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Senate Study Bill 1049 - IntroducedA Bill ForAn Act 1concerning the apportionment of certain business
2income of an airline or a qualified air freight forwarder
3for purposes of Iowa corporate income tax, and including
4retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.33, subsection 2, paragraph a,
2subparagraph (2), Code 2021, is amended by adding the following
3new subparagraph divisions:
4 NEW SUBPARAGRAPH DIVISION. (0f) Notwithstanding
5subparagraph division (c), where income is derived by an
6airline from transportation operations, the part attributable
7to business within the state shall be in the proportion that
8the miles of the airline traveled in this state bears to the
9total miles of such airline traveled everywhere.
10 NEW SUBPARAGRAPH DIVISION. (00f) (i) Notwithstanding
11subparagraph division (c), where income is derived by a
12qualified air freight forwarder from transportation operations
13through an affiliated airline, such income shall be apportioned
14as follows:
15(A) For tax years beginning during the 2021 calendar year,
16ninety percent of such income shall be equitably apportioned
17as provided in subparagraph division (c), and of the remaining
18ten percent of such income, the part attributable to business
19within the state shall be in the proportion that the miles
20of the qualified air freight forwarder’s affiliated airline
21traveled in this state bears to the total miles of the
22affiliated airline traveled everywhere.
23(B) For tax years beginning during the 2022 calendar year,
24eighty percent of such income shall be equitably apportioned
25as provided in subparagraph division (c), and of the remaining
26twenty percent of such income, the part attributable to
27business within the state shall be in the proportion that the
28miles of the qualified air freight forwarder’s affiliated
29airline traveled in this state bears to the total miles of the
30affiliated airline traveled everywhere.
31(C) For tax years beginning during the 2023 calendar year,
32seventy percent of such income shall be equitably apportioned
33as provided in subparagraph division (c), and of the remaining
34thirty percent of such income, the part attributable to
35business within the state shall be in the proportion that the
-1-1miles of the qualified air freight forwarder’s affiliated
2airline traveled in this state bears to the total miles of the
3affiliated airline traveled everywhere.
4(D) For tax years beginning during the 2024 calendar year,
5sixty percent of such income shall be equitably apportioned as
6provided in subparagraph division (c), and of the remaining
7forty percent of such income, the part attributable to business
8within the state shall be in the proportion that the miles
9of the qualified air freight forwarder’s affiliated airline
10traveled in this state bears to the total miles of the
11affiliated airline traveled everywhere.
12(E) For tax years beginning during the 2025 calendar year,
13fifty percent of such income shall be equitably apportioned as
14provided in subparagraph division (c), and of the remaining
15fifty percent of such income, the part attributable to business
16within the state shall be in the proportion that the miles
17of the qualified air freight forwarder’s affiliated airline
18traveled in this state bears to the total miles of the
19affiliated airline traveled everywhere.
20(F) For tax years beginning during the 2026 calendar year,
21forty percent of such income shall be equitably apportioned as
22provided in subparagraph division (c), and of the remaining
23sixty percent of such income, the part attributable to business
24within the state shall be in the proportion that the miles
25of the qualified air freight forwarder’s affiliated airline
26traveled in this state bears to the total miles of the
27affiliated airline traveled everywhere.
28(G) For tax years beginning during the 2027 calendar year,
29thirty percent of such income shall be equitably apportioned
30as provided in subparagraph division (c), and of the remaining
31seventy percent of such income, the part attributable to
32business within the state shall be in the proportion that the
33miles of the qualified air freight forwarder’s affiliated
34airline traveled in this state bears to the total miles of the
35affiliated airline traveled everywhere.
-2- 1(H) For tax years beginning during the 2028 calendar year,
2twenty percent of such income shall be equitably apportioned
3as provided in subparagraph division (c), and of the remaining
4eighty percent of such income, the part attributable to
5business within the state shall be in the proportion that the
6miles of the qualified air freight forwarder’s affiliated
7airline traveled in this state bears to the total miles of the
8affiliated airline traveled everywhere.
9(I) For tax years beginning during the 2029 calendar year,
10ten percent of such income shall be equitably apportioned as
11provided in subparagraph division (c), and of the remaining
12ninety percent of such income, the part attributable to
13business within the state shall be in the proportion that the
14miles of the qualified air freight forwarder’s affiliated
15airline traveled in this state bears to the total miles of the
16affiliated airline traveled everywhere.
17(J) For tax years beginning on or after January 1, 2030,
18the part attributable to business within the state shall be
19in the proportion that the miles of the qualified air freight
20forwarder’s affiliated airline traveled in this state bears to
21the total miles of the affiliated airline traveled everywhere.
22(ii) For purposes of this subparagraph division (00f),
23“qualified air freight forwarder” means a taxpayer who meets all
24of the following requirements:
25(A) The taxpayer is primarily engaged in the facilitation of
26the transportation of property by air.
27(B) The taxpayer does not itself operate aircraft.
28(C) The taxpayer is in the same affiliated group as an
29airline.
30 Sec. 2. Section 422.33, subsection 2, paragraph a,
31subparagraph (2), subparagraph division (g), Code 2021, is
32amended to read as follows:
33(g) Where income consists of more than one class of income
34as provided in subparagraph divisions (a) through (e) (00f)
35 of this subparagraph, it shall be reasonably apportioned by
-3-1the business activity ratio provided in rules adopted by the
2director.
3 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies
4retroactively to January 1, 2021, for tax years beginning on
5or after that date.
6EXPLANATION
7The inclusion of this explanation does not constitute agreement with
8the explanation’s substance by the members of the general assembly.
9This bill relates to the apportionment of income of an
10airline and of a qualified air freight forwarder for purposes
11of the Iowa corporate income tax.
12A corporation doing business both within and without Iowa is
13required to apportion its business income among Iowa and the
14other states in which it does business. The amount of business
15income apportioned to Iowa is generally in the same percentage
16as the business’s gross sales made within Iowa if the business
17involves the manufacture or sale of goods and products, or in
18the same percentage as the business’s gross receipts earned
19within Iowa if the business involves something other than the
20manufacture or sale of goods and products. However, airlines
21and other specified industries have special rules provided
22by administrative rule for apportioning the income of those
23industries.
24Under current law pursuant to 701 Iowa administrative code,
25rule 54.7(2), an airline deriving income from transportation
26operations is required to apportion its business income to
27Iowa in the same proportion that its mileage traveled in Iowa
28bears to its total mileage traveled everywhere. The bill
29specifies that an airline shall apportion this business income
30in the same manner described above as required under 701 Iowa
31administrative code, rule 54.7(2).
32The bill also provides rules for apportioning income derived
33by a qualified air freight forwarder from transportation
34operations through an affiliated airline. The bill defines
35“qualified air freight forwarder” to be a taxpayer that is
-4-1primarily engaged in the facilitation of the transportation of
2property by air, and that does not itself operate aircraft but
3that is in the same affiliated group as an airline.
4The bill states that the qualified air freight forwarder
5income derived from transportation operations shall be
6apportioned to Iowa either under the current rules of the
7director of revenue (current statutory rules), or in the
8same proportion that the miles of the qualified air freight
9forwarder’s affiliated airline traveled in this state bears to
10the total miles of the affiliated airline traveled everywhere
11(affiliated airline mileage rules), based on increasing
12percentages as enumerated in the bill over a number of tax
13years.
14The bill applies retroactively to tax years beginning on or
15after January 1, 2021.
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2income of an airline or a qualified air freight forwarder
3for purposes of Iowa corporate income tax, and including
4retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.33, subsection 2, paragraph a,
2subparagraph (2), Code 2021, is amended by adding the following
3new subparagraph divisions:
4 NEW SUBPARAGRAPH DIVISION. (0f) Notwithstanding
5subparagraph division (c), where income is derived by an
6airline from transportation operations, the part attributable
7to business within the state shall be in the proportion that
8the miles of the airline traveled in this state bears to the
9total miles of such airline traveled everywhere.
10 NEW SUBPARAGRAPH DIVISION. (00f) (i) Notwithstanding
11subparagraph division (c), where income is derived by a
12qualified air freight forwarder from transportation operations
13through an affiliated airline, such income shall be apportioned
14as follows:
15(A) For tax years beginning during the 2021 calendar year,
16ninety percent of such income shall be equitably apportioned
17as provided in subparagraph division (c), and of the remaining
18ten percent of such income, the part attributable to business
19within the state shall be in the proportion that the miles
20of the qualified air freight forwarder’s affiliated airline
21traveled in this state bears to the total miles of the
22affiliated airline traveled everywhere.
23(B) For tax years beginning during the 2022 calendar year,
24eighty percent of such income shall be equitably apportioned
25as provided in subparagraph division (c), and of the remaining
26twenty percent of such income, the part attributable to
27business within the state shall be in the proportion that the
28miles of the qualified air freight forwarder’s affiliated
29airline traveled in this state bears to the total miles of the
30affiliated airline traveled everywhere.
31(C) For tax years beginning during the 2023 calendar year,
32seventy percent of such income shall be equitably apportioned
33as provided in subparagraph division (c), and of the remaining
34thirty percent of such income, the part attributable to
35business within the state shall be in the proportion that the
-1-1miles of the qualified air freight forwarder’s affiliated
2airline traveled in this state bears to the total miles of the
3affiliated airline traveled everywhere.
4(D) For tax years beginning during the 2024 calendar year,
5sixty percent of such income shall be equitably apportioned as
6provided in subparagraph division (c), and of the remaining
7forty percent of such income, the part attributable to business
8within the state shall be in the proportion that the miles
9of the qualified air freight forwarder’s affiliated airline
10traveled in this state bears to the total miles of the
11affiliated airline traveled everywhere.
12(E) For tax years beginning during the 2025 calendar year,
13fifty percent of such income shall be equitably apportioned as
14provided in subparagraph division (c), and of the remaining
15fifty percent of such income, the part attributable to business
16within the state shall be in the proportion that the miles
17of the qualified air freight forwarder’s affiliated airline
18traveled in this state bears to the total miles of the
19affiliated airline traveled everywhere.
20(F) For tax years beginning during the 2026 calendar year,
21forty percent of such income shall be equitably apportioned as
22provided in subparagraph division (c), and of the remaining
23sixty percent of such income, the part attributable to business
24within the state shall be in the proportion that the miles
25of the qualified air freight forwarder’s affiliated airline
26traveled in this state bears to the total miles of the
27affiliated airline traveled everywhere.
28(G) For tax years beginning during the 2027 calendar year,
29thirty percent of such income shall be equitably apportioned
30as provided in subparagraph division (c), and of the remaining
31seventy percent of such income, the part attributable to
32business within the state shall be in the proportion that the
33miles of the qualified air freight forwarder’s affiliated
34airline traveled in this state bears to the total miles of the
35affiliated airline traveled everywhere.
-2- 1(H) For tax years beginning during the 2028 calendar year,
2twenty percent of such income shall be equitably apportioned
3as provided in subparagraph division (c), and of the remaining
4eighty percent of such income, the part attributable to
5business within the state shall be in the proportion that the
6miles of the qualified air freight forwarder’s affiliated
7airline traveled in this state bears to the total miles of the
8affiliated airline traveled everywhere.
9(I) For tax years beginning during the 2029 calendar year,
10ten percent of such income shall be equitably apportioned as
11provided in subparagraph division (c), and of the remaining
12ninety percent of such income, the part attributable to
13business within the state shall be in the proportion that the
14miles of the qualified air freight forwarder’s affiliated
15airline traveled in this state bears to the total miles of the
16affiliated airline traveled everywhere.
17(J) For tax years beginning on or after January 1, 2030,
18the part attributable to business within the state shall be
19in the proportion that the miles of the qualified air freight
20forwarder’s affiliated airline traveled in this state bears to
21the total miles of the affiliated airline traveled everywhere.
22(ii) For purposes of this subparagraph division (00f),
23“qualified air freight forwarder” means a taxpayer who meets all
24of the following requirements:
25(A) The taxpayer is primarily engaged in the facilitation of
26the transportation of property by air.
27(B) The taxpayer does not itself operate aircraft.
28(C) The taxpayer is in the same affiliated group as an
29airline.
30 Sec. 2. Section 422.33, subsection 2, paragraph a,
31subparagraph (2), subparagraph division (g), Code 2021, is
32amended to read as follows:
33(g) Where income consists of more than one class of income
34as provided in subparagraph divisions (a) through (e) (00f)
35 of this subparagraph, it shall be reasonably apportioned by
-3-1the business activity ratio provided in rules adopted by the
2director.
3 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies
4retroactively to January 1, 2021, for tax years beginning on
5or after that date.
6EXPLANATION
7The inclusion of this explanation does not constitute agreement with
8the explanation’s substance by the members of the general assembly.
9This bill relates to the apportionment of income of an
10airline and of a qualified air freight forwarder for purposes
11of the Iowa corporate income tax.
12A corporation doing business both within and without Iowa is
13required to apportion its business income among Iowa and the
14other states in which it does business. The amount of business
15income apportioned to Iowa is generally in the same percentage
16as the business’s gross sales made within Iowa if the business
17involves the manufacture or sale of goods and products, or in
18the same percentage as the business’s gross receipts earned
19within Iowa if the business involves something other than the
20manufacture or sale of goods and products. However, airlines
21and other specified industries have special rules provided
22by administrative rule for apportioning the income of those
23industries.
24Under current law pursuant to 701 Iowa administrative code,
25rule 54.7(2), an airline deriving income from transportation
26operations is required to apportion its business income to
27Iowa in the same proportion that its mileage traveled in Iowa
28bears to its total mileage traveled everywhere. The bill
29specifies that an airline shall apportion this business income
30in the same manner described above as required under 701 Iowa
31administrative code, rule 54.7(2).
32The bill also provides rules for apportioning income derived
33by a qualified air freight forwarder from transportation
34operations through an affiliated airline. The bill defines
35“qualified air freight forwarder” to be a taxpayer that is
-4-1primarily engaged in the facilitation of the transportation of
2property by air, and that does not itself operate aircraft but
3that is in the same affiliated group as an airline.
4The bill states that the qualified air freight forwarder
5income derived from transportation operations shall be
6apportioned to Iowa either under the current rules of the
7director of revenue (current statutory rules), or in the
8same proportion that the miles of the qualified air freight
9forwarder’s affiliated airline traveled in this state bears to
10the total miles of the affiliated airline traveled everywhere
11(affiliated airline mileage rules), based on increasing
12percentages as enumerated in the bill over a number of tax
13years.
14The bill applies retroactively to tax years beginning on or
15after January 1, 2021.
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