HF 2760 (LSB 5083HZ (2) 91)

HOUSE FILE 2760

BY  COMMITTEE ON APPROPRIATIONS

(SUCCESSOR TO HF 2331)
(SUCCESSOR TO HSB 532)

A BILL FOR

An Act creating an attorney loan repayment program, and making appropriations.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  256.232  Attorney loan repayment program —— fund.
   1.  Program established.  The college student aid commission shall establish an attorney loan repayment program to encourage attorneys to remain and practice law in this state.
   2.  Eligibility.  An individual is eligible to apply to enter into a program agreement with the college student aid commission pursuant to subsection 3 if the individual meets all of the following requirements:
   a.  Is a graduate of an accredited law school.
   b.  Is licensed to practice law in Iowa.
   c.  Is practicing law in Iowa at the time of application or commits to begin practicing law in this state upon execution of a program agreement.
   3.  Program agreements.  An agreement shall be entered into by an eligible attorney and the college student aid commission. Under the agreement, to receive loan repayments pursuant to subsection 5, an eligible attorney shall agree to and fulfill all of the following requirements:
   a.  Remain and practice law in Iowa in the area designated pursuant to the attorney’s preference determination during each year for which loan repayment assistance is received.
   b.  Provide not less than the number of hours per year of legal services as an indigent defense attorney as designated pursuant to the attorney’s preference determination.
   4.  Priority.
   a.  In awarding loan repayment assistance under this section, the commission shall give priority to attorneys who practice law in this state in the following order:
   (1)  Attorneys who reside and practice law in rural areas of the state and provide a minimum of fifty hours of indigent defense services annually.
   (2)  Attorneys who practice law in rural areas of the state and provide a minimum of one hundred hours of indigent defense services annually.
   (3)  Attorneys who practice law in Iowa and provide two hundred hours of indigent defense services annually.
   (4)  Attorneys who graduated from an Iowa law school, an Iowa high school, or completed private instruction pursuant to chapter 299A.
   b.  For purposes of this section, “rural area” means a county or municipality that has a population of less than twenty-six thousand and is located more than twenty miles from a city with a population of at least fifty thousand, based on the most recent federal decennial census.
   5.  Loan repayment assistance.  An eligible attorney who enters into and remains in compliance with a program agreement pursuant to subsection 3 shall receive loan repayment assistance in an amount not to exceed ten thousand dollars per year or the outstanding balance of the attorney’s eligible loans, whichever is less. In the event an attorney who receives loan repayment assistance under this section ceases to practice law in accordance with the program agreement, the loan repayment assistance shall terminate immediately, the loan repayment assistance shall be prorated for the months the attorney complied with the agreement, and no further payment shall be made. Loan repayment assistance may be provided for each year of eligible practice during a period of not more than six consecutive years. The total amount of loan repayment assistance an attorney may receive under the program shall not exceed the total outstanding balance of the attorney’s eligible student loans at the time the program agreement is executed. For purposes of this section, “eligible loan” means the attorney’s total federally guaranteed Stafford loan amount under the federal family education loan program or the federal direct loan program, the attorney’s federal graduate plus loans, or the attorney’s federal Perkins loan, including principal and interest. Loan payment assistance received pursuant to this section is not subject to Iowa income tax.
   6.  Fund established.  An attorney loan repayment program fund is created in the state treasury under the control of the college student aid commission. The commission may accept gifts, grants, bequests, and other private contributions, as well as state or federal moneys, for deposit in the fund. All moneys deposited in the fund are appropriated to the commission to be used for purposes of this section. Notwithstanding section 8.33, moneys in the fund that remain unencumbered or unobligated at the close of a fiscal year shall not revert but shall remain available for expenditure for the purposes designated. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys in the fund shall be credited to the fund.
   7.  Rules.  The college student aid commission shall adopt rules to administer this section.
   8.  Limitation.  The program shall not provide assistance for more than twenty-five attorneys in a single year.
    Sec. 2.  Section 422.7, Code 2026, is amended by adding the following new subsection:
   NEW SUBSECTION.  46.  a.  Subtract, to the extent included, income resulting from the payment of the amount of any loan repayment assistance received pursuant to section 256.232, whether paid to the taxpayer or the lender, not to exceed ten thousand dollars in any tax year.
   b.  If the taxpayer has a deduction in computing federal taxable income under section 221 of the Internal Revenue Code for interest on a qualified education loan, the taxpayer shall recompute for purposes of this subsection the amount of the deduction under paragraph “a” by not subtracting any amount of income resulting from the loan repayment assistance received pursuant to section 256.232 that was also deducted by the taxpayer under section 221 of the Internal Revenue Code.
   c.  A taxpayer is eligible to receive a deduction pursuant to this subsection for not more than six consecutive tax years in the taxpayer’s lifetime.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill establishes an attorney loan repayment program to encourage attorneys to remain and practice law in Iowa. The program is to be administered by the college student aid commission.
   The bill provides that an individual is eligible to apply for the program if the individual is a graduate of an accredited law school, is licensed to practice law in Iowa, and is practicing law in Iowa at the time of application or commits to begin practicing law in the state upon execution of a program agreement.
   The bill requires a program agreement to be entered into by the commission and an eligible attorney. Under the agreement, an attorney must agree to remain and practice law in Iowa during each year for which loan repayment assistance is received and must provide not less than the number of hours per year of legal services as an indigent defense attorney as designated pursuant to the attorney’s preference determination.
   The bill requires the commission to give priority in awarding loan repayment assistance to attorneys who practice law in this state in the following order: (1) attorneys who reside and practice law in rural areas and provide a minimum of 50 hours of indigent defense services annually; (2) attorneys who practice law in rural areas and provide a minimum of 100 hours of indigent defense services annually; (3) attorneys who practice law in the state and provide 200 hours of indigent defense services annually; and (4) attorneys who graduated from an Iowa law school, Iowa high school, or completed private instruction pursuant to Code chapter 299A.
   The bill defines “rural area” as a county or municipality that has a population of less than 26,000 and is located more than 20 miles from a city with a population of at least 50,000, based on the most recent federal decennial census.
   The bill provides that an eligible attorney who enters into and remains in compliance with a program agreement may receive loan repayment assistance in an amount not to exceed $10,000 per year or the outstanding balance of the attorney’s eligible student loans, whichever is less. If an attorney who receives assistance ceases to practice law in accordance with the attorney’s program agreement, the assistance shall terminate, be prorated, and no further payments shall be made. Loan repayment assistance may be provided for not more than six consecutive years, and the total amount of assistance may not exceed the outstanding balance of the attorney’s eligible student loans at the time the agreement is executed. The bill defines “eligible loan” as the attorney’s total federally guaranteed Stafford loan amount under the federal family education loan program or the federal direct loan program, the attorney’s federal graduate plus loans, or the attorney’s federal Perkins loan, including principal and interest.
   The bill creates an attorney loan repayment program fund in the state treasury under the control of the commission. The fund consists of gifts, grants, bequests, private contributions, and state or federal moneys. Moneys in the fund are appropriated to the commission for purposes of the program, do not revert at the end of a fiscal year, and retain interest earnings.
   The bill requires the commission to adopt rules to administer the program and limits participation to not more than 25 attorneys in a single year.
   The bill provides that loan payment assistance received pursuant to the program is not subject to the Iowa income tax. The bill adds a corresponding provision.