HF 2225 (LSB 5802YH (4) 91)

HOUSE FILE 2225

BY  BARKER, LATHAM, INGELS, BRADLEY, WELDON, HORA, BERGAN, ZABNER, BLOM, WILLIAMS, DUNWELL, MOMMSEN, WOOD, GEARHART, VONDRAN, GUSTOFF, GERHOLD, WENGRYN, LARSON, C. JOHNSON, SIECK, and SMITH

A BILL FOR

An Act creating a new graduate nonresident tuition tax credit available against the individual income tax, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  422.12R  New graduate nonresident tuition tax credit.
   1.  For purposes of this section:
   a.  “Health care professional” means an individual who is licensed, certified, or otherwise authorized or permitted by the law of this state to administer health care in the ordinary course of business or in the practice of a profession.
   b.  “Institution” means an institution of higher education governed by the board of regents.
   c.  “Licensed veterinarian” means a person who is validly and currently licensed to practice veterinary medicine in the state of Iowa.
   d.  “New graduate” means an individual who is a graduate of an institution within three years of first claiming the nonresident tuition tax credit, who has been a resident of and employed in this state since graduating, and who is employed as a health care professional, teacher, licensed veterinarian, or professional engineer in this state.
   e.  “Professional engineer” means an individual engaged in the practice of engineering as defined in section 542B.2 who is issued a certificate of licensure as a professional engineer pursuant to section 542B.17.
   f.  “Teacher” means a teacher licensed under chapter 256.
   2.  a.  The taxes imposed under this subchapter, less the credits allowed under section 422.12, shall be reduced by a new graduate nonresident tuition tax credit equal to one hundred percent of the difference between the base tuition paid by a new graduate as a nonresident student enrolled at an institution and the base tuition amount paid by a resident student at the same institution for the same school year during the years of attendance by the new graduate.
   b.  The board of regents shall post on the board of regents’ internet site the base tuition amounts for nonresident and resident students at each institution from at least the previous ten-year period.
   3.  Any new graduate nonresident tuition tax credit in excess of the tax liability is not refundable. Any credit in excess of the tax liability for the tax year may be credited to the tax liability for the following five tax years or until depleted, whichever is the earlier. However, any credit in excess of tax liability shall not be credited to or deplete tax liability on the return of a nonresident.
   4.  Married taxpayers electing to file separate returns or filing separately on a combined return may avail themselves of the new graduate nonresident tuition tax credit by allocating the new graduate nonresident tuition tax credit to each spouse in the proportion that each spouse’s respective earned income bears to the total combined earned income.
    Sec. 2.  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 creates a new graduate nonresident tuition tax credit available against the individual income tax.
   The bill defines “institution” to mean an institution of higher education governed by the board of regents.
   The bill defines “new graduate” to mean an individual who is a graduate of an institution within three years of claiming the credit, who has been a resident of and employed in this state since graduating, and who is employed as a health care professional, teacher, licensed veterinarian, or professional engineer in this state.
   The bill specifies that a new graduate may claim the new graduate nonresident tuition tax credit that is equal to 100 percent of the difference between the base tuition paid by the new graduate as a nonresident student enrolled at an institution and the base tuition amount paid by a resident student at the same institution for the same school year during the years of attendance by the new graduate.
   The bill requires the board of regents to post on the board of regents’ internet site the base tuition amounts for nonresident and resident students at each institution from at least the previous 10-year period.
   Any new graduate nonresident tax credit in excess of the tax liability is not refundable. The bill specifies any credit in excess of the tax liability for the tax year may be credited to the tax liability for the following five tax years or until depleted, whichever is the earlier. However, any credit in excess of tax liability shall not be credited to or deplete future tax liability on the return of a new graduate who becomes a nonresident.
   The bill applies retroactively to tax years beginning on or after January 1, 2026.