SSB 3105 (LSB 5960XC (3) 91)

SENATE FILE _____ 

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON BOUSSELOT)

A BILL FOR

An Act creating a state corporate income tax deduction for net controlled foreign corporation tested income, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.35, subsection 12, Code 2026, is amended to read as follows:
   12.  Subtract, to the extent included, global intangible low-taxed income under section 951A of the Internal Revenue Code.
    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 state corporate income tax deduction for net controlled foreign corporation tested income (NCTI).
   Currently, Code section 422.35(12) specifically references global intangible low-taxed income (GILTI) under section 951A of the Internal Revenue Code (IRC) for purposes of a state corporate income tax deduction allowed under that Code section. Recent federal legislation replaced GILTI with NCTI under section 951A of the IRC. NCTI is the aggregate amount of net income subject to federal tax that is earned by a taxpayer from controlled foreign corporations of the taxpayer, and is applied more broadly to foreign income than GILTI.
   Since the federal legislation replaced GILTI with NCTI in the same section of the IRC (951A), the state corporate income tax deduction no longer applies because Code section 422.35(12) specifically references GILTI income under section 951A of the IRC. The bill strikes the specific reference to GILTI but continues to allow the deduction for income under section 951A of the IRC which is now recharacterized as NCTI.