House File 2641 - Reprinted HOUSE FILE 2641 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 696) (As Amended and Passed by the House June 11, 2020 ) A BILL FOR An Act relating to state taxation and related laws of the 1 state, including the administration by the department of 2 revenue of certain tax credits and refunds, income taxes, 3 moneys and credits taxes, sales and use taxes, partnership 4 and pass-through entity audits, and by modifying provisions 5 relating to the reinstatement of business entities, the 6 assessment and valuation of property, the Iowa reinvestment 7 Act, port authorities, and animals and food, and providing 8 penalties, and including effective date and retroactive 9 applicability provisions. 10 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 11 HF 2641 (7) 88 jm/jh/md
H.F. 2641 DIVISION I 1 DEPARTMENT OF REVENUE ADMINISTRATION AND PENALTY PROVISIONS 2 Section 1. Section 421.6, Code 2020, is amended to read as 3 follows: 4 421.6 Definition of return. 5 For purposes of this title , unless the context otherwise 6 requires, “return” means any tax or information return, amended 7 return, declaration of estimated tax, or claim for refund 8 that is required by, provided for, or permitted under, the 9 provisions of this title or section 533.329, and which is filed 10 with the department by, on behalf of, or with respect to any 11 person. “Return” includes any amendment or supplement to these 12 items, including supporting schedules, attachments, or lists 13 which are supplemental to or part of the filed return. 14 Sec. 2. Section 421.17, Code 2020, is amended by adding the 15 following new subsection: 16 NEW SUBSECTION . 36. To enter into an agreement pursuant 17 to chapter 28E with the state fair organized under chapter 173 18 or with a fair defined in section 174.1, to collect and remit 19 taxes and fees from sellers making sales at retail on property 20 owned, controlled, or operated by a fair or through events 21 conducted by a fair. 22 Sec. 3. Section 421.27, subsection 1, Code 2020, is amended 23 to read as follows: 24 1. Failure to timely file a return or deposit form. 25 a. If a person fails to file with the department on or 26 before the due date a return or deposit form there shall be 27 added to the tax shown due or required to be shown due a penalty 28 of ten percent of the tax shown due or required to be shown due. 29 b. In the case of a specified business with no tax shown 30 due or required to be shown due that fails to timely file an 31 income return, the specified business shall pay the greater of 32 the following penalty amounts: 33 (1) Two hundred dollars. 34 (2) An amount equal to ten percent of the imputed Iowa 35 -1- HF 2641 (7) 88 jm/jh/md 1/ 93
H.F. 2641 liability of the specified business, not to exceed twenty-five 1 thousand dollars. 2 c. The penalty, if assessed pursuant to paragraph “a” or 3 “b” , shall be waived by the department upon a showing of any of 4 the following conditions: 5 a. (1) At An amount of tax greater than zero is required to 6 be shown due and at least ninety percent of the tax required to 7 be shown due has been paid by the due date of the tax. 8 b. (2) Those taxpayers who are required to file quarterly 9 returns, or monthly or semimonthly deposit forms may have one 10 late return or deposit form within a three-year period. The 11 use of any other penalty exception will not count as a late 12 return or deposit form for purposes of this exception. 13 c. (3) The death of a taxpayer, death of a member of 14 the immediate family of the taxpayer, or death of the person 15 directly responsible for filing the return and paying the tax, 16 when the death interferes with timely filing. 17 d. (4) The onset of serious, long-term illness or 18 hospitalization of the taxpayer, of a member of the immediate 19 family of the taxpayer, or of the person directly responsible 20 for filing the return and paying the tax. 21 e. (5) Destruction of records by fire, flood, or other act 22 of God. 23 f. (6) The taxpayer presents proof that the taxpayer 24 relied upon applicable, documented, written advice specifically 25 made to the taxpayer, to the taxpayer’s preparer, or to an 26 association representative of the taxpayer from the department, 27 state department of transportation, county treasurer, or 28 federal internal revenue service, whichever is appropriate, 29 that has not been superseded by a court decision, ruling by a 30 quasi-judicial body, or the adoption, amendment, or repeal of 31 a rule or law. 32 g. (7) Reliance upon results in a previous audit was a 33 direct cause for the failure to file where the previous audit 34 expressly and clearly addressed the issue and the previous 35 -2- HF 2641 (7) 88 jm/jh/md 2/ 93
H.F. 2641 audit results have not been superseded by a court decision, or 1 the adoption, amendment, or repeal of a rule or law. 2 h. (8) Under rules prescribed by the director, the taxpayer 3 presents documented proof of substantial authority to rely 4 upon a particular position or upon proof that all facts and 5 circumstances are disclosed on a return or deposit form. 6 i. (9) The return, deposit form, or payment is timely, 7 but erroneously, mailed with adequate postage to the internal 8 revenue service, another state agency, or a local government 9 agency and the taxpayer provides proof of timely mailing with 10 adequate postage. 11 j. (10) The tax has been paid by the wrong licensee and the 12 payments were timely remitted to the department for one or more 13 tax periods prior to notification by the department. 14 k. (11) The failure to file was discovered through a 15 sanctioned self-audit program conducted by the department. 16 l. (12) If the availability of funds in payment of tax 17 required to be made through electronic funds transfer is 18 delayed and the delay of availability is due to reasons beyond 19 the control of the taxpayer. “Electronic funds transfer” means 20 any transfer of funds, other than a transaction originated 21 by check, draft, or similar paper instrument, that is 22 initiated through an electronic terminal telephone, computer, 23 magnetic tape, or similar device for the purpose of ordering, 24 instructing, or authorizing a financial institution to debit or 25 credit an account. 26 m. (13) The failure to file a timely inheritance tax return 27 resulting solely from a disclaimer that required the personal 28 representative to file an inheritance tax return. The penalty 29 shall be waived if such return is filed and any tax due is paid 30 within the later of nine months from the date of death or sixty 31 days from the delivery or filing of the disclaimer pursuant to 32 section 633E.12 . 33 n. (14) That an Iowa inheritance tax return is filed for 34 an estate within the later of nine months from the date of 35 -3- HF 2641 (7) 88 jm/jh/md 3/ 93
H.F. 2641 death or sixty days from the filing of a disclaimer by the 1 beneficiary of the estate refusing to take the property or 2 right or interest in the property. 3 Sec. 4. Section 421.27, subsections 4 and 6, Code 2020, are 4 amended to read as follows: 5 4. Willful failure to file or deposit. 6 a. (1) In case of willful failure to file a return 7 or deposit form with the intent to evade tax or a filing 8 requirement , or in case of willfully filing a false return 9 or deposit form with the intent to evade tax, in lieu of the 10 penalties otherwise provided in this section , a penalty of 11 seventy-five percent shall be added to the amount shown due or 12 required to be shown as tax on the return or deposit form. 13 (2) In case of a willful failure by a specified business to 14 file an income return with no tax shown due or required to be 15 shown due with intent to evade a filing requirement, or in case 16 of willfully filing a false income return with no tax shown due 17 or required to be shown due with the intent to evade reporting 18 of Iowa-source income, the penalty imposed shall be the greater 19 of the following amounts: 20 (a) One thousand five hundred dollars. 21 (b) An amount equal to seventy-five percent of the imputed 22 Iowa liability of the specified business. 23 (3) If penalties are applicable for failure to file a 24 return or deposit form and failure to pay the tax shown due or 25 required to be shown due on the return or deposit form, the 26 penalty provision for failure to file shall be in lieu of the 27 penalty provisions for failure to pay the tax shown due or 28 required to be shown due on the return or deposit form, except 29 in the case of willful failure to file a return or deposit form 30 or willfully filing a false return or deposit form with intent 31 to evade tax. 32 b. The penalties imposed under this subsection are not 33 subject to waiver. 34 6. Improper receipt of payments Liability —— fraudulent 35 -4- HF 2641 (7) 88 jm/jh/md 4/ 93
H.F. 2641 practice . A person who makes an erroneous application for 1 refund, credit, reimbursement, rebate, or other payment shall 2 be liable for any overpayment received or tax liability reduced 3 plus interest at the rate in effect under section 421.7 . 4 a. In addition, a person who willfully commits a fraudulent 5 practice and is liable for a penalty equal to seventy-five 6 percent of the refund, credit, exemption, reimbursement, 7 rebate, or other payment or benefit being claimed if the person 8 does any of the following: 9 (1) Willfully makes a false or frivolous application for 10 refund, credit , exemption , reimbursement, rebate, or other 11 payment or benefit with intent to evade tax or with intent to 12 receive a refund, credit, exemption, reimbursement, rebate, 13 or other payment or benefit, to which the person is not 14 entitled is guilty of a fraudulent practice and is liable for a 15 penalty equal to seventy-five percent of the refund, credit, 16 reimbursement, rebate, or other payment being claimed . 17 (2) Willfully submits any false information, document, 18 or document containing false information in support of an 19 application for refund, credit, exemption, reimbursement, 20 rebate, or other payment or benefit with the intent to evade 21 tax. 22 (3) Willfully submits with any false information, document, 23 or document containing false information in support of an 24 application for refund with the intent to receive a refund, 25 credit, exemption, reimbursement, rebate, or other payment 26 benefit, to which the person is not entitled. 27 b. Payments, penalties, and interest due under this 28 subsection may be collected and enforced in the same manner as 29 the tax imposed. 30 Sec. 5. Section 421.27, Code 2020, is amended by adding the 31 following new subsections: 32 NEW SUBSECTION . 8. Definitions. As used in this section: 33 a. “Imputed Iowa liability” means any of the following: 34 (1) In the case of corporations other than corporations 35 -5- HF 2641 (7) 88 jm/jh/md 5/ 93
H.F. 2641 described in section 422.34 or section 422.36, subsection 5, 1 the corporation’s Iowa net income after the application of the 2 Iowa business activity ratio, if applicable, multiplied by the 3 top income tax rate imposed under section 422.33 for the tax 4 year. 5 (2) In the case of financial institutions as defined in 6 section 422.61, the financial institution’s Iowa net income 7 after the application of the Iowa business activity ratio, if 8 applicable, multiplied by the franchise tax rate imposed under 9 section 422.63 for the tax year. 10 (3) In this case of all other entities, including 11 corporations described in section 422.36, subsection 5, and all 12 other entities required to file an information return under 13 section 422.15, subsection 2, the entity’s Iowa net income 14 after the application of the Iowa business activity ratio, if 15 applicable, multiplied by the top income tax rate imposed under 16 section 422.5A for the tax year. 17 b. “Income return” means an income tax return or information 18 return required under section 422.15, subsection 2, or section 19 422.36, 422.37, or 422.62. 20 c. “Specified business” means a partnership or other entity 21 required to file an information return under section 422.15, 22 subsection 2, a corporation required to file a return under 23 section 422.36 or 422.37, or a financial institution required 24 to file a return under section 422.62. 25 NEW SUBSECTION . 9. Additional penalty. In addition to the 26 penalties imposed by this section, if a taxpayer fails to file 27 a return within ninety days of written notice by the department 28 that the taxpayer is required to do so, there shall be added to 29 the amount shown due or required to be shown due a penalty in 30 the amount of one thousand dollars. 31 Sec. 6. NEW SECTION . 421.27A Perjury. 32 1. For purposes of this title, a form, application, or any 33 other documentation required or requested by the department 34 shall be required to be certified under penalty of perjury that 35 -6- HF 2641 (7) 88 jm/jh/md 6/ 93
H.F. 2641 the information contained in the form, application, or other 1 documentation is true and correct. 2 2. A person commits a class “D” felony under any of the 3 following circumstances: 4 a. The person makes a form, application, or other document 5 containing false information in support of an application for 6 refund, credit, exemption, reimbursement, rebate, or other 7 payment or benefit with intent to evade tax. 8 b. The person makes a form, application, or other document 9 containing false information with intent to unlawfully receive 10 a refund, credit, exemption, reimbursement, rebate, or other 11 payment or benefit, to which the person is not entitled. 12 c. The person knowingly makes any false affidavit. 13 d. The person knowingly swears or affirms falsely to any 14 matter or thing required by the terms of this title to be sworn 15 to or affirmed. 16 Sec. 7. NEW SECTION . 421.59 Power of attorney —— authority 17 to act on behalf of taxpayer. 18 1. a. A taxpayer may authorize an individual to act on 19 behalf of the taxpayer by filing a power of attorney with the 20 department, on a form prescribed by the department. 21 b. A taxpayer may at any time revoke a power of attorney 22 filed with the department pursuant to subsection 1. Upon 23 processing of the taxpayer’s revocation of a power of attorney, 24 the department shall cease honoring the power of attorney. 25 2. The department may authorize the following persons to act 26 and receive information on behalf of and exercise all of the 27 rights of a taxpayer, regardless of whether a power of attorney 28 has been filed pursuant to subsection 1: 29 a. A guardian, conservator, or custodian appointed by a 30 court, if a taxpayer has been deemed legally incompetent by a 31 court. The authority of the appointee to act on behalf of the 32 taxpayer shall be limited to the extent specifically stated in 33 the order of appointment. 34 (1) Upon request, a guardian, conservator, or custodian of 35 -7- HF 2641 (7) 88 jm/jh/md 7/ 93
H.F. 2641 a taxpayer shall submit to the department a copy of the court 1 order appointing the guardian, conservator, or custodian. 2 (2) The department may petition the court that appointed the 3 guardian, conservator, or custodian to verify the appointment 4 or to determine the scope of the appointment. 5 b. A receiver appointed pursuant to chapter 680. An 6 appointed receiver shall be limited to act on behalf of the 7 taxpayer by the authority stated in the order of appointment. 8 (1) Upon the request of the department, a receiver shall 9 submit to the department a copy of the court order appointing 10 the receiver. 11 (2) The department may petition the court that appointed the 12 receiver to verify the appointment or to determine the scope 13 of the appointment. 14 c. An individual who has been named as an authorized 15 representative on a fiduciary return of income filed under 16 section 422.14 or a tax return filed under chapter 450. 17 d. (1) An individual holding the following title or 18 position within a corporation, association, partnership, or 19 other business entity: 20 (a) A president or chief executive officer, or any other 21 officer of the corporation or association if the president or 22 chief executive officer certifies that the officer has the 23 authority to legally bind the corporation or association. 24 (b) A designated partner duly authorized to act on behalf 25 of the partnership. 26 (c) A person authorized to act on behalf of a limited 27 liability company in tax matters pursuant to a valid statement 28 of authority. 29 (2) An individual seeking to act on behalf of a taxpayer 30 pursuant to this paragraph shall file an affidavit with the 31 department attesting to the identity and qualifications of the 32 individual and any necessary certifications required under this 33 paragraph. The department may require any documents or other 34 evidence to demonstrate the individual has authority to act on 35 -8- HF 2641 (7) 88 jm/jh/md 8/ 93
H.F. 2641 behalf of the taxpayer before the department. 1 e. A licensed attorney who has appeared on behalf of the 2 taxpayer or the taxpayer’s estate in a court proceeding. 3 Authorization under this paragraph is limited to those matters 4 within the scope of the representation. 5 f. A parent or guardian of a taxpayer who has not reached 6 the age of majority where the parent or guardian has signed the 7 taxpayer’s return on behalf of the taxpayer. Authorization 8 under this paragraph is limited to those matters relating to 9 the return signed by the parent or guardian. Authorization 10 under this paragraph automatically terminates when the taxpayer 11 reaches the age of majority pursuant to section 599.1. 12 3. a. In lieu of executing a power of attorney pursuant 13 to subsection 1, the department may enter into a memorandum of 14 understanding with the taxpayer for each employee, officer, 15 or member of a third-party entity engaged with or otherwise 16 hired by a taxpayer to manage the tax matters of the taxpayer, 17 to permit the disclosure of confidential tax information to 18 the third-party entity and the authority to act on behalf of 19 the taxpayer. The memorandum of understanding shall adhere to 20 requirements as established by the director. 21 b. The memorandum of understanding shall be signed by 22 the director, the taxpayer, and the third-party entity or an 23 authorized representative of the third-party entity. 24 c. At any time, a taxpayer may unilaterally revoke 25 a memorandum of understanding entered into pursuant to 26 this subsection by filing a notice of revocation with the 27 department. Upon the filing of such a revocation by the 28 taxpayer, the department shall cease honoring the memorandum 29 of understanding. 30 4. The department shall adopt rules pursuant to chapter 17A 31 to administer this section. 32 Sec. 8. Section 421.60, subsection 2, paragraph a, 33 subparagraph (2), Code 2020, is amended to read as follows: 34 (2) The statement prepared in accordance with this 35 -9- HF 2641 (7) 88 jm/jh/md 9/ 93
H.F. 2641 paragraph shall be available on the department’s internet site. 1 The internet site for this information shall be distributed by 2 the department to all taxpayers at the first contact by the 3 department with respect to the determination or collection of 4 any tax, except in the case of simply providing tax forms. 5 Sec. 9. Section 421.60, Code 2020, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 11. Electronic communication. 8 Notwithstanding any provision of the law to the contrary, for 9 purposes of this title and sections 321.105A and 533.329, a 10 taxpayer may elect to receive any notices, correspondence, 11 or other communication electronically that the department is 12 required to send by regular mail. The director may establish 13 procedures and limitations for obtaining this election from the 14 taxpayer. 15 Sec. 10. Section 421.62, subsection 1, Code 2020, is amended 16 by adding the following new paragraph: 17 NEW PARAGRAPH . 0b. “Income tax return or claim for refund” 18 means any tax return or claim for refund under chapter 422, 19 excluding withholding returns under section 422.16. 20 Sec. 11. Section 421.62, subsection 1, paragraph c, 21 subparagraph (1), Code 2020, is amended to read as follows: 22 (1) “Tax return preparer” means any individual who, for 23 a fee or other consideration, prepares ten or more income 24 tax returns or claims for refund under chapter 422 during 25 a calendar year, or who assumes final responsibility for 26 completed work on such income tax returns or claims for refund 27 under chapter 422 on which preliminary work has been done by 28 another individual. 29 Sec. 12. Section 421.62, subsection 2, paragraph a, Code 30 2020, is amended to read as follows: 31 a. On or after January 1, 2020, a tax return preparer 32 is required to include the tax return preparer’s PTIN on 33 any income tax return or claim for refund prepared by the 34 tax return preparer and filed under chapter 422 with the 35 -10- HF 2641 (7) 88 jm/jh/md 10/ 93
H.F. 2641 department . 1 Sec. 13. Section 421.64, subsection 1, Code 2020, is amended 2 to read as follows: 3 1. For purposes of this section , “tax return preparer” means 4 the same as defined in section 421.61 421.62 . 5 Sec. 14. Section 422.20, subsections 1 and 2, Code 2020, are 6 amended to read as follows: 7 1. It shall be unlawful for any present or former officer 8 or employee of the state to willfully or recklessly divulge or 9 to make known in any manner whatever not provided by law to 10 any person the amount or source of income, profits, losses, 11 expenditures, or any particular thereof, set forth or disclosed 12 in any income return, or to permit any income return or copy 13 thereof or any book containing any abstract or particulars 14 thereof to be seen or examined by any person except as provided 15 by law; and it shall be unlawful for any person to willfully or 16 recklessly print or publish in any manner whatever not provided 17 by law any income return, or any part thereof or source of 18 income, profits, losses, or expenditures appearing in any 19 income return; and any person committing an offense against the 20 foregoing provision shall be guilty of a serious misdemeanor. 21 If the offender is an officer or employee of the state, such 22 person shall also be dismissed from office or discharged from 23 employment. Nothing herein shall prohibit turning over to duly 24 authorized officers of the United States or tax officials of 25 other states state information and income returns pursuant 26 to agreement between the director and the secretary of the 27 treasury of the United States or the secretary’s delegate or 28 pursuant to a reciprocal agreement with another state. 29 2. It is unlawful for an officer, employee, or agent, or 30 former officer, employee, or agent of the state to willfully 31 or recklessly disclose to any person, except as authorized 32 in subsection 1 of this section , any federal tax return 33 or return information as defined in section 6103(b) of the 34 Internal Revenue Code. It is unlawful for a person to whom 35 -11- HF 2641 (7) 88 jm/jh/md 11/ 93
H.F. 2641 any federal tax return or return information, as defined in 1 section 6103(b) of the Internal Revenue Code, is disclosed 2 in a manner unauthorized by subsection 1 of this section 3 to thereafter willfully or recklessly print or publish in 4 any manner not provided by law any such return or return 5 information. A person violating this provision is guilty of 6 a serious misdemeanor. 7 Sec. 15. Section 422.20, subsection 3, paragraph a, Code 8 2020, is amended to read as follows: 9 a. Unless otherwise expressly permitted by section 8A.504 , 10 section 8G.4 , section 11.41 , section 96.11, subsection 6 , 11 section 421.17, subsections 22, 23, and 26 , section 421.17, 12 subsection 27 , paragraph “k” , section 421.17, subsection 31 , 13 section 252B.9 , section 321.40, subsection 6 , sections 321.120 , 14 421.19 , 421.28 , 421.59, 422.72 , and 452A.63 , this section , or 15 another provision of law, a tax return, return information, or 16 investigative or audit information shall not be divulged to any 17 person or entity, other than the taxpayer, the department, or 18 internal revenue service for use in a matter unrelated to tax 19 administration. 20 Sec. 16. Section 422.20, Code 2020, is amended by adding the 21 following new subsections: 22 NEW SUBSECTION . 3A. The director may disclose the tax 23 return of a partnership, limited liability company, or S 24 corporation, any such return information, or any investigative 25 information related to the return, to any person who was a 26 partner, shareholder, or member of such an entity during any 27 part of the period covered by the return. 28 NEW SUBSECTION . 3B. a. Prior to being made available for 29 public inspection, the department shall redact from the record 30 in an appeal or contested case the following information from 31 any pleading, exhibit, attachment, motion, written evidence, 32 final order, decision, or opinion: 33 (1) A financial account number. 34 (2) An account number generated by the department to 35 -12- HF 2641 (7) 88 jm/jh/md 12/ 93
H.F. 2641 identify an audit or examination. 1 (3) A social security number. 2 (4) A federal employer identification number. 3 (5) The name of a minor. 4 (6) A medical record or other medical information. 5 b. Upon a motion filed by the taxpayer, the department 6 may redact from the record in an appeal or contested case any 7 other information from a pleading, exhibit, attachment, motion, 8 or written evidence, if the taxpayer proves by clear and 9 convincing evidence that the release of such information would 10 disclose a trade secret or be a clear, unwarranted invasion of 11 personal privacy. 12 c. Notwithstanding paragraph “a” , when making final orders, 13 decisions, or opinions available for public inspection, the 14 department may disclose the items in paragraph “a” if the 15 department determines such information is necessary to the 16 resolution or decision of the appeal or case. 17 d. Except as described in paragraphs “a” and “b” , all 18 information contained in a pleading, exhibit, attachment, 19 motion, written evidence, final order, decision, opinion, 20 and the record in an appeal or contested case is subject to 21 examination to the extent provided by chapter 22. 22 Sec. 17. Section 422.25, subsection 1, Code 2020, is amended 23 by adding the following new paragraph: 24 NEW PARAGRAPH . c. The period of examination and 25 determination is unlimited under this title in the case of 26 any action by the department to recover or rescind any tax 27 expenditure as defined by section 2.48, subsection 1, or any 28 other incentive or assistance, due to a failure to meet or 29 maintain the requirements of a program administered by the 30 economic development authority. 31 Sec. 18. Section 422.69, subsection 1, Code 2020, is amended 32 to read as follows: 33 1. All fees, taxes, interest, and penalties imposed under 34 this chapter shall be paid to the department in the form of 35 -13- HF 2641 (7) 88 jm/jh/md 13/ 93
H.F. 2641 remittances payable to the state treasurer department and the 1 department shall transmit each payment daily to the state 2 treasurer. 3 Sec. 19. Section 422.72, subsection 1, paragraph a, 4 subparagraph (1), Code 2020, is amended to read as follows: 5 (1) It is unlawful for the director, or any person having 6 an administrative duty under this chapter , or any present or 7 former officer or other employee of the state authorized by the 8 director to examine returns, to willfully or recklessly divulge 9 in any manner whatever, the business affairs, operations, or 10 information obtained by an investigation under this chapter of 11 records and equipment of any person visited or examined in the 12 discharge of official duty, or the amount or source of income, 13 profits, losses, expenditures or any particular thereof, set 14 forth or disclosed in any return, or to willfully or recklessly 15 permit any return or copy of a return or any book containing 16 any abstract or particulars thereof to be seen or examined by 17 any person except as provided by law. 18 Sec. 20. Section 422.72, Code 2020, is amended by adding the 19 following new subsection: 20 NEW SUBSECTION . 7A. a. Prior to being made available for 21 public inspection, the department shall redact from the record 22 in an appeal or contested case the following information from 23 any pleading, exhibit, attachment, motion, written evidence, 24 final order, decision, or opinion: 25 (1) A financial account number. 26 (2) An account number generated by the department to 27 identify an audit or examination. 28 (3) A social security number. 29 (4) A federal employer identification number. 30 (5) The name of a minor. 31 (6) A medical record or other medical information. 32 b. Upon a motion filed by the taxpayer, the department 33 may redact from the record in an appeal or contested case any 34 other information from a pleading, exhibit, attachment, motion, 35 -14- HF 2641 (7) 88 jm/jh/md 14/ 93
H.F. 2641 or written evidence, if the taxpayer proves by clear and 1 convincing evidence that the release of such information would 2 disclose a trade secret or be a clear, unwarranted invasion of 3 personal privacy. 4 c. Notwithstanding paragraph “a” , when making final orders, 5 decisions, or opinions available for public inspection, the 6 department may disclose the items in paragraph “a” if the 7 department determines such information is necessary to the 8 resolution or decision of the appeal or case. 9 d. Except as described in paragraphs “a” and “b” , all 10 information contained in a pleading, exhibit, attachment, 11 motion, written evidence, final order, decision, opinion, 12 and the record in an appeal or contested case is subject to 13 examination to the extent provided by chapter 22. 14 Sec. 21. Section 423.37, Code 2020, is amended by adding the 15 following new subsection: 16 NEW SUBSECTION . 4. The period of limitation on examination 17 and determination is unlimited under this title in the case 18 of any action by the department to recover or rescind any tax 19 expenditure as defined by section 2.48, subsection 1, or any 20 other incentive or assistance, due to a failure to meet or 21 maintain the requirements of a program administered by the 22 economic development authority. 23 Sec. 22. Section 428A.1, subsection 3, Code 2020, is amended 24 to read as follows: 25 3. The declaration of value shall state the full 26 consideration paid for the real property transferred. If 27 agricultural land, as defined in section 9H.1 , is purchased by 28 a corporation, limited partnership, trust, alien or nonresident 29 alien, the declaration of value shall include the name and 30 address of the buyer, the name and address of the seller, a 31 legal description of the agricultural land, and identify the 32 buyer as a corporation, limited partnership, trust, alien, or 33 nonresident alien. The county recorder shall not record the 34 declaration of value, but shall enter on the declaration of 35 -15- HF 2641 (7) 88 jm/jh/md 15/ 93
H.F. 2641 value information the director of revenue requires for the 1 production of the sales/assessment ratio study and transmit 2 all declarations of value to the city or county assessor in 3 whose jurisdiction the property is located. The city or county 4 assessor shall enter on the declaration of value provide the 5 information the director of revenue requires for the production 6 of the sales/assessment ratio study and transmit one copy of 7 each declaration of value to the director of revenue, at times 8 as directed by the director of revenue. The assessor shall 9 retain one copy of each declaration of value for three years 10 from December 31 of the year in which the transfer of realty 11 for which the declaration was filed took place. The director 12 of revenue shall, upon receipt of the information required to 13 be filed under this chapter by the city or county assessor, 14 send to the office of the secretary of state that part of the 15 declaration of value which identifies a corporation, limited 16 partnership, trust, alien, or nonresident alien as a purchaser 17 of agricultural land as defined in section 9H.1 . 18 Sec. 23. Section 441.48, Code 2020, is amended to read as 19 follows: 20 441.48 Notice of adjustment. 21 1. Before the department of revenue shall adjust the 22 valuation of any class of property any such percentage, the 23 department shall first serve ten days’ notice by mail, on the 24 county auditor of the county whose valuation is proposed to be 25 adjusted. The department shall hold an adjourned meeting after 26 such 27 2. If the county or assessing jurisdiction intends to 28 protest the proposed adjustment, the board of supervisors or 29 city council, as applicable, shall provide the department with 30 notice of intent to protest prior to expiration of the ten 31 days’ notice. 32 3. After expiration of the ten days’ notice, at which time 33 the county or assessing jurisdiction may appear by its city 34 council or board of supervisors, city or county attorney, and 35 -16- HF 2641 (7) 88 jm/jh/md 16/ 93
H.F. 2641 other assessing jurisdiction, or city or county officials, and 1 make written or oral protest against such proposed adjustment. 2 4. The protest shall consist simply of a statement of the 3 error, or errors, complained of with such facts as may lead to 4 their correction. At the adjourned meeting 5 5. After written protest is received, or an oral protest 6 is heard, the final action may be taken in reference to the 7 proposed adjustment. 8 Sec. 24. Section 489.706, subsection 2, Code 2020, is 9 amended to read as follows: 10 2. The secretary of state shall refer the federal tax 11 identification number contained in the application for 12 reinstatement to the departments department of revenue and 13 workforce development. The departments department of revenue 14 and workforce development shall report to the secretary of 15 state the tax status of the limited liability company. If 16 either the department reports to the secretary of state that 17 a filing delinquency or liability exists against the limited 18 liability company, the secretary of state shall not cancel the 19 declaration of dissolution until the filing delinquency or 20 liability is satisfied. 21 Sec. 25. Section 490.1422, subsection 2, paragraph a, Code 22 2020, is amended to read as follows: 23 a. The secretary of state shall refer the federal tax 24 identification number contained in the application for 25 reinstatement to the departments department of revenue and 26 workforce development. The departments department of revenue 27 and workforce development shall report to the secretary 28 of state the tax status of the corporation. If either the 29 department reports to the secretary of state that a filing 30 delinquency or liability exists against the corporation, 31 the secretary of state shall not cancel the certificate of 32 dissolution until the filing delinquency or liability is 33 satisfied. 34 Sec. 26. Section 501.813, subsection 2, paragraph a, Code 35 -17- HF 2641 (7) 88 jm/jh/md 17/ 93
H.F. 2641 2020, is amended to read as follows: 1 a. The secretary of state shall refer the federal tax 2 identification number contained in the application for 3 reinstatement to the departments department of revenue and 4 workforce development. The departments department of revenue 5 and workforce development shall report to the secretary 6 of state the tax status of the cooperative. If either the 7 department reports to the secretary of state that a filing 8 delinquency or liability exists against the cooperative, 9 the secretary of state shall not cancel the certificate of 10 dissolution until the filing delinquency or liability is 11 satisfied. 12 Sec. 27. Section 504.1423, subsection 2, paragraph a, Code 13 2020, is amended to read as follows: 14 a. The secretary of state shall refer the federal tax 15 identification number contained in the application for 16 reinstatement to the departments department of revenue and 17 workforce development. The departments department of revenue 18 and workforce development shall report to the secretary 19 of state the tax status of the corporation. If either the 20 department reports to the secretary of state that a filing 21 delinquency or liability exists against the corporation, 22 the secretary of state shall not cancel the certificate of 23 dissolution until the filing delinquency or liability is 24 satisfied. 25 Sec. 28. Section 533.329, Code 2020, is amended by adding 26 the following new subsection: 27 NEW SUBSECTION . 03. Returns shall be in the form the 28 director of revenue prescribes, and shall be filed with the 29 department of revenue on or before the last day of the fourth 30 month after the expiration of the tax year. The moneys and 31 credits tax is due and payable on the last day of the fourth 32 month after the expiration of the tax year. 33 Sec. 29. Section 533.329, subsection 3, Code 2020, is 34 amended to read as follows: 35 -18- HF 2641 (7) 88 jm/jh/md 18/ 93
H.F. 2641 3. The department of revenue shall administer and enforce 1 the provisions of this section , and except as explicitly 2 provided in this section or another provision of law, shall 3 apply all applicable penalty, interest, and administrative 4 provisions of chapters 421 and 422 as nearly as possible in 5 administering and enforcing the moneys and credits tax imposed 6 by this section . 7 Sec. 30. LEGISLATIVE INTENT. It is the intent of the 8 general assembly that the sections of this division amending 9 Code sections 422.25 and 423.37 are conforming amendments 10 consistent with current state law, and that the amendments 11 do not change the application of current law but instead 12 reflect current law both before and after the enactment of this 13 division of this Act. 14 Sec. 31. EFFECTIVE DATE. The following, being deemed of 15 immediate importance, take effect upon enactment: 16 1. The section of this division of this Act amending section 17 422.25. 18 2. The section of this division of this Act amending section 19 423.37. 20 Sec. 32. APPLICABILITY. The following applies to any 21 return for which a written notice that the taxpayer is required 22 to file such return is issued by the department on or after 23 January 1, 2022: 24 The portion of the section of this division of this Act 25 enacting section 421.27, subsection 9. 26 Sec. 33. APPLICABILITY. The following apply to tax years 27 beginning on or after January 1, 2022: 28 1. The section of this division of this Act amending section 29 421.27, subsection 1. 30 2. The portion of the section of this division of this Act 31 amending section 421.27, subsection 4. 32 3. The portion of the section of this division of this Act 33 enacting section 421.27, subsection 8. 34 DIVISION II 35 -19- HF 2641 (7) 88 jm/jh/md 19/ 93
H.F. 2641 SALES AND USE TAX 1 Sec. 34. Section 321G.4, subsection 2, Code 2020, is amended 2 to read as follows: 3 2. a. The owner of the snowmobile shall file an application 4 for registration with the department through the county 5 recorder of the county of residence in the manner established 6 by the commission. The application shall be completed by the 7 owner and shall be accompanied by a fee of fifteen dollars and 8 a writing fee as provided in section 321G.27 . A snowmobile 9 shall not be registered by the county recorder until the 10 county recorder is presented with receipts, bills of sale, 11 or other satisfactory evidence that the sales or use tax has 12 been paid for the purchase of the snowmobile or that the 13 owner is exempt from paying the tax. A snowmobile that has 14 an expired registration certificate from another state may be 15 registered in this state upon proper application, payment of 16 all applicable registration and writing fees, and payment of a 17 penalty of five dollars. 18 b. If the owner of the snowmobile is unable to present 19 satisfactory evidence that the sales or use tax has been paid, 20 the county recorder shall collect the tax. On or before the 21 tenth day of each month, the county recorder shall remit to 22 the department of revenue the amount of the taxes collected 23 during the preceding month, together with an itemized statement 24 on forms furnished by the department of revenue showing the 25 name of each taxpayer, the make and purchase price of each 26 snowmobile, the amount of tax paid, and such other information 27 as the department of revenue requires. 28 Sec. 35. Section 321I.4, subsection 2, Code 2020, is amended 29 to read as follows: 30 2. a. The owner of the all-terrain vehicle shall file an 31 application for registration with the department through the 32 county recorder of the county of residence, or in the case 33 of a nonresident owner, in the county of primary use, in the 34 manner established by the commission. The application shall 35 -20- HF 2641 (7) 88 jm/jh/md 20/ 93
H.F. 2641 be completed by the owner and shall be accompanied by a fee 1 of fifteen dollars and a writing fee as provided in section 2 321I.29 . An all-terrain vehicle shall not be registered by the 3 county recorder until the county recorder is presented with 4 receipts, bills of sale, or other satisfactory evidence that 5 the sales or use tax has been paid for the purchase of the 6 all-terrain vehicle or that the owner is exempt from paying the 7 tax. An all-terrain vehicle that has an expired registration 8 certificate from another state may be registered in this state 9 upon proper application, payment of all applicable registration 10 and writing fees, and payment of a penalty of five dollars. 11 b. If the owner of the all-terrain vehicle is unable to 12 present satisfactory evidence that the sales or use tax has 13 been paid, the county recorder shall collect the tax. On or 14 before the tenth day of each month, the county recorder shall 15 remit to the department of revenue the amount of the taxes 16 collected during the preceding month, together with an itemized 17 statement on forms furnished by the department of revenue 18 showing the name of each taxpayer, the make and purchase price 19 of each all-terrain vehicle, the amount of tax paid, and such 20 other information as the department of revenue requires. 21 Sec. 36. Section 423.2, subsection 6, paragraph bs, Code 22 2020, is amended to read as follows: 23 bs. Services arising from or related to installing, 24 maintaining, servicing, repairing, operating, upgrading, or 25 enhancing either specified digital products or software sold 26 as tangible personal property . 27 Sec. 37. Section 423.2, subsection 8, paragraph d, 28 subparagraph (1), Code 2020, is amended to read as follows: 29 (1) The retail sale of tangible personal property or 30 specified digital product and a service , where the tangible 31 personal property or specified digital product is essential 32 to the use of the service, and is provided exclusively in 33 connection with the service, and the true object of the 34 transaction is the service. 35 -21- HF 2641 (7) 88 jm/jh/md 21/ 93
H.F. 2641 Sec. 38. Section 423.3, subsection 3A, Code 2020, is amended 1 to read as follows: 2 3A. The sales price from the sale of a commercial recreation 3 service offering the opportunity to hunt a preserve whitetail 4 as defined in section 484C.1 if the sale occurred between July 5 1, 2005, and December 31, 2015. 6 Sec. 39. Section 423.3, subsection 31, unnumbered paragraph 7 1, Code 2020, is amended to read as follows: 8 The sales price of tangible personal property or specified 9 digital products sold to and of services furnished to a tribal 10 government as defined in 216A.161, or the sales price of 11 tangible personal property or specified digital products sold 12 to and of services furnished , and used for public purposes 13 sold to a tax-certifying or tax-levying body of the state or a 14 governmental subdivision of the state, including the following: 15 regional transit systems, as defined in section 324A.1 , ; 16 the state board of regents , ; department of human services , ; 17 state department of transportation , ; any municipally owned 18 solid waste facility which sells all or part of its processed 19 waste as fuel to a municipally owned public utility , ; and all 20 divisions, boards, commissions, agencies, or instrumentalities 21 of state, federal, county, or municipal government , or tribal 22 government which have no earnings going to the benefit of an 23 equity investor or stockholder, except any of the following: 24 Sec. 40. Section 423.3, Code 2020, is amended by adding the 25 following new subsection: 26 NEW SUBSECTION . 60A. The sales price from sales of diapers 27 eligible for medical assistance as defined in section 249A.2. 28 Sec. 41. Section 423.3, subsection 80, paragraphs b and c, 29 Code 2020, are amended to read as follows: 30 b. Subject to the limitations in paragraph “c” , if a 31 contractor, subcontractor, or builder is to use building 32 materials, supplies, and equipment , or services in the 33 performance of a written construction contract with a 34 designated exempt entity, the person shall purchase such 35 -22- HF 2641 (7) 88 jm/jh/md 22/ 93
H.F. 2641 items of tangible personal property or services without 1 liability for the tax if such property or services will be 2 used in the performance of the written construction contract 3 and a purchasing agent authorization letter and an exemption 4 certificate, issued by the designated exempt entity, are 5 presented to the retailer. 6 c. (1) With regard to a written construction contract 7 with a designated exempt entity described in paragraph “a” , 8 subparagraph (1), the sales price of building materials, 9 supplies, or equipment , or services is exempt from tax by this 10 subsection only to the extent the building materials, supplies, 11 or equipment , or services are completely consumed in the 12 performance of the construction contract with the designated 13 exempt entity , and only if the property that is the subject 14 of the construction project becomes public property or the 15 property of the designated exempt entity . 16 (2) With regard to a written construction contract with 17 a designated exempt entity described in paragraph “a” , 18 subparagraph (2), the sales price of building materials, 19 supplies, or equipment , or services is exempt from tax by this 20 subsection only to the extent the building materials, supplies, 21 or equipment , or services are completely consumed in the 22 performance of a construction contract to construct a project, 23 as defined in section 15J.2, subsection 10 , which project has 24 been approved by the economic development authority board in 25 accordance with chapter 15J . 26 Sec. 42. Section 423.3, Code 2020, is amended by adding the 27 following new subsection: 28 NEW SUBSECTION . 107. The sales price from the sale of 29 feminine hygiene products. For purposes of this subsection, 30 “feminine hygiene products” means sanitary napkins, tampons, or 31 other similar items used for feminine hygiene. 32 Sec. 43. Section 423.4, subsection 1, Code 2020, is amended 33 to read as follows: 34 1. a. For purposes of this subsection, a “designated exempt 35 -23- HF 2641 (7) 88 jm/jh/md 23/ 93
H.F. 2641 entity” means any of the following: 1 (1) A private nonprofit educational institution in this 2 state , . 3 (2) A nonprofit Iowa affiliate of a nonprofit international 4 organization whose primary activity is the promotion of the 5 construction, remodeling, or rehabilitation of one-family or 6 two-family dwellings for low-income families , . 7 (3) A nonprofit private museum in this state , . 8 (4) A tax-certifying or tax-levying body or governmental 9 subdivision of the state, including the state board of regents, 10 state department of human services, state department of 11 transportation , a . 12 (5) A municipally owned solid waste facility which sells all 13 or part of its processed waste as fuel to a municipally owned 14 public utility , and all . 15 (6) The state of Iowa. 16 (7) Any political subdivision of the state. 17 (8) All divisions, boards, commissions, agencies, or 18 instrumentalities of state, federal, county, or municipal 19 government which do not have earnings going to the benefit of 20 an equity investor or stockholder , . 21 (9) A tribal government as defined in section 216A.161, 22 and any instrumentalities of the tribal government which do 23 not have earnings going to the benefit of an equity investor 24 or stockholder. 25 b. A designated exempt entity may make application apply 26 to the department for the refund of the sales or use tax upon 27 the sales price of all sales of goods, wares, or merchandise 28 building materials, supplies, equipment , or from services 29 furnished to a contractor, used in the fulfillment performance 30 of a written contract with the state of Iowa, any political 31 subdivision of the state, or a division, board, commission, 32 agency, or instrumentality of the state or a political 33 subdivision, a private nonprofit educational institution in 34 this state, a nonprofit Iowa affiliate described in this 35 -24- HF 2641 (7) 88 jm/jh/md 24/ 93
H.F. 2641 subsection , or a nonprofit private museum in this state if the 1 property becomes an integral part of the project under contract 2 and at the completion of the project becomes public property, 3 is devoted to educational uses, becomes part of a low-income 4 one-family or two-family dwelling in the state, or becomes a 5 nonprofit private museum; except goods, wares, or merchandise, 6 designated exempt entity if all of the following apply: 7 (1) The building materials, supplies, equipment, or 8 services are completely consumed in the performance of a 9 construction project with the designated entity. 10 (2) The property that is subject of the construction project 11 becomes public property or the property of an exempt entity. 12 (3) The building materials, supplies, equipment, or 13 services furnished which are not used in the performance of 14 any contract in connection with the operation of any municipal 15 utility engaged in selling gas, electricity, or heat to 16 the general public or in connection with the operation of a 17 municipal pay television system; and except goods, wares, and 18 merchandise are not used in the performance of a contract for a 19 “project” under chapter 419 as defined in that chapter other 20 than goods, wares, or merchandise used in the performance of 21 a contract for a “project” under chapter 419 for which a bond 22 issue was approved by a municipality prior to July 1, 1968, or 23 for which the goods, wares, or merchandise becomes an integral 24 part of the project under contract and at the completion of the 25 project becomes public property or is devoted to educational 26 uses. 27 a. c. Such A contractor shall state under oath, on forms 28 provided by the department, the amount of such sales of goods, 29 wares, or merchandise, or services furnished and used in the 30 performance of such contract, and upon which sales or use tax 31 has been paid, and shall file such forms with the governmental 32 unit, private nonprofit educational institution, nonprofit Iowa 33 affiliate, or nonprofit private museum designated exempt entity 34 which has made any written contract for performance by the 35 -25- HF 2641 (7) 88 jm/jh/md 25/ 93
H.F. 2641 contractor. The forms shall be filed by the contractor with 1 the governmental unit, educational institution, nonprofit Iowa 2 affiliate, or nonprofit private museum designated exempt entity 3 before final settlement is made. 4 b. d. Such governmental unit, educational institution, 5 nonprofit Iowa affiliate, or nonprofit private museum A 6 designated exempt entity shall, not more than one year after 7 the final settlement has been made, make application apply 8 to the department for any refund of the amount of the sales 9 or use tax which shall have been paid upon any goods, wares, 10 or merchandise building materials, supplies, equipment , 11 or services furnished, the application to be made in the 12 manner and upon forms to be provided by the department, 13 and the department shall forthwith audit the claim and, if 14 approved, issue a warrant to the governmental unit, educational 15 institution, nonprofit Iowa affiliate, or nonprofit private 16 museum designated exempt entity in the amount of the sales or 17 use tax which has been paid to the state of Iowa under the 18 contract. 19 c. e. Refunds authorized under this subsection shall accrue 20 interest in accordance with section 421.60, subsection 2 , 21 paragraph “e” . 22 d. f. Any contractor who willfully makes a false report of 23 tax paid under the provisions of this subsection is guilty of 24 a simple misdemeanor and in addition shall be liable for the 25 payment of the tax and any applicable penalty and interest. 26 Sec. 44. Section 423.4, subsection 2, paragraphs a and b, 27 Code 2020, are amended to read as follows: 28 a. A contractor awarded a contract for a transportation 29 construction project is considered the consumer of all building 30 materials, building supplies, and equipment , and services and 31 shall pay sales tax to the supplier or remit consumer use tax 32 directly to the department. 33 b. The contractor is not required to file information with 34 the state department of transportation stating the amount of 35 -26- HF 2641 (7) 88 jm/jh/md 26/ 93
H.F. 2641 goods, wares, or merchandise, or services rendered, furnished, 1 or performed and building materials, supplies, equipment, or 2 services used in the performance of the contract or the amount 3 of sales or use tax paid. 4 Sec. 45. Section 423.4, subsection 6, paragraph a, 5 subparagraph (1), Code 2020, is amended to read as follows: 6 (1) The owner of a collaborative educational facility 7 in this state may make application to the department for the 8 refund of the sales or use tax upon the sales price of all sales 9 of goods, wares, or merchandise building materials, supplies, 10 equipment , or from services furnished to a contractor, used 11 in the fulfillment of a written construction contract with 12 the owner of the collaborative educational facility for the 13 original construction, or additions or modifications to, a 14 building or structure to be used as part of the collaborative 15 educational facility. 16 Sec. 46. Section 423.4, subsection 6, paragraphs b and c, 17 Code 2020, are amended to read as follows: 18 b. Such A contractor shall state under oath, on forms 19 provided by the department, the amount of such sales of goods, 20 wares, or merchandise building materials, supplies, equipment , 21 or services furnished and used in the performance of such 22 contract, and upon which sales or use tax has been paid, and 23 shall file such forms with the owner of the collaborative 24 educational facility which has made any written contract for 25 performance by the contractor. 26 c. (1) The owner of the collaborative educational facility 27 shall, not more than one year after the final settlement has 28 been made, make application to the department for any refund 29 of the amount of the sales or use tax which shall have been 30 paid upon any goods, wares, or merchandise building materials, 31 supplies, equipment , or services furnished, the application 32 to be made in the manner and upon forms to be provided by 33 the department, and the department shall forthwith audit the 34 claim and, if approved, issue a warrant to the owner of the 35 -27- HF 2641 (7) 88 jm/jh/md 27/ 93
H.F. 2641 collaborative educational facility in the amount of the sales 1 or use tax which has been paid to the state of Iowa under the 2 contract. 3 (2) Refunds authorized under this subsection shall accrue 4 interest in accordance with section 421.60, subsection 2 , 5 paragraph “e” . 6 Sec. 47. Section 423.5, subsection 1, paragraph b, Code 7 2020, is amended by striking the paragraph. 8 Sec. 48. Section 423.29, subsection 1, Code 2020, is amended 9 to read as follows: 10 1. Every seller who is a retailer and who is making taxable 11 sales of tangible personal property or specified digital 12 products in Iowa or who is a retailer maintaining a place 13 of business in this state making taxable sales of tangible 14 personal property or specified digital products shall, at 15 the time of making the sale, collect the sales tax. Every 16 seller who is a retailer that is not otherwise required to 17 collect sales tax under the provisions of this chapter and who 18 is selling tangible personal property or specified digital 19 products for use in Iowa shall, at the time of making the sale, 20 whether within or without the state, collect the use tax. 21 Sellers required to collect sales or use tax shall give to any 22 purchaser a receipt for the tax collected in the manner and 23 form prescribed by the director. 24 Sec. 49. Section 423.33, subsection 1, Code 2020, is amended 25 to read as follows: 26 1. Liability of purchaser for sales tax and retailer . 27 a. If a purchaser fails to pay sales tax to the retailer 28 required to collect the tax, then in addition to all of the 29 rights, obligations, and remedies provided, the a use tax 30 is payable by the purchaser directly to the department, and 31 sections 423.31 , 423.32 , 423.37 , 423.38 , 423.39 , 423.40 , 32 423.41 , and 423.42 apply to the purchaser. 33 b. For failure to pay the sales or use tax as described 34 in paragraph “a” , the retailer and purchaser are jointly 35 -28- HF 2641 (7) 88 jm/jh/md 28/ 93
H.F. 2641 liable, unless the circumstances described in section 29C.24, 1 subsection 3, paragraph “a” , subparagraph (2), section 421.60, 2 subsection 2 , paragraph “m” , section 423.34A , or section 3 423.45, subsection 4 , paragraph “b” or “e” , or subsection 5 , 4 paragraph “c” or “e” , are applicable. 5 c. If the retailer fails to collect sales tax at the time 6 of the transaction, the retailer shall thereafter remit the 7 applicable sales tax, or the purchaser thereafter shall remit 8 the applicable use tax. If the purchaser remits all applicable 9 use tax, the retailer remains liable for any local sales and 10 services tax under chapter 423B that the retailer failed to 11 collect. 12 Sec. 50. REFUNDS RELATED TO PRESERVE WHITETAIL DEER 13 HUNTING. Refunds of taxes, interest, or penalties that arise 14 from claims resulting from the amendment of section 423.3, 15 subsection 3A, for sales occurring between July 1, 2005, 16 and the effective date of the amendment to section 423.3, 17 subsection 3A, shall not be allowed, notwithstanding any other 18 law to the contrary. 19 Sec. 51. LEGISLATIVE INTENT. 20 1. It is the intent of the general assembly that the section 21 of this division of this Act amending section 423.29 is a 22 conforming amendment consistent with current state law, and 23 that the amendment does not change the application of current 24 law but instead reflects current law both before and after the 25 enactment of this division of this Act. 26 2. It is the intent of the general assembly that the 27 addition of “jointly” in the section of this division of 28 this Act amending section 423.33 is a conforming amendment 29 consistent with current state law, and that the amendment 30 does not change the application of current law but instead 31 reflects current law both before and after the enactment of 32 this division of this Act. 33 Sec. 52. EFFECTIVE DATE. The following, being deemed of 34 immediate importance, take effect upon enactment: 35 -29- HF 2641 (7) 88 jm/jh/md 29/ 93
H.F. 2641 1. The section of this division of this Act amending section 1 423.3, subsection 3A. 2 2. The section of this division of this Act relating 3 to refunds for commercial recreation services offering an 4 opportunity to hunt preserve whitetail deer. 5 Sec. 53. RETROACTIVE APPLICABILITY. The following applies 6 retroactively to July 1, 2005: 7 The section of this division of this Act amending section 8 423.3, subsection 3A. 9 DIVISION III 10 INCOME TAX 11 Sec. 54. Section 422.9, subsection 3, paragraph c, Code 12 2020, is amended by striking the paragraph and inserting in 13 lieu thereof the following: 14 c. A taxpayer may elect to waive the entire carryback period 15 with respect to an Iowa net operating loss for any taxable year 16 beginning on or after January 1, 2020. The election shall be 17 made in the manner and form prescribed by the department, and 18 shall be made by the due date for filing the taxpayer’s Iowa 19 return, including extensions of time. After the election is 20 made for any taxable year, the election shall be irrevocable 21 for such taxable year. When an election has been properly 22 made, the Iowa net operating loss shall be carried forward 23 twenty taxable years. 24 Sec. 55. Section 422.9, subsection 3, paragraph d, Code 25 2020, is amended to read as follows: 26 d. Notwithstanding paragraph “a” , for a taxpayer who is 27 engaged in the trade or business of farming , which means the 28 same as a “farming business” as defined in section 263A(e)(4) of 29 the Internal Revenue Code , and has a farming loss from farming 30 as defined in section 172(b)(1)(B) of the Internal Revenue Code 31 including modifications prescribed by rule by the director, 32 the Iowa farming loss from the trade or business of farming is 33 a net operating loss which may , at the time of the election of 34 the taxpayer, be carried back five taxable years prior to the 35 -30- HF 2641 (7) 88 jm/jh/md 30/ 93
H.F. 2641 taxable year of the loss. The election shall be made in the 1 manner and form prescribed by the department, and shall be made 2 by the due date for filing the taxpayer’s return, including 3 extensions of time. After the election is made for any taxable 4 year, the election shall be irrevocable for such taxable year. 5 Sec. 56. APPLICABILITY. This division of this Act applies 6 to tax years beginning on or after January 1, 2020. 7 DIVISION IV 8 SCHOOL TUITION TAX CREDIT —— FUNDING 9 Sec. 57. Section 422.11S, subsection 8, paragraph a, 10 subparagraph (2), Code 2020, is amended to read as follows: 11 (2) (a) “Total approved tax credits” means for the 2006 12 calendar year, two million five hundred thousand dollars, for 13 the 2007 calendar year, five million dollars, for calendar 14 years beginning on or after January 1, 2008, but before January 15 1, 2012, seven million five hundred thousand dollars, for 16 calendar years beginning on or after January 1, 2012, but 17 before January 1, 2014, eight million seven hundred fifty 18 thousand dollars, for calendar years beginning on or after 19 January 1, 2014, but before January 1, 2019, twelve million 20 dollars, and for calendar years beginning on or after January 21 1, 2019, but before January 1, 2020, thirteen million dollars, 22 and for calendar years beginning on or after January 1, 2020, 23 fifteen million dollars. 24 (b) (i) During any calendar year beginning on or after 25 January 1, 2022, if the amount of awarded tax credits from the 26 preceding calendar year are equal to or greater than ninety 27 percent of the total approved tax credits for the current 28 calendar year, the total approved tax credits for the current 29 calendar year shall equal the product of ten percent multiplied 30 by the total approved tax credits for the current calendar year 31 plus the total approved tax credits for the current calendar 32 year. 33 (ii) If total approved tax credits are recomputed pursuant 34 to subparagraph subdivision (i), the total approved tax credits 35 -31- HF 2641 (7) 88 jm/jh/md 31/ 93
H.F. 2641 shall equal the previous total approved tax credits recomputed 1 pursuant to subparagraph subdivision (i) for purposes of future 2 recomputations under subparagraph subdivision (i), provided 3 that the maximum total approved tax credits recomputed pursuant 4 to this subparagraph division (b) shall not exceed twenty 5 million dollars in a calendar year. 6 DIVISION V 7 RESEARCH ACTIVITIES CREDIT 8 Sec. 58. Section 15.335, subsection 4, paragraph a, Code 9 2020, is amended to read as follows: 10 a. In lieu of the credit amount computed in subsection 2 , an 11 eligible business may elect to compute the credit amount for 12 qualified research expenses incurred in this state in a manner 13 consistent with the alternative simplified credit described in 14 section 41(c)(5) 41(c)(4) of the Internal Revenue Code. The 15 taxpayer may make this election regardless of the method used 16 for the taxpayer’s federal income tax. The election made under 17 this paragraph is for the tax year and the taxpayer may use 18 another or the same method for any subsequent year. 19 Sec. 59. Section 15.335, subsection 4, paragraph b, 20 unnumbered paragraph 1, Code 2020, is amended to read as 21 follows: 22 For purposes of the alternate credit computation method in 23 paragraph “a” , the credit percentages applicable to qualified 24 research expenses described in section 41(c)(5)(A) 41(c)(4)(A) 25 and clause (ii) of section 41(c)(5)(B) 41(c)(4)(B) of the 26 Internal Revenue Code are as follows: 27 Sec. 60. Section 422.10, subsection 1, paragraphs c and d, 28 Code 2020, are amended to read as follows: 29 c. In lieu of the credit amount computed in paragraph “b” , 30 subparagraph (1), subparagraph division (a), a taxpayer may 31 elect to compute the credit amount for qualified research 32 expenses incurred in this state in a manner consistent with the 33 alternative simplified credit described in section 41(c)(5) 34 41(c)(4) of the Internal Revenue Code. The taxpayer may make 35 -32- HF 2641 (7) 88 jm/jh/md 32/ 93
H.F. 2641 this election regardless of the method used for the taxpayer’s 1 federal income tax. The election made under this paragraph is 2 for the tax year and the taxpayer may use another or the same 3 method for any subsequent year. 4 d. For purposes of the alternate credit computation 5 method in paragraph “c” , the credit percentages applicable to 6 qualified research expenses described in section 41(c)(5)(A) 7 41(c)(4)(A) and clause (ii) of section 41(c)(5)(B) 41(c)(4)(B) 8 of the Internal Revenue Code are four and fifty-five 9 hundredths percent and one and ninety-five hundredths percent, 10 respectively. 11 Sec. 61. Section 422.33, subsection 5, paragraphs c and d, 12 Code 2020, are amended to read as follows: 13 c. In lieu of the credit amount computed in paragraph 14 “a” , subparagraph (1), a corporation may elect to compute the 15 credit amount for qualified research expenses incurred in this 16 state in a manner consistent with the alternative simplified 17 credit described in section 41(c)(5) 41(c)(4) of the Internal 18 Revenue Code. The taxpayer may make this election regardless 19 of the method used for the taxpayer’s federal income tax. The 20 election made under this paragraph is for the tax year and the 21 taxpayer may use another or the same method for any subsequent 22 year. 23 d. For purposes of the alternate credit computation 24 method in paragraph “c” , the credit percentages applicable to 25 qualified research expenses described in section 41(c)(5)(A) 26 41(c)(4)(A) and clause (ii) of section 41(c)(5)(B) 41(c)(4)(B) 27 of the Internal Revenue Code are four and fifty-five 28 hundredths percent and one and ninety-five hundredths percent, 29 respectively. 30 Sec. 62. EFFECTIVE DATE. This division of this Act, being 31 deemed of immediate importance, takes effect upon enactment. 32 Sec. 63. RETROACTIVE APPLICABILITY. This division of this 33 Act applies retroactively to January 1, 2019, for tax years 34 beginning on or after that date. 35 -33- HF 2641 (7) 88 jm/jh/md 33/ 93
H.F. 2641 DIVISION VI 1 PARTNERSHIP AND PASS-THROUGH ENTITY AUDITS AND REPORTING OF 2 FEDERAL ADJUSTMENTS 3 Sec. 64. Section 421.27, subsection 2, paragraph c, Code 4 2020, is amended to read as follows: 5 c. (1) The Except in the case of a final federal 6 partnership adjustment governed by subparagraph (2), the 7 taxpayer provides written notification to the department of a 8 federal audit while it is in progress and voluntarily files an 9 amended return which includes a copy of the federal document 10 showing the final disposition or final federal adjustments 11 and pays any additional Iowa tax due within sixty one hundred 12 eighty days of the final disposition determination date of the 13 federal government’s audit. For purposes of this subparagraph, 14 “final determination date” means the same as defined in section 15 422.25. 16 (2) (a) In the case of a final federal partnership 17 adjustment arising from a partnership level audit, with respect 18 to the audited partnership or a direct partner or indirect 19 partner of the audited partnership, the audited partnership, 20 direct partner, or indirect partner voluntarily and timely 21 complies with its reporting and payment requirements under 22 section 422.25A, subsection 4 or 5. 23 (b) As used in this subparagraph, all words and phrases 24 defined in section 422.25A shall have the same meaning given 25 them by that section. 26 Sec. 65. Section 422.7, Code 2020, is amended by adding the 27 following new subsection: 28 NEW SUBSECTION . 59. Any income subtracted from federal 29 taxable income for an adjustment year pursuant to section 6225 30 of the Internal Revenue Code and the regulations thereunder 31 shall be added back in computing net income for state tax 32 purposes for the adjustment year. 33 Sec. 66. Section 422.25, subsections 1 and 2, Code 2020, 34 are amended by striking the subsections and inserting in lieu 35 -34- HF 2641 (7) 88 jm/jh/md 34/ 93
H.F. 2641 thereof the following: 1 1. a. For purposes of this subsection: 2 (1) “Federal adjustment” means a change to an item or amount 3 required to be determined under the Internal Revenue Code and 4 the regulations thereunder that is used by the taxpayer to 5 compute state tax owed whether such change results from action 6 by the internal revenue service, or the filing of a timely 7 amended federal return or timely federal refund claim. A 8 federal adjustment is positive to the extent that it increases 9 Iowa taxable income as determined under this title and is 10 negative to the extent that it decreases Iowa taxable income 11 as determined under this title. 12 (2) “Federal adjustments report” means the method or form 13 required by the department by rule to report final federal 14 adjustments or final federal partnership adjustments as defined 15 in section 422.25A, and in the case of any entity taxed as a 16 partnership or S corporation for federal income tax purposes, 17 identifies all owners that hold an interest directly in such 18 entity and provides the effect of the final federal adjustments 19 on such owner’s Iowa income. 20 (3) “Final determination date” means the following: 21 (a) Except as provided in subparagraph divisions (b) and 22 (c), for federal adjustments arising from an internal revenue 23 service audit or other action by the internal revenue service, 24 the final determination date is the first day on which no 25 federal adjustments arising from that audit or other action 26 remain to be finally determined, whether by internal revenue 27 service decision with respect to which all rights of appeal 28 have been waived or exhausted, by agreement, or, if appealed 29 or contested, by a final decision with respect to which all 30 rights of appeal have been waived or exhausted. For agreements 31 required to be signed by the internal revenue service and the 32 taxpayer, the final determination date is the date on which the 33 last party signed the agreement. 34 (b) For federal adjustments arising from an internal 35 -35- HF 2641 (7) 88 jm/jh/md 35/ 93
H.F. 2641 revenue service audit or other action by the internal revenue 1 service, if the taxpayer filed as a member of a consolidated 2 return under section 422.37, the final determination date 3 is the first day on which no related federal adjustments 4 arising from that audit or other action remain to be finally 5 determined, as described in subparagraph division (a), for the 6 entire group. 7 (c) For federal adjustments arising from a timely filed 8 amended federal return or a timely filed federal refund 9 claim, or if it is a federal adjustment reported on a timely 10 amended federal return or other similar report filed pursuant 11 to section 6225(c) of the Internal Revenue Code, the final 12 determination date is the day on which the amended return, 13 refund claim, or other similar report was filed. 14 (4) “Final federal adjustment” means a federal adjustment 15 after the final determination date for that federal adjustment 16 has passed. 17 b. Within three years after the return is filed or within 18 three years after the return became due, including any 19 extensions of time for filing, whichever time is the later, 20 the department shall examine the return and determine the tax. 21 However, if the taxpayer omits from income an amount which 22 will, under the Internal Revenue Code, extend the statute of 23 limitations for assessment of federal tax to six years under 24 the federal law, the period for examination and determination 25 is six years. 26 c. The period for examination and determination of the 27 correct amount of tax is unlimited in the case of a false or 28 fraudulent return made with the intent to evade tax or in the 29 case of a failure to file a return. 30 d. In lieu of the period of limitation for any prior year 31 for which an overpayment of tax or an elimination or reduction 32 of an underpayment of tax due for that prior year results from 33 the carryback to that prior year of a net operating loss or 34 net capital loss, the period is the period of limitation for 35 -36- HF 2641 (7) 88 jm/jh/md 36/ 93
H.F. 2641 the taxable year of the net operating loss or net capital loss 1 which results in the carryback. 2 e. (1) In addition to the applicable period of limitation 3 for examination and determination in paragraph “b” , “c” , or “d” , 4 the department may make an examination and determination at any 5 time within one year from the date of receipt by the department 6 of a federal adjustments report with respect to a final 7 federal adjustment or final federal partnership adjustment 8 as defined in section 422.25A for a particular tax year. In 9 order to begin the running of the one-year period, the federal 10 adjustments report related to the final federal adjustment or 11 final federal partnership adjustment shall be transmitted to 12 the department by the taxpayer in the form and manner specified 13 by the department by rule. 14 (2) The department in its discretion may adopt rules to 15 establish a de minimis amount for which subparagraph (1) shall 16 not apply and the taxpayer shall not be required to file a 17 federal adjustments report. 18 (3) The department may in its discretion and when 19 administratively feasible adopt a process through rule by 20 which a taxpayer may make estimated payments of tax expected 21 to result from a pending internal revenue service audit 22 prior to the filing of a federal adjustments report with the 23 department. The process shall provide that the estimated 24 tax payments shall be credited against any tax liability 25 ultimately found to be due to the state from the internal 26 revenue service audit and will limit the accrual of further 27 statutory interest on that liability. The process shall also 28 provide that if the estimated tax payments exceed the final 29 tax liability and statutory interest ultimately determined to 30 be due, the taxpayer is entitled to a refund or credit for 31 the excess, without interest, provided the taxpayer files a 32 federal adjustments report, or a claim for refund or credit of 33 tax under section 422.73, no later than one year following the 34 final determination date. 35 -37- HF 2641 (7) 88 jm/jh/md 37/ 93
H.F. 2641 2. a. If the tax found due under subsection 1 is greater 1 than the amount paid, the department shall compute the amount 2 due, together with interest and penalties as provided in 3 paragraph “b” , and shall mail a notice of assessment to the 4 taxpayer and, if applicable, to the taxpayer’s authorized 5 representative of the total, which shall be computed as a sum 6 certain, with interest computed to the last day of the month 7 in which the notice is dated. 8 b. In addition to the tax or additional tax determined 9 by the department under subsection 1, the taxpayer shall pay 10 interest on the tax or additional tax at the rate in effect 11 under section 421.7 for each month counting each fraction of 12 a month as an entire month, computed from the date the return 13 was required to be filed. In addition to the tax or additional 14 tax, the taxpayer shall pay a penalty as provided in section 15 421.27. 16 Sec. 67. NEW SECTION . 422.25A Reporting and treatment of 17 certain partnership adjustments. 18 1. Definitions. As used in this section and sections 19 422.25B and 422.25C, unless the context otherwise requires: 20 a. “Administrative adjustment request” means the same as 21 provided in section 6227 of the Internal Revenue Code. 22 b. “Audited partnership” means a partnership subject 23 to a final federal partnership adjustment resulting from a 24 partnership level audit. 25 c. “C corporation” means an entity that elects or is 26 required to be taxed as a corporation under title 26, chapter 27 1, subchapter A, part 2, of the Internal Revenue Code. 28 d. “Corporate partner” means a C corporation partner that is 29 subject to tax pursuant to section 422.33. 30 e. “Direct partner” means a person that holds an interest 31 directly in a partnership or pass-through entity. 32 f. “Exempt partner” means a partner that is exempt from 33 taxation pursuant to section 422.34. 34 g. “Federal adjustments report” means the same as defined 35 -38- HF 2641 (7) 88 jm/jh/md 38/ 93
H.F. 2641 in section 422.25. 1 h. “Federal partnership adjustment” means a change to an 2 item or amount required to be determined under the Internal 3 Revenue Code and the regulations thereunder that is used by a 4 partnership and its direct and indirect partners to compute 5 state tax owed for the reviewed year where such change results 6 from a partnership level audit or an administrative adjustment 7 request. A federal partnership adjustment is positive to the 8 extent that it increases Iowa taxable income as determined 9 under this title and is negative to the extent that it 10 decreases Iowa taxable income as determined under this title. 11 A federal adjustment reported on an amended federal return 12 or other similar report filed pursuant to section 6225(c) of 13 the Internal Revenue Code shall not be considered a federal 14 partnership adjustment for purposes of this section. 15 i. “Federal partnership representative” means the person 16 the partnership designates for the taxable year as the 17 partnership’s representative, or the person the internal 18 revenue service has appointed to act as the federal partnership 19 representative, pursuant to section 6223(a) of the Internal 20 Revenue Code and the regulations thereunder. 21 j. “Fiduciary partner” means a partner that is a fiduciary 22 that is subject to tax pursuant to sections 422.5 and 422.6. 23 k. “Final determination date” means any one of the following 24 dates: 25 (1) In the case of a federal partnership adjustment that 26 arises from a partnership level audit, the first day on which 27 no federal adjustments arising from that audit remain to be 28 finally determined, whether by agreement, or, if appealed 29 or contested, by a final decision with respect to which all 30 rights of appeal have been waived or exhausted. For agreements 31 required to be signed by the internal revenue service and the 32 audited partnership, the final determination date is the date 33 on which the last party signed the agreement. 34 (2) In the case of a federal partnership adjustment that 35 -39- HF 2641 (7) 88 jm/jh/md 39/ 93
H.F. 2641 results from a timely filed administrative adjustment request, 1 the day on which the administrative adjustment request was 2 filed with the internal revenue service. 3 l. “Final federal partnership adjustment” means a federal 4 partnership adjustment after the final determination date for 5 that federal partnership adjustment has passed. 6 m. “Indirect partner” means a partner in a partnership or 7 pass-through entity where such partnership or pass-through 8 entity itself holds an interest directly, or through another 9 indirect partner, in a partnership or pass-through entity. 10 n. “Individual partner” means a partner who is a natural 11 person that is subject to tax pursuant to section 422.5. 12 o. “Nonresident partner” means a partner that is not a 13 resident partner as defined in this subsection. 14 p. “Partner” means a person that holds an interest, directly 15 or indirectly, in a partnership or pass-through entity. 16 q. “Partnership” means an entity subject to taxation 17 under subchapter K of the Internal Revenue Code and the 18 regulations thereunder and includes but is not limited to a 19 syndicate, group, pool, joint venture, or other unincorporated 20 organization through or by means of which any business, 21 financial operation, or venture is carried on and which is 22 not, within the meaning of this chapter, a trust, estate, or 23 corporation. 24 r. “Partnership level audit” means an examination by the 25 internal revenue service at the partnership level pursuant to 26 subchapter C, title 26, subtitle F, chapter 63, of the Internal 27 Revenue Code, as enacted by the Bipartisan Budget Act of 2015, 28 Pub. L. No. 114-74, and as amended, which results in final 29 federal partnership adjustments initiated and made by the 30 internal revenue service. 31 s. “Pass-through entity” means an entity, other than 32 a partnership, that is not subject to tax under section 33 422.33 for C corporations but excluding an exempt partner. 34 “Pass-through entity” includes but is not limited to S 35 -40- HF 2641 (7) 88 jm/jh/md 40/ 93
H.F. 2641 corporations, estates, and trusts other than grantor trusts. 1 t. “Reallocation adjustment” means a final federal 2 partnership adjustment that changes the shares of items of 3 partnership income, gain, loss, expense, or credit allocated 4 to a partner that holds an interest directly in a partnership 5 or pass-through entity. A positive reallocation adjustment 6 means the portion of a reallocation adjustment that would 7 increase Iowa taxable income for such partners, and a negative 8 reallocation adjustment means the portion of a reallocation 9 adjustment that would decrease Iowa taxable income for such 10 partners. 11 u. “Resident partner” means any of the following: 12 (1) For an individual partner, a “resident” as defined in 13 section 422.4. 14 (2) For a fiduciary partner, one with situs in Iowa. 15 (3) For all other partners, a partner whose headquarters or 16 principal place of business is located in Iowa. 17 v. “Reviewed year” means the taxable year of a partnership 18 that is subject to a partnership level audit from which final 19 federal partnership adjustments arise, or otherwise means the 20 taxable year of the partnership or pass-through entity that is 21 the subject of a state partnership audit. 22 w. “State partnership audit” means an examination by the 23 director at the partnership or pass-through entity level which 24 results in adjustments to partnership or pass-through entity 25 related items or reallocations of income, gains, losses, 26 expenses, credits, and other attributes among such partners for 27 the reviewed year. 28 x. “Tiered partner” means any partner that is a partnership 29 or pass-through entity. 30 y. “Unrelated business income” means the income which is 31 defined in section 512 of the Internal Revenue Code and the 32 regulations thereunder. 33 2. Application. Partnerships and their direct partners 34 and indirect partners shall report final federal partnership 35 -41- HF 2641 (7) 88 jm/jh/md 41/ 93
H.F. 2641 adjustments as provided in this section. 1 3. State partnership representative. Notwithstanding any 2 other law to the contrary, the state partnership representative 3 for the reviewed year shall have the sole authority to act on 4 behalf of the partnership or pass-through entity with respect 5 to an action required or permitted to be taken by a partnership 6 or pass-through entity under this section or section 422.28 or 7 422.29 with respect to final federal partnership adjustments 8 arising from a partnership level audit or an administrative 9 adjustment request, and its direct partners and indirect 10 partners shall be bound by those actions. 11 4. Reporting and payment requirements for audited 12 partnerships and their partners subject to final federal 13 partnership adjustments. 14 a. Unless an audited partnership makes the election in 15 subsection 5, the audited partnership shall do all of the 16 following for all final federal partnership adjustments no 17 later than ninety days after the final determination date of 18 the audited partnership: 19 (1) File a completed federal adjustments report. 20 (2) Notify each direct partner of such partner’s 21 distributive share of the adjustments in the manner and form 22 prescribed by the department by rule. 23 (3) File an amended composite return under section 422.13 24 if one was originally filed, and if applicable for withholding 25 from partners, file an amended withholding report under 26 section 422.16, and pay the additional amount under this title 27 that would have been due had the final federal partnership 28 adjustments been reported properly as required, including any 29 applicable interest and penalties. 30 b. Unless an audited partnership paid an amount on behalf 31 of the direct partners of the audited partnership pursuant to 32 subsection 5, all direct partners of the audited partnership 33 shall do all of the following no later than one hundred 34 eighty days after the final determination date of the audited 35 -42- HF 2641 (7) 88 jm/jh/md 42/ 93
H.F. 2641 partnership: 1 (1) File a completed federal adjustments report reporting 2 the direct partner’s distributive share of the adjustments 3 required to be reported to such partners under paragraph “a” . 4 (2) If the direct partner is a tiered partner, notify all 5 partners that hold an interest directly in the tiered partner 6 of such partner’s distributive share of the adjustments in the 7 manner and form prescribed by the department by rule. 8 (3) If the direct partner is a tiered partner and subject to 9 section 422.13, file an amended composite return under section 10 422.13 if such return was originally filed, and if applicable 11 for withholding from partners file an amended withholding 12 report under section 422.16 if one was originally required to 13 be filed. 14 (4) Pay any additional amount under this title that would 15 have been due had the final federal partnership adjustments 16 been reported properly as required, including any applicable 17 penalty and interest. 18 c. Unless a partnership or tiered partner paid an amount on 19 behalf of the partners pursuant to subsection 5, each indirect 20 partner shall do all of the following: 21 (1) Within ninety days after the time for filing and 22 furnishing statements to tiered partners and their partners 23 as established by section 6226 of the Internal Revenue Code 24 and the regulations thereunder, file a completed federal 25 adjustments report. 26 (2) If the indirect partner is a tiered partner, within 27 ninety days after the time for filing and furnishing statements 28 to tiered partners and their partners as established by 29 section 6226 of the Internal Revenue Code and the regulations 30 thereunder but within sufficient time for all indirect partners 31 to also complete the requirements of this subsection, notify 32 all of the partners that hold an interest directly in the 33 tiered partner of such partner’s distributive share of the 34 adjustments in the manner and form prescribed by the department 35 -43- HF 2641 (7) 88 jm/jh/md 43/ 93
H.F. 2641 by rule. 1 (3) Within ninety days after the time for filing and 2 furnishing statements to tiered partners and their partners 3 as established by section 6226 of the Internal Revenue Code 4 and the regulations thereunder, if the indirect partner 5 is a tiered partner and subject to section 422.13, file an 6 amended composite return under section 422.13 if such return 7 was originally filed, and if applicable for withholding from 8 partners, file an amended withholding report under section 9 422.16 if one was originally required to be filed. 10 (4) Within ninety days after the time for filing and 11 furnishing statements to tiered partners and the partners of 12 the tiered partners as established by section 6226 of the 13 Internal Revenue Code and the regulations thereunder, pay any 14 additional amount due under this title, including any penalty 15 and interest that would have been due had the final federal 16 partnership adjustments been reported properly as required. 17 5. Election for partnership or tiered partners to pay. 18 a. An audited partnership, or a tiered partner that receives 19 a notification of a final federal partnership adjustment under 20 subsection 4, may make an election to pay as provided under 21 this subsection. 22 b. An audited partnership or tiered partner makes an 23 election to pay under this subsection by filing a completed 24 federal adjustments report, notifying the department in the 25 manner and form prescribed by the department that it is making 26 the election under this subsection, notifying each of the 27 direct partners of such partner’s distributive share of the 28 adjustments, and paying on behalf of its partners an amount 29 calculated in paragraph “c” , including any applicable penalty 30 and interest. These requirements shall all be fulfilled within 31 one of the following time periods: 32 (1) For the audited partnership, no later than ninety days 33 after the final determination date of the audited partnership. 34 (2) For a direct tiered partner, no later than one hundred 35 -44- HF 2641 (7) 88 jm/jh/md 44/ 93
H.F. 2641 eighty days after the final determination date of the audited 1 partnership. 2 (3) For an indirect tiered partner, within ninety days 3 after the time for filing and furnishing statements to a 4 tiered partner and the partner of the tiered partner, as 5 established by section 6226 of the Internal Revenue Code and 6 the regulations thereunder. 7 c. The amount due under this subsection from an audited 8 partnership or tiered partner shall be calculated as follows: 9 (1) Exclude from final federal partnership adjustments and 10 any positive reallocation adjustments the distributive share 11 of such adjustments reported to an exempt partner that holds 12 an interest directly in the audited partnership if the audited 13 partnership is making the election or that holds an interest 14 directly in the tiered partner if the tiered partner is making 15 the election, but only to the extent the distributive share is 16 not unrelated business income. 17 (2) Determine the total distributive share of all final 18 federal partnership adjustments and positive reallocation 19 adjustments as modified by this title that are reported to 20 corporate partners, and to exempt partners to the extent the 21 distributive share is unrelated business income, and allocate 22 and apportion such adjustments as provided in section 422.33 23 at the partnership or tiered partner level, and multiply the 24 resulting amount by the maximum state corporate income tax rate 25 pursuant to section 422.33 for the reviewed year. 26 (3) Determine the total distributive share of all final 27 federal partnership adjustments and positive reallocation 28 adjustments as modified by this title that are reported to 29 nonresident individual partners and nonresident fiduciary 30 partners and allocate and apportion such adjustments as 31 provided in section 422.33 at the partnership or tiered 32 partner level, and multiply the resulting amount by the maximum 33 individual income tax rate pursuant to section 422.5A for the 34 reviewed year. 35 -45- HF 2641 (7) 88 jm/jh/md 45/ 93
H.F. 2641 (4) For the total distributive share of all final federal 1 partnership adjustments and positive reallocation adjustments 2 as modified by this title that are reported to tiered partners: 3 (a) Determine the amount of such adjustments which are of a 4 type that would be subject to sourcing to Iowa under section 5 422.8, subsection 2, paragraph “a” , as a nonresident, and then 6 determine the portion of this amount that would be sourced to 7 Iowa under those provisions as if the tiered partner were a 8 nonresident. 9 (b) Determine the amount of such adjustments which are of 10 a type that would not be subject to sourcing to Iowa under 11 section 422.8, subsection 2, paragraph “a” , as a nonresident. 12 (c) Determine the portion of the amount in subparagraph 13 division (b) that can be established, as prescribed by the 14 department by rule, to be properly allocable to indirect 15 partners that are nonresident partners or other partners not 16 subject to tax on the adjustments. 17 (d) Multiply the total of the amounts determined in 18 subparagraph divisions (a) and (b), reduced by any amount 19 determined in subparagraph division (c), by the highest 20 individual income tax rate pursuant to section 422.5A for the 21 reviewed year. 22 (5) For the total distributive share of all final federal 23 partnership adjustments and positive reallocation adjustments 24 as modified by this title that are reported to resident 25 individual partners and resident fiduciary partners, multiply 26 that amount by the highest individual income tax rate pursuant 27 to section 422.5A for the reviewed year. 28 (6) Total the amounts computed pursuant to subparagraphs 29 (2) through (5) and calculate any interest and penalty as 30 provided under this title. Notwithstanding any provision of 31 law to the contrary, interest and penalties on the amount due 32 by the audited partnership or tiered partner shall be computed 33 from the day after the due date of the reviewed year return 34 without extension, and shall be imposed as if the audited 35 -46- HF 2641 (7) 88 jm/jh/md 46/ 93
H.F. 2641 partnership or tiered partner was required to pay tax or show 1 tax due on the original return for the reviewed year. 2 d. Adjustments subject to the election in this subsection 3 do not include any adjustments arising from an administrative 4 adjustment request. 5 e. An audited partnership or tiered partner not otherwise 6 subject to any reporting or payment obligation to Iowa that 7 makes an election under this subsection consents to be subject 8 to the Iowa laws related to reporting, assessment, collection, 9 and payment of Iowa tax, interest, and penalties calculated 10 under the election. 11 6. Modified reporting and payment method. The department may 12 adopt procedures for an audited partnership or tiered partner 13 to enter into an agreement with the department to use an 14 alternative reporting and payment method, including applicable 15 time requirements or any other provision of this section. The 16 audited partnership or tiered partner must demonstrate that 17 the requested method will reasonably provide for the reporting 18 and payment of taxes, penalties, and interest due under the 19 provisions of this section. Application for approval of an 20 alternative reporting and payment method must be made by the 21 audited partnership or tiered partner within the time for 22 making an election to pay under subsection 5 and in the manner 23 prescribed by the department. Approval of such an alternative 24 reporting and payment method shall be at the discretion of the 25 department. 26 7. Effect of election by partnership or tiered partner and 27 payment of amount due. 28 a. The election made under subsection 5 is irrevocable, 29 unless in the discretion of the director, the director 30 determines otherwise. 31 b. The amount determined in subsection 5, when properly 32 reported and paid by the audited partnership or tiered partner, 33 shall be treated as paid on behalf of the partners of such 34 audited partnership or tiered partner on the same final federal 35 -47- HF 2641 (7) 88 jm/jh/md 47/ 93
H.F. 2641 partnership adjustments, provided, however, that no partner may 1 take any deduction or credit for the amount, claim a refund of 2 the amount, or include the amount on such partner’s Iowa return 3 in any manner. 4 c. In the event another state offers to an audited 5 partnership or tiered partner a similar election to pay state 6 tax resulting from final federal partnership adjustments, 7 nothing in this subsection shall prohibit a resident who holds 8 an interest directly in that audited partnership or tiered 9 partner, as the case may be, from claiming a credit for taxes 10 paid by the resident to another state under section 422.8, 11 subsection 1, for any amounts paid by the audited partnership 12 or tiered partner on such resident partner’s behalf to another 13 state, provided such payment otherwise meets the requirements 14 of section 422.8, subsection 1. 15 d. Nothing in this section shall prohibit the department 16 from assessing direct partners and indirect partners for taxes 17 they owe in the event that an audited partnership or tiered 18 partner fails to timely make any report or payment required by 19 this section for any reason. 20 8. Assessments of additional Iowa income tax, interest, and 21 penalties, and claims for refund, arising from final federal 22 partnership adjustments. 23 a. The department shall assess additional Iowa income 24 tax, interest, and penalties arising from final federal 25 partnership adjustments in the same manner as provided in 26 this title unless a different treatment is provided by this 27 subsection. Since final federal partnership adjustments are 28 determined at the audited partnership level, any assessment 29 issued to partners shall not be appealable by the partner. 30 The department may assess any taxes, including on-behalf-of 31 amounts, interest, and penalties arising from the final federal 32 partnership adjustments if it issues a notice of assessment to 33 the audited partnership, tiered partner, or other direct or 34 indirect partner on or before the expiration of the applicable 35 -48- HF 2641 (7) 88 jm/jh/md 48/ 93
H.F. 2641 limitations period specified in section 422.25. 1 b. In addition to the period for claiming a refund or credit 2 provided in section 422.73, subsection 1, paragraph “a” , and 3 notwithstanding section 422.73, subsection 1, paragraph “b” , 4 a partnership, tiered partner, or other direct or indirect 5 partner, as the case may be, may file a claim for refund of 6 Iowa income tax arising directly or indirectly from a final 7 federal partnership adjustment arising from a partnership level 8 audit on or before the date which is one year from the date the 9 federal adjustments report for that final federal partnership 10 adjustment was required to be filed by such person under this 11 section. 12 9. Rules. The department may adopt any rules pursuant to 13 chapter 17A to implement this section. 14 Sec. 68. NEW SECTION . 422.25B State partnership 15 representative. 16 1. As used in this section, all words and phrases defined 17 in section 422.25A shall have the same meaning given them by 18 that section. 19 2. The state partnership representative for the reviewed 20 year for a partnership shall be the partnership’s federal 21 partnership representative with respect to an action required 22 or permitted to be taken by a state partnership representative 23 under this chapter for a reviewed year, unless the partnership 24 designates in writing another person as the state partnership 25 representative as provided in subsection 3. The state 26 partnership representative for the reviewed year for a 27 pass-through entity is the person designated in subsection 3. 28 3. The department may establish reasonable qualifications 29 for a person to be a state partnership representative. If 30 a partnership desires to designate a person other than the 31 federal partnership representative, the partnership shall 32 designate such person in the manner and form prescribed by the 33 department. A pass-through entity shall designate a person as 34 the state partnership representative in the manner and form 35 -49- HF 2641 (7) 88 jm/jh/md 49/ 93
H.F. 2641 prescribed by the department. A partnership or pass-through 1 entity shall be allowed to change such designation by notifying 2 the department at the time the change occurs in the manner and 3 form prescribed by the department. 4 4. The department may adopt any rules pursuant to chapter 5 17A to implement this section. 6 Sec. 69. NEW SECTION . 422.25C Partnership and pass-through 7 entity audits and examinations —— consistent treatment of 8 entity-level items —— binding actions —— amended returns. 9 1. As used in this section, all words and phrases defined 10 in section 422.25A shall have the same meaning given them by 11 that section. 12 2. For tax years beginning on or after January 1, 2020, any 13 adjustments to a partnership’s or pass-through entity’s items 14 of income, gain, loss, expense, or credit, or an adjustment 15 to such items allocated to a partner that holds an interest 16 in a partnership or pass-through entity for the reviewed year 17 by the department as a result of a state partnership audit, 18 shall be determined at the partnership level or pass-through 19 entity level in the same manner as provided by section 6221(a) 20