HF 30 (LSB 1353YH (2) 91)

HOUSE FILE 30

BY  LOHSE

A BILL FOR

An Act providing a deduction from the individual and corporate income taxes for the amount of certain income derived from indigent representation by an eligible law firm, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  45.  a.  As used in this subsection:
   (1)  “Eligible attorney” means an attorney who is appointed to an eligible case and who, at the time of such appointment, has been licensed to practice law for fewer than ten years.
   (2)  “Eligible case” means an appointment on or after July 1, 2025, by an Iowa court of an eligible attorney to represent a person in a case pursuant to section 814.11 or 815.10.
   (3)  “Eligible law firm” means a law firm in this state that has two or more attorneys that practice law in the law firm for at least half of each tax year during which the law firm is engaged in an eligible case.
   b.  (1)  An eligible law firm may subtract, to the extent included, the aggregated amount equal to the difference between the total hours billed by the eligible attorney in the eligible case multiplied by one hundred fifty dollars or the actual hourly rate charged by the eligible law firm for that eligible attorney for such a case, whichever is less, and the total hours billed by the eligible attorney in the eligible case multiplied by the hourly rate in effect for the eligible case in section 815.7.
   (2)  The amount of the deduction allowed pursuant to this subsection for an individual taxpayer of an eligible law firm shall be calculated using the same percentage as the taxpayer’s pro rata percentage share of the profits or losses from the partnership, limited liability company, or subchapter S corporation.
    Sec. 2.  Section 422.35, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  14.  a.  As used in this subsection:
   (1)  “Eligible attorney” means an attorney who is appointed to an eligible case and who, at the time of such appointment, has been licensed to practice law for fewer than ten years.
   (2)  “Eligible case” means an appointment on or after July 1, 2025, by an Iowa court of an eligible attorney to represent a person in a case pursuant to section 814.11 or 815.10.
   (3)  “Eligible law firm” means a law firm in this state that has two or more attorneys that practice law in the law firm for at least half of each tax year during which the law firm is engaged in an eligible case.
   b.  An eligible law firm may subtract, to the extent included, the aggregated amount equal to the difference between the total hours billed by the eligible attorney in the eligible case multiplied by one hundred fifty dollars or the actual hourly rate charged by the eligible law firm for that eligible attorney for such a case, whichever is less, and the total hours billed by the eligible attorney in the eligible case multiplied by the hourly rate in effect for the eligible case in section 815.7.
    Sec. 3.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2025, 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 provides a deduction from the individual income or corporate income tax for the amount of certain income derived from indigent representation by an eligible law firm.
   The bill defines “eligible law firm” to mean a law firm in this state that has two or more attorneys that practice law in the law firm for at least half of each tax year during which the law firm is engaged in an eligible case.
   The bill defines “eligible case” to mean an appointment on or after July 1, 2025, by an Iowa court of an eligible attorney to represent a person in a case pursuant to Code section 814.11 (indigent’s right to counsel) or 815.10 (appointment of counsel by court).
   The bill defines “eligible attorney” to mean an attorney who is appointed to an eligible case and who, at the time of such appointment, has been licensed to practice law for fewer than 10 years.
   The amount of the deduction shall equal the aggregated amount equal to the difference between the total hours billed by the eligible attorney in the eligible case multiplied by $150 or the actual hourly rate charged by the eligible law firm for that eligible attorney for such a case, whichever is less, and the total hours billed by the eligible attorney in the eligible case multiplied by the hourly rate in effect for the eligible case in Code section 815.7.
    The current hourly rate is $86 per hour for a class “A” felony, $81 per hour for a class “B” felony, and $76 per hour for all other cases.
   For individual income tax purposes, a taxpayer who is a partner of a partnership, a shareholder of a subchapter S corporation, or a member of a limited liability corporation may deduct the portion of the amount of the deduction calculated under the bill based on the taxpayer’s pro rata share of the profits or losses from the partnership or subchapter S corporation.
   The bill applies retroactively to tax years beginning on or after January 1, 2025.