpose of providing advanced payments. For the fiscal year commencing July 1, 2026, and each succeeding fiscal year, there is appropriated from the general fund of the state to the opportunity fund an amount necessary to pay all advanced payments approved for that fiscal year.
   By making a claim for the credit, the taxpayer shall be considered to have granted the department permission to review the enrollment status or ESA payments with the department of education to determine eligibility for the credit.
   Beginning January 15, 2028, and each January 15 thereafter, the department shall prepare and file a report with the general assembly on the credit, detailing the number of claims including any known fraudulent claims and any other relevant information the department deems necessary.
   The bill requires the department to adopt rules to administer the credit.
   The bill takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2026.