HF 31 (LSB 1355YH (2) 91)

HOUSE FILE 31

BY  LOHSE

A BILL FOR

An Act creating the new resident and new graduate tax credits, 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.  422.12Q  New resident tax credit.
   1.  a.  For purposes of this section, “new resident” means an individual who became a resident of Iowa upon taking full-time employment in this state, who remains a resident of and employed full-time in this state while claiming the credit, and who has not been a resident of this state at any time during the previous twelve-month period prior to establishing residency in this state. 
   b.  For purposes of this section, “public assistance” means the supplemental nutrition assistance program, the Medicaid program, or the family investment program. 
   2.  a.  The taxes imposed under this division less the credits allowed under section 422.12 shall be reduced by a new resident tax credit equal to one hundred percent of the taxes imposed in a tax year for up to four consecutive tax years.
   b.  An individual may claim the credit during either the first or second tax year of residency, and shall take the credit consecutively every tax year thereafter as provided in paragraph “a”.
   c.  An individual is eligible to take the credit one time in the individual’s lifetime. If an individual is unable to claim the credit in consecutive tax years, the individual shall be ineligible to claim the credit in a future tax year. 
   3.  Any new resident tax credit in excess of the tax liability is not refundable.
   4.  An individual claiming the credit may claim an exemption from withholding on the state W-4 form.
   5.  Married taxpayers electing to file separate returns may avail themselves of the new resident tax credit by allocating the new resident tax credit to each spouse in the proportion that each spouse’s respective earned income bears to the total combined earned income. 
   6.  An individual shall not be eligible to claim the credit if the person is receiving public assistance after the first tax year the credit is claimed. 
    Sec. 2.  NEW SECTION.  422.12R  New graduate tax credit.
   1.  a.  For purposes of this section, “new graduate” means an individual who is a recent graduate from an Iowa-based community college, college, university, or an apprenticeship program as defined in section 84E.2, who is a resident of and employed in this state, and who is thirty years of age or less during the first tax year when claiming the tax credit. 
   b.  For purposes of this section, “public assistance” means the supplemental nutrition assistance program, the Medicaid program, or the family investment program. 
   2.  a.  The taxes imposed under this division less the credits allowed under section 422.12 shall be reduced by a new graduate tax credit equal to one hundred percent of the taxes imposed in a tax year for up to four consecutive tax years.
   b.  An individual may claim the tax credit during either the first or second tax year after graduation, and shall take the credit consecutively every tax year thereafter as provided in paragraph “a”. 
   c.  An individual is eligible to take the credit one time in the individual’s lifetime. If an individual is unable to claim the credit in consecutive tax years, the individual shall be ineligible to claim the credit in a future tax year.
   3.  Any new graduate tax credit in excess of the tax liability is not refundable.
   4.  An individual claiming the credit may claim an exemption from withholding on the state W-4 form.
   5.  Married taxpayers electing to file separate returns may avail themselves of the new graduate tax credit by allocating the new graduate tax credit to each spouse in the proportion that each spouse’s respective earned income bears to the total combined earned income. 
   6.  An individual shall not be eligible to claim the credit if the person is receiving public assistance after the first tax year the credit is claimed.
    Sec. 3.  CONTINGENT FUTURE REPEAL —— CODE EDITOR DIRECTIVE —— APPLICABILITY AFTER REPEAL.
   1.  Sections 422.12Q and 422.12R are repealed January 1 following the occurrence of the statewide average annual unemployment rate equaling or exceeding four percent for three consecutive calendar years as calculated by the United States department of labor, bureau of labor statistics, beginning with calendar year 2025. The director of the department of workforce development or the director’s designee shall notify the Code editor when the annual statewide unemployment rate exceeds four percent for three consecutive calendar years as set forth in this subsection.
   2.  If the Code editor is notified by the director of the department of workforce development or the director’s designee that the condition in subsection 1 has been satisfied, the Code editor is directed to remove sections 422.12Q and 422.12R from the Code.
   3.  A taxpayer claiming the tax credit in section 422.12Q or 422.12R prior to repeal pursuant to subsection 2 is eligible to claim the credit after the repeal up to any remaining tax years the taxpayer would have been eligible to claim prior to the repeal, as long as the taxpayer remains eligible to claim the credit under the law prior to repeal. 
    Sec. 4.  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 creates the new resident and new graduate tax credits, which are available against the individual income tax. The bill applies to tax years beginning on or after January 1, 2025. 
   NEW RESIDENT TAX CREDIT. The bill defines “new resident” to mean an individual who became a resident of Iowa upon taking full-time employment in this state, who remains a resident of and employed full-time in this state while claiming the credit, and who has not been a resident of this state at any time during the previous 12-month period prior to establishing residency. 
   The new resident tax credit authorized in the bill is available to a new resident for up to four consecutive tax years following the establishment of residency in this state. A new resident may begin to claim the credit during either the first or second tax year of residency.
   The amount of the credit is equal to 100 percent of the income tax imposed in a tax year for up to four consecutive tax years. 
   An individual is eligible to claim the new resident tax credit one time in the individual’s lifetime for the tax year period described in the bill. 
   An individual claiming the new resident tax credit may claim an exemption from withholding on the state W-4 form. 
   Any new resident tax credit in excess of tax liability is not refundable.
   An individual is not eligible to claim the credit if the person is receiving public assistance after the first tax year the credit is claimed. The bill defines “public assistance” to mean the supplemental nutrition assistance program, the Medicaid program, or the family investment program. 
   NEW GRADUATE TAX CREDIT. The bill defines “new graduate” to mean an individual who is a recent graduate from an Iowa-based community college, college, university, or an apprenticeship program as defined in Code section 84E.2, who is a resident of and employed in this state, and who is 30 years of age or less during the first tax year when claiming the tax credit. 
   The new graduate tax credit authorized in the bill is available to a new graduate for up to four consecutive tax years following graduation. A new graduate may begin to claim the credit during either the first or second tax year after graduation.
   The amount of the credit is equal to 100 percent of the income tax imposed in a tax year for up to four consecutive tax years. 
   An individual is eligible to claim the new graduate tax credit one time in the individual’s lifetime for the tax year period described in the bill. 
   An individual claiming the new graduate tax credit may claim an exemption from withholding on the state W-4 form.
   Any new graduate tax credit in excess of tax liability is not refundable.
   An individual is not eligible to claim the credit if the person is receiving public assistance after the first tax year the credit is claimed. The bill defines “public assistance” to mean the supplemental nutrition assistance program, the Medicaid program, or the family investment program. 
   CONTINGENT FUTURE REPEAL —— CODE EDITOR DIRECTIVE —— APPLICABILITY AFTER REPEAL. The bill repeals the new resident tax credit and the new graduate tax credit January 1 following the occurrence of the statewide average annual unemployment rate equaling or exceeding 4 percent for three consecutive calendar years as calculated by the United States department of labor, bureau of labor statistics, beginning with calendar year 2025. The director of the department of workforce development or the director’s designee shall notify the Code editor when the annual statewide unemployment rate exceeds 4 percent for three consecutive calendar years.
   If the Code editor receives notification under the bill, the Code editor is directed to remove the tax credits.
   A taxpayer claiming a tax credit prior to repeal under the bill is eligible to claim the credit after the repeal up to any remaining tax years the taxpayer would have been eligible to claim prior to the repeal, as long as the taxpayer remains eligible to claim the credit under the law prior to repeal.
   APPLICABILITY. The bill applies retroactively to tax years beginning on or after January 1, 2025.