H.F. 31 Section 1. NEW SECTION . 422.12Q New resident tax credit. 1 1. a. For purposes of this section, “new resident” means an 2 individual who became a resident of Iowa upon taking full-time 3 employment in this state, who remains a resident of and 4 employed full-time in this state while claiming the credit, and 5 who has not been a resident of this state at any time during the 6 previous twelve-month period prior to establishing residency 7 in this state. 8 b. For purposes of this section, “public assistance” means 9 the supplemental nutrition assistance program, the Medicaid 10 program, or the family investment program. 11 2. a. The taxes imposed under this division less the 12 credits allowed under section 422.12 shall be reduced by a new 13 resident tax credit equal to one hundred percent of the taxes 14 imposed in a tax year for up to four consecutive tax years. 15 b. An individual may claim the credit during either the 16 first or second tax year of residency, and shall take the 17 credit consecutively every tax year thereafter as provided in 18 paragraph “a” . 19 c. An individual is eligible to take the credit one time in 20 the individual’s lifetime. If an individual is unable to claim 21 the credit in consecutive tax years, the individual shall be 22 ineligible to claim the credit in a future tax year. 23 3. Any new resident tax credit in excess of the tax 24 liability is not refundable. 25 4. An individual claiming the credit may claim an exemption 26 from withholding on the state W-4 form. 27 5. Married taxpayers electing to file separate returns may 28 avail themselves of the new resident tax credit by allocating 29 the new resident tax credit to each spouse in the proportion 30 that each spouse’s respective earned income bears to the total 31 combined earned income. 32 6. An individual shall not be eligible to claim the credit 33 if the person is receiving public assistance after the first 34 tax year the credit is claimed. 35 -1- LSB 1355YH (2) 91 jm/jh 1/ 5

H.F. 31 Sec. 2. NEW SECTION . 422.12R New graduate tax credit. 1 1. a. For purposes of this section, “new graduate” means 2 an individual who is a recent graduate from an Iowa-based 3 community college, college, university, or an apprenticeship 4 program as defined in section 84E.2, who is a resident of and 5 employed in this state, and who is thirty years of age or less 6 during the first tax year when claiming the tax credit. 7 b. For purposes of this section, “public assistance” means 8 the supplemental nutrition assistance program, the Medicaid 9 program, or the family investment program. 10 2. a. The taxes imposed under this division less the 11 credits allowed under section 422.12 shall be reduced by a new 12 graduate tax credit equal to one hundred percent of the taxes 13 imposed in a tax year for up to four consecutive tax years. 14 b. An individual may claim the tax credit during either the 15 first or second tax year after graduation, and shall take the 16 credit consecutively every tax year thereafter as provided in 17 paragraph “a” . 18 c. An individual is eligible to take the credit one time in 19 the individual’s lifetime. If an individual is unable to claim 20 the credit in consecutive tax years, the individual shall be 21 ineligible to claim the credit in a future tax year. 22 3. Any new graduate tax credit in excess of the tax 23 liability is not refundable. 24 4. An individual claiming the credit may claim an exemption 25 from withholding on the state W-4 form. 26 5. Married taxpayers electing to file separate returns may 27 avail themselves of the new graduate tax credit by allocating 28 the new graduate tax credit to each spouse in the proportion 29 that each spouse’s respective earned income bears to the total 30 combined earned income. 31 6. An individual shall not be eligible to claim the credit 32 if the person is receiving public assistance after the first 33 tax year the credit is claimed. 34 Sec. 3. CONTINGENT FUTURE REPEAL —— CODE EDITOR DIRECTIVE 35 -2- LSB 1355YH (2) 91 jm/jh 2/ 5

H.F. 31 —— APPLICABILITY AFTER REPEAL. 1 1. Sections 422.12Q and 422.12R are repealed January 1 2 following the occurrence of the statewide average annual 3 unemployment rate equaling or exceeding four percent for three 4 consecutive calendar years as calculated by the United States 5 department of labor, bureau of labor statistics, beginning 6 with calendar year 2025. The director of the department of 7 workforce development or the director’s designee shall notify 8 the Code editor when the annual statewide unemployment rate 9 exceeds four percent for three consecutive calendar years as 10 set forth in this subsection. 11 2. If the Code editor is notified by the director of the 12 department of workforce development or the director’s designee 13 that the condition in subsection 1 has been satisfied, the Code 14 editor is directed to remove sections 422.12Q and 422.12R from 15 the Code. 16 3. A taxpayer claiming the tax credit in section 422.12Q or 17 422.12R prior to repeal pursuant to subsection 2 is eligible 18 to claim the credit after the repeal up to any remaining tax 19 years the taxpayer would have been eligible to claim prior to 20 the repeal, as long as the taxpayer remains eligible to claim 21 the credit under the law prior to repeal. 22 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 23 retroactively to January 1, 2025, for tax years beginning on 24 or after that date. 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanation’s substance by the members of the general assembly. 28 This bill creates the new resident and new graduate tax 29 credits, which are available against the individual income tax. 30 The bill applies to tax years beginning on or after January 1, 31 2025. 32 NEW RESIDENT TAX CREDIT. The bill defines “new resident” to 33 mean an individual who became a resident of Iowa upon taking 34 full-time employment in this state, who remains a resident of 35 -3- LSB 1355YH (2) 91 jm/jh 3/ 5

H.F. 31 and employed full-time in this state while claiming the credit, 1 and who has not been a resident of this state at any time during 2 the previous 12-month period prior to establishing residency. 3 The new resident tax credit authorized in the bill is 4 available to a new resident for up to four consecutive tax 5 years following the establishment of residency in this state. 6 A new resident may begin to claim the credit during either the 7 first or second tax year of residency. 8 The amount of the credit is equal to 100 percent of the 9 income tax imposed in a tax year for up to four consecutive tax 10 years. 11 An individual is eligible to claim the new resident tax 12 credit one time in the individual’s lifetime for the tax year 13 period described in the bill. 14 An individual claiming the new resident tax credit may claim 15 an exemption from withholding on the state W-4 form. 16 Any new resident tax credit in excess of tax liability is not 17 refundable. 18 An individual is not eligible to claim the credit if the 19 person is receiving public assistance after the first tax year 20 the credit is claimed. The bill defines “public assistance” 21 to mean the supplemental nutrition assistance program, the 22 Medicaid program, or the family investment program. 23 NEW GRADUATE TAX CREDIT. The bill defines “new graduate” to 24 mean an individual who is a recent graduate from an Iowa-based 25 community college, college, university, or an apprenticeship 26 program as defined in Code section 84E.2, who is a resident of 27 and employed in this state, and who is 30 years of age or less 28 during the first tax year when claiming the tax credit. 29 The new graduate tax credit authorized in the bill is 30 available to a new graduate for up to four consecutive tax 31 years following graduation. A new graduate may begin to claim 32 the credit during either the first or second tax year after 33 graduation. 34 The amount of the credit is equal to 100 percent of the 35 -4- LSB 1355YH (2) 91 jm/jh 4/ 5

H.F. 31 income tax imposed in a tax year for up to four consecutive tax 1 years. 2 An individual is eligible to claim the new graduate tax 3 credit one time in the individual’s lifetime for the tax year 4 period described in the bill. 5 An individual claiming the new graduate tax credit may claim 6 an exemption from withholding on the state W-4 form. 7 Any new graduate tax credit in excess of tax liability is not 8 refundable. 9 An individual is not eligible to claim the credit if the 10 person is receiving public assistance after the first tax year 11 the credit is claimed. The bill defines “public assistance” 12 to mean the supplemental nutrition assistance program, the 13 Medicaid program, or the family investment program. 14 CONTINGENT FUTURE REPEAL —— CODE EDITOR DIRECTIVE —— 15 APPLICABILITY AFTER REPEAL. The bill repeals the new resident 16 tax credit and the new graduate tax credit January 1 following 17 the occurrence of the statewide average annual unemployment 18 rate equaling or exceeding 4 percent for three consecutive 19 calendar years as calculated by the United States department of 20 labor, bureau of labor statistics, beginning with calendar year 21 2025. The director of the department of workforce development 22 or the director’s designee shall notify the Code editor when 23 the annual statewide unemployment rate exceeds 4 percent for 24 three consecutive calendar years. 25 If the Code editor receives notification under the bill, the 26 Code editor is directed to remove the tax credits. 27 A taxpayer claiming a tax credit prior to repeal under the 28 bill is eligible to claim the credit after the repeal up to 29 any remaining tax years the taxpayer would have been eligible 30 to claim prior to the repeal, as long as the taxpayer remains 31 eligible to claim the credit under the law prior to repeal. 32 APPLICABILITY. The bill applies retroactively to tax years 33 beginning on or after January 1, 2025. 34 -5- LSB 1355YH (2) 91 jm/jh 5/ 5