Print
House File 278 - IntroducedA Bill ForAn Act 1relating to the taxation under the state corporate
2income tax, franchise tax, and insurance companies tax
3of compensation paid by a publicly held corporation to
4its chief executive officer, and including applicability
5provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.35, Code 2019, is amended by adding
2the following new subsection:
3 NEW SUBSECTION. 26. a. For purposes of this subsection,
4“compensation” means the total amount allowable under section
5162(a)(1) of the Internal Revenue Code as salary or other
6compensation for personal services actually rendered,
7determined without regard to sections 162(m) or 280G of the
8Internal Revenue Code.
9b. If the taxpayer is a publicly held corporation as defined
10in section 162(m)(2) of the Internal Revenue Code, the taxpayer
11shall do all of the following:
12(1) Add, to the extent allowed as a deduction in computing
13federal taxable income, the amount paid or accrued during the
14tax year as compensation of the chief executive officer of the
15taxpayer, or the individual acting in such capacity.
16(2) Add the amount paid or accrued during the tax year as
17compensation of the chief executive officer of the taxpayer, or
18the individual acting in such capacity.
19 Sec. 2. NEW SECTION. 432.11 Tax on chief executive officer
20compensation of publicly held corporations.
211. For purposes of this section:
22a. “Compensation” means the same as defined in section
23422.35, subsection 26.
24b. “Federal income tax year” means, with respect to an
25insurance company or association, the calendar year, or the
26fiscal year ending during such calendar year, upon the basis of
27which the insurance company’s or association’s federal income
28tax is computed.
292. Every insurance company or association of whatever kind
30or character that is subject to the tax on gross premiums
31imposed in this chapter and that is a publicly held corporation
32as defined in section 162(m)(2) of the federal Internal Revenue
33Code shall pay to the director of the department of revenue, or
34to a depository designated by the director, as a tax, an amount
35equal to one percent of the amount paid or accrued, as the case
-1-1may be, during a federal income tax year as compensation of
2the chief executive officer, or the individual acting in such
3capacity.
43. If the taxable income of the insurance company or
5association for federal income tax purposes is derived from its
6business carried on entirely within this state, the tax in this
7section shall be imposed on the entire compensation, but if the
8business is carried on partly within and partly without the
9state, the portion of compensation reasonably attributable to
10the business within the state shall be specifically allocated
11or equitably apportioned within and without the state under
12rules of the director of the department of revenue.
134. The tax imposed in this section shall be paid on or
14before the due date under the federal Internal Revenue Code
15for paying the federal income tax of the insurance company or
16association for the applicable federal income tax year that is
17the subject of the tax in this section, as provided by rules
18adopted by the commissioner. The commissioner, in consultation
19with the director of the department of revenue, shall create
20and make available forms to be used in paying the tax imposed
21in this section.
225. The commissioner may suspend or revoke the license of a
23company or association that fails to pay its tax on or before
24the due date.
25 Sec. 3. APPLICABILITY. This Act applies to tax years
26beginning on or after January 1, 2020.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill relates to the taxation of compensation paid to
31chief executive officers of publicly traded corporations under
32the Iowa corporate income tax, franchise tax, and insurance
33premiums tax. The bill defines “compensation” to be the total
34amount allowable as a business expense deduction under the
35Internal Revenue Code (IRC) for salary and compensation for
-2-1personal services actually rendered, determined without regard
2to the deduction limitations in the IRC for certain excessive
3employee compensation or excess parachute payments.
4For purposes of calculating net income of a publicly held
5corporation under the Iowa corporate income tax, and under
6the franchise tax imposed on financial institutions, the bill
7disallows a deduction for amounts paid or accrued during a tax
8year as compensation of the chief executive officer, or the
9individual acting in such capacity. The bill additionally
10requires the publicly held corporation to add to net income the
11amounts paid or accrued during the tax year as compensation of
12the chief executive officer, or the individual acting in such
13capacity.
14Insurance companies and associations doing business in
15Iowa are not subject to the Iowa corporate income tax or
16the franchise tax, but are instead generally subject to a 1
17percent gross premiums tax related to business done in Iowa
18on a calendar year basis. The bill provides that any such
19insurance company or association subject to the Iowa insurance
20premiums tax that is a publicly held corporation shall also
21be subject to a tax equal to 1 percent of the amount paid or
22accrued during each federal income tax year as compensation of
23the chief executive officer, or the individual acting in such
24capacity. “Federal income tax year” is defined in the bill to
25be the calendar year or fiscal year upon which an insurance
26company or association computes its federal income tax. If
27the entire federal taxable income of the insurance company or
28association is derived in Iowa, then the tax is imposed on the
29entire amount of the compensation, but if business is conducted
30inside and outside of Iowa, only a portion of the compensation
31is taxable in Iowa pursuant to allocation and apportionment
32rules required to be adopted by the director of revenue.
33The tax is due on or before the due date under the IRC for
34paying the federal income tax of the insurance company or
35association for the applicable federal income tax year that
-3-1is the subject of the compensation tax. The bill allows the
2commissioner of insurance to suspend or revoke the license of
3any insurance company or association that fails to pay the
4compensation tax on or before the due date.
5The bill applies to tax years beginning on or after January
61, 2020.
-4-jm/jh
2income tax, franchise tax, and insurance companies tax
3of compensation paid by a publicly held corporation to
4its chief executive officer, and including applicability
5provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.35, Code 2019, is amended by adding
2the following new subsection:
3 NEW SUBSECTION. 26. a. For purposes of this subsection,
4“compensation” means the total amount allowable under section
5162(a)(1) of the Internal Revenue Code as salary or other
6compensation for personal services actually rendered,
7determined without regard to sections 162(m) or 280G of the
8Internal Revenue Code.
9b. If the taxpayer is a publicly held corporation as defined
10in section 162(m)(2) of the Internal Revenue Code, the taxpayer
11shall do all of the following:
12(1) Add, to the extent allowed as a deduction in computing
13federal taxable income, the amount paid or accrued during the
14tax year as compensation of the chief executive officer of the
15taxpayer, or the individual acting in such capacity.
16(2) Add the amount paid or accrued during the tax year as
17compensation of the chief executive officer of the taxpayer, or
18the individual acting in such capacity.
19 Sec. 2. NEW SECTION. 432.11 Tax on chief executive officer
20compensation of publicly held corporations.
211. For purposes of this section:
22a. “Compensation” means the same as defined in section
23422.35, subsection 26.
24b. “Federal income tax year” means, with respect to an
25insurance company or association, the calendar year, or the
26fiscal year ending during such calendar year, upon the basis of
27which the insurance company’s or association’s federal income
28tax is computed.
292. Every insurance company or association of whatever kind
30or character that is subject to the tax on gross premiums
31imposed in this chapter and that is a publicly held corporation
32as defined in section 162(m)(2) of the federal Internal Revenue
33Code shall pay to the director of the department of revenue, or
34to a depository designated by the director, as a tax, an amount
35equal to one percent of the amount paid or accrued, as the case
-1-1may be, during a federal income tax year as compensation of
2the chief executive officer, or the individual acting in such
3capacity.
43. If the taxable income of the insurance company or
5association for federal income tax purposes is derived from its
6business carried on entirely within this state, the tax in this
7section shall be imposed on the entire compensation, but if the
8business is carried on partly within and partly without the
9state, the portion of compensation reasonably attributable to
10the business within the state shall be specifically allocated
11or equitably apportioned within and without the state under
12rules of the director of the department of revenue.
134. The tax imposed in this section shall be paid on or
14before the due date under the federal Internal Revenue Code
15for paying the federal income tax of the insurance company or
16association for the applicable federal income tax year that is
17the subject of the tax in this section, as provided by rules
18adopted by the commissioner. The commissioner, in consultation
19with the director of the department of revenue, shall create
20and make available forms to be used in paying the tax imposed
21in this section.
225. The commissioner may suspend or revoke the license of a
23company or association that fails to pay its tax on or before
24the due date.
25 Sec. 3. APPLICABILITY. This Act applies to tax years
26beginning on or after January 1, 2020.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill relates to the taxation of compensation paid to
31chief executive officers of publicly traded corporations under
32the Iowa corporate income tax, franchise tax, and insurance
33premiums tax. The bill defines “compensation” to be the total
34amount allowable as a business expense deduction under the
35Internal Revenue Code (IRC) for salary and compensation for
-2-1personal services actually rendered, determined without regard
2to the deduction limitations in the IRC for certain excessive
3employee compensation or excess parachute payments.
4For purposes of calculating net income of a publicly held
5corporation under the Iowa corporate income tax, and under
6the franchise tax imposed on financial institutions, the bill
7disallows a deduction for amounts paid or accrued during a tax
8year as compensation of the chief executive officer, or the
9individual acting in such capacity. The bill additionally
10requires the publicly held corporation to add to net income the
11amounts paid or accrued during the tax year as compensation of
12the chief executive officer, or the individual acting in such
13capacity.
14Insurance companies and associations doing business in
15Iowa are not subject to the Iowa corporate income tax or
16the franchise tax, but are instead generally subject to a 1
17percent gross premiums tax related to business done in Iowa
18on a calendar year basis. The bill provides that any such
19insurance company or association subject to the Iowa insurance
20premiums tax that is a publicly held corporation shall also
21be subject to a tax equal to 1 percent of the amount paid or
22accrued during each federal income tax year as compensation of
23the chief executive officer, or the individual acting in such
24capacity. “Federal income tax year” is defined in the bill to
25be the calendar year or fiscal year upon which an insurance
26company or association computes its federal income tax. If
27the entire federal taxable income of the insurance company or
28association is derived in Iowa, then the tax is imposed on the
29entire amount of the compensation, but if business is conducted
30inside and outside of Iowa, only a portion of the compensation
31is taxable in Iowa pursuant to allocation and apportionment
32rules required to be adopted by the director of revenue.
33The tax is due on or before the due date under the IRC for
34paying the federal income tax of the insurance company or
35association for the applicable federal income tax year that
-3-1is the subject of the compensation tax. The bill allows the
2commissioner of insurance to suspend or revoke the license of
3any insurance company or association that fails to pay the
4compensation tax on or before the due date.
5The bill applies to tax years beginning on or after January
61, 2020.
-4-jm/jh