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Senate Study Bill 1145 - IntroducedA Bill ForAn Act 1relating to state taxation by authorizing future tax
2contingencies, excluding certain grants from the computation
3of net income for the individual or corporate income tax,
4providing for tax credits and deductions, and including
5effective date and retroactive applicability provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2FUTURE TAX CHANGES
3 Section 1. 2018 Iowa Acts, chapter 1161, section 133, is
4amended by striking the section and inserting in lieu thereof
5the following:
6SEC. 133. EFFECTIVE DATE. This division of this Act takes
7effect January 1, 2023.
8DIVISION II
9INSTALLMENT SALES — CAPITAL GAINS
10 Sec. 2. 2018 Iowa Acts, chapter 1161, section 134, is
11amended to read as follows:
12SEC. 134. APPLICABILITY.
131. This division of this Act applies to tax years beginning
14on or after the effective date of this division of this Act.
152. The section of this division of this Act amending section
16422.7, subsection 21, as amended by 2019 Iowa Acts, chapter
17162, applies to sales consummated on or after the effective
18date of this division of this Act, and sales consummated prior
19to the effective date of this division of this Act shall be
20governed by law as it existed prior to the effective date of
21this division of this Act.
22DIVISION III
23COVID-19 RELATED GRANTS — TAXATION
24 Sec. 3. Section 422.7, subsection 62, Code 2021, is amended
25to read as follows:
2662. a. Subtract, to the extent included, the amount of
27any financial assistance qualifying COVID-19 grant provided to
28an eligible small issued to an individual or business by the
29economic development authority under the Iowa small business
30relief grant program created during calendar year 2020 to
31provide financial assistance to eligible small businesses
32economically impacted by the COVID-19 pandemic, the Iowa
33finance authority, or the department of agriculture and land
34stewardship.
35b. For purposes of this subsection, “qualifying COVID-19
-1-1grant” includes any grant identified by the department by rule
2that was issued under a grant program administered by the
3economic development authority, Iowa finance authority, or
4the department of agriculture and land stewardship to provide
5financial assistance to individuals and businesses economically
6impacted by the COVID-19 pandemic.
7c. The economic development authority, Iowa finance
8authority, or the department of agriculture and land
9stewardship shall notify the department of any COVID-19 grant
10program that may qualify under this subsection in the manner
11and form prescribed by the department.
12d. This subsection is repealed January 1, 2024, and does not
13apply to tax years beginning on or after that date.
14 Sec. 4. Section 422.35, subsection 30, Code 2021, is amended
15to read as follows:
1630. a. Subtract, to the extent included, the amount of
17any financial assistance qualifying COVID-19 grant provided
18to an eligible small issued to a business by the economic
19development authority under the Iowa small business relief
20grant program created during calendar year 2020 to provide
21financial assistance to eligible small businesses economically
22impacted by the COVID-19 pandemic, the Iowa finance authority,
23or the department of agriculture and land stewardship.
24b. For purposes of this subsection, “qualifying COVID-19
25grant” includes any grant identified by the department by rule
26that was issued under a grant program administered by the
27economic development authority, Iowa finance authority, or
28the department of agriculture and land stewardship to provide
29financial assistance to businesses economically impacted by the
30COVID-19 pandemic.
31c. The economic development authority, Iowa finance
32authority, or the department of agriculture and land
33stewardship shall notify the department of any COVID-19 grant
34program that may qualify under this subsection in the manner
35and form prescribed by the department.
-2- 1d. This subsection is repealed January 1, 2024, and does not
2apply to tax years beginning on or after that date.
3 Sec. 5. EFFECTIVE DATE. This division of this Act, being
4deemed of immediate importance, takes effect upon enactment.
5 Sec. 6. RETROACTIVE APPLICABILITY. This division of this
6Act applies retroactively to March 23, 2020, for tax years
7ending on or after that date.
8DIVISION IV
9HOOVER PRESIDENTIAL LIBRARY TAX CREDIT
10 Sec. 7. NEW SECTION. 15E.364 Hoover presidential library
11tax credit.
121. For tax years beginning on or after January 1, 2022,
13but before January 1, 2025, a tax credit shall be allowed
14against the taxes imposed in chapter 422, subchapters II, III,
15and V, and in chapter 432, and against the moneys and credits
16tax imposed in section 533.329, equal to twenty-five percent
17of a person’s donation during the tax year to the Hoover
18presidential foundation for the Hoover presidential library and
19museum renovation project fund. An individual may claim a tax
20credit under this section of a partnership, limited liability
21company, S corporation, estate, or trust electing to have
22income taxed directly to the individual. The amount claimed
23by the individual shall be based upon the pro rata share of the
24individual’s earnings from the partnership, limited liability
25company, S corporation, estate, or trust.
262. The amount of the donation for which the tax credit is
27claimed shall not be deductible in determining taxable income
28for state income tax purposes.
293. Any tax credit in excess of the person’s tax liability
30for the tax year may be credited to the tax liability for the
31following five years or until depleted, whichever occurs first.
32A tax credit shall not be carried back to a tax year prior to
33the tax year in which the person claims the tax credit.
344. a. The aggregate amount of tax credits authorized
35pursuant to this section shall not exceed a total of four
-3-1million dollars.
2b. The maximum amount of tax credits granted to a person
3shall not exceed five percent of the aggregate amount of tax
4credits authorized.
5c. Ten percent of the aggregate amount of tax credits
6authorized shall be reserved for those donations in amounts
7of thirty thousand dollars or less. If any portion of the
8reserved tax credits have not been distributed by September 1,
92024, the remaining reserved tax credits shall be available to
10any other eligible person.
115. The tax credit shall not be transferable to any other
12person.
136. The authority shall develop a system for authorization
14of tax credits under this section and shall control the
15distribution of all tax credits to persons providing a
16donation subject to this section. The authority shall
17adopt administrative rules pursuant to chapter 17A for the
18qualification and administration of the donations made pursuant
19to this section.
207. This section is repealed December 31, 2030.
21 Sec. 8. NEW SECTION. 422.12O Hoover presidential library
22tax credit.
23The tax imposed under this subchapter, less the credits
24allowed under section 422.12, shall be reduced by Hoover
25presidential library tax credit authorized pursuant to section
2615E.364.
27 Sec. 9. Section 422.33, Code 2021, is amended by adding the
28following new subsection:
29 NEW SUBSECTION. 31. The taxes imposed under this subchapter
30shall be reduced by a Hoover presidential library tax credit
31allowed under section 15E.364.
32 Sec. 10. Section 422.60, Code 2021, is amended by adding the
33following new subsection:
34 NEW SUBSECTION. 14. The taxes imposed under this subchapter
35shall be reduced by a Hoover presidential library tax credit
-4-1allowed under section 15E.364.
2 Sec. 11. NEW SECTION. 432.12N Hoover presidential library
3tax credit.
4The taxes imposed under this chapter shall be reduced by a
5Hoover presidential library tax credit allowed under section
615E.364.
7 Sec. 12. Section 533.329, subsection 2, Code 2021, is
8amended by adding the following new paragraph:
9 NEW PARAGRAPH. l. The moneys and credits tax imposed under
10this section shall be reduced by a Hoover presidential library
11tax credit allowed under section 15E.364.
12DIVISION V
13FEDERAL PAYCHECK PROTECTION PROGRAM
14 Sec. 13. FEDERAL PAYCHECK PROTECTION
15PROGRAM. Notwithstanding any other provision of the law
16to the contrary, for any tax year ending after March 27,
172020, Division N, Tit.II, Subtitle B, §276 of the federal
18Consolidated Appropriations Act, 2021, Pub.L. No.116-260,
19applies in computing net income for state tax purposes under
20section 422.7 or 422.35.
21EXPLANATION
22The inclusion of this explanation does not constitute agreement with
23the explanation’s substance by the members of the general assembly.
24This bill relates to state taxation by authorizing future
25tax contingencies, excludes certain grants from the computation
26of net income for individual or corporate income tax, creates a
27new tax credit, and provides for an exemption from the state
28sales and use tax.
29DIVISION I — FUTURE TAX CHANGES. The bill amends 2018 Iowa
30Acts, chapter 1161, section 133 (trigger), by striking the two
31conditions necessary for the trigger to occur, and specifies
32the provisions in 2018 Iowa Acts, chapter 1161, sections
3399-132, take effect January 1, 2023.
34Currently, the two conditions are necessary for the trigger
35to occur include net general fund revenues for the fiscal year
-5-1ending June 30, 2022, equaling or exceeding $8.3146 billion,
2and also equaling or exceeding 104 percent of the net general
3fund revenues for the fiscal year ending June 30, 2021. If
4these two conditions are not satisfied, current law institutes
5the changes for tax years beginning on or after the January 1
6following the first fiscal year for which the two conditions
7do occur. By striking the “trigger”, the bill sets in motion
8numerous tax changes for tax years beginning on or after
9January 1, 2023, described below.
10INDIVIDUAL INCOME TAX. The tax changes include reducing the
11number of individual income tax brackets from nine to four, and
12modifying the taxable income amounts and tax rates as follows:
13Income over:But not over:Tax Rate:
141)$0$6,0004.40%
152)$6,000$30,0004.82%
163)$30,000$75,0005.70%
174)$75,0006.50%
18For a married couple filing a joint return, the taxable
19income amounts in each bracket above are doubled. Also, the
20taxable income amounts in each bracket above will be indexed to
21inflation and increased in future tax years, beginning in the
22tax year following the 2023 tax year.
23INDIVIDUAL INCOME TAX CALCULATION. Under current law, the
24starting point for computing the Iowa individual income tax is
25federal adjusted gross income before the net operating loss
26deduction, which is generally a taxpayer’s gross income minus
27several deductions. From that point, Iowa requires several
28adjustments and then provides taxpayers with a deduction
29for federal income taxes paid, and the option to deduct a
30standard deduction or itemized deductions. The bill changes
31the starting point for computing the individual income tax
32to federal taxable income, which includes all deductions and
33adjustments taken at the federal level in computing tax,
34including a standard deduction or itemized deductions, and the
35qualified business income deduction allowed for certain income
-6-1earned from a pass-through entity. Because the starting point
2changes to federal taxable income, and federal law does not
3provide for the filing status of married filing separately
4on a combined return, the bill repeals that filing status
5option for Iowa tax purposes. Because net operating loss is
6no longer calculated at the state level, the bill requires a
7taxpayer to add back any federal net operating loss deduction
8carried over from a taxable year beginning prior to the 2023
9tax year, but allows taxpayers to deduct any remaining Iowa net
10operating loss from a prior taxable year. The bill repeals the
11individual alternative minimum tax (AMT), allows an individual
12to claim any remaining AMT credit against the individual’s
13regular tax liability for the 2023 tax year, and then repeals
14the AMT credit in the tax year following the 2023 tax year.
15The bill repeals most Iowa-specific deductions, exemptions,
16and adjustments currently available when computing net income
17and taxable income under Iowa law, including the Iowa optional
18standard deduction and all itemized deductions, and the ability
19to deduct federal income taxes, except for a one-year phase
20out in the 2023 tax year for taxes paid, or refunds received,
21that relate to a prior year. The bill maintains the add-back
22for income from securities that are federally exempt but not
23state-exempt, and for bonus depreciation amounts. The bill
24maintains the general pension exclusion and the deduction
25for income from federal securities. The bill maintains the
26deduction for contributions to the Iowa 529 plan, the Iowa ABLE
27plan, a first-time homebuyer savings account, and an individual
28development account. The bill also maintains the deductions
29for military pension income, military active duty pay, social
30security retirement benefits, certain payments received for
31providing unskilled in-home health care, certain amounts
32received from the veterans trust fund, victim compensation
33awards, biodiesel production refunds, certain wages paid
34to individuals with disabilities or individuals previously
35convicted of a felony, certain organ donations, and Segal
-7-1AmeriCorps education award payments. The bill modifies the
2existing deduction for health insurance payments in Code
3section 422.7(29) to make the deduction only applicable to
4taxpayers who are at least 65 years old and who have net
5income below $100,000. The bill also modifies the existing
6capital gain deduction in Code section 422.7(21) to restrict
7the deduction to the sale of real property used in farming
8businesses by permitting the taxpayer to take the deduction
9if either of the following apply: the taxpayer materially
10participated in the farming business for at least 10 years and
11held the real property for at least 10 years; or the taxpayer
12sold the real property to a relative. The bill expands the
13definition of “relative” to include an entity in which a
14relative of the taxpayer has a legal or equitable interest in
15the entity as an owner, member, partner, or beneficiary. The
16bill provides a new deduction for any income of an employee
17resulting from the payment by an employer, whether paid to
18the employee or a lender, of principal or interest on the
19employee’s qualified education loan. The bill also modifies
20the calculation of net income for purposes of the alternate
21tax calculation in Code section 422.5(3) and (3B), and the tax
22return filing thresholds in Code section 422.13, to require
23that any amount of itemized deduction, standard deduction,
24personal exemption deduction, or qualified business income
25deduction that was allowed in computing federal taxable income
26shall be added back.
27CORPORATE INCOME TAX AND FRANCHISE TAX CALCULATION. Under
28current law, the starting point for calculating the corporate
29income tax and franchise tax is federal taxable income before
30the net operating loss deduction, because net operating loss is
31calculated at the state level. The bill repeals the separate
32calculation of net operating loss at the state level. As a
33result, the bill requires taxpayers to add back any federal
34net operating loss deduction carried over from a taxable year
35beginning prior to the trigger year, but allows taxpayers to
-8-1deduct any remaining Iowa net operating loss from a prior
2taxable year. The bill also repeals most Iowa-specific
3deductions, exemptions, and adjustments currently available
4when computing net income and taxable income under Iowa law.
5The bill maintains the add-back for income from securities
6that are federally exempt but not state exempt, and for bonus
7depreciation amounts. The bill maintains the deductions for
8income from federal securities, for foreign dividend and
9subpart F income, for certain wages paid to individuals with
10disabilities or individuals previously convicted of a felony,
11and for biodiesel production refunds.
12DIVISION II — INSTALLMENT SALES — CAPITAL GAINS.
13 Currently, the capital gain individual income tax deduction is
14governed by Code section 422.7(21). The capital gain deduction
15in Code section 422.7(21) is amended when the trigger occurs
16in 2018 Iowa Acts, chapter 1161, section 113. The capital
17gain deduction in 2018 Iowa Acts, chapter 1161, section 113,
18was further amended by 2019 Iowa Acts, chapter 162. Division
19I of the bill removes the triggers and specifies that 2018
20Iowa Acts, chapter 1161, sections 99 through 132, take effect
21January 1, 2023, including the changes to the capital gain
22deduction mentioned above. The bill specifies that for
23sales occurring on or after January 1, 2023, the capital gain
24deduction is governed by 2019 Iowa Acts, chapter 162, and
25for sales occurring prior to January 1, 2023, the capital
26gain deduction is governed by existing law in Code section
27422.7(21).
28DIVISION III — COVID-19 RELATED GRANTS — TAXATION. The
29bill excludes from the calculation of Iowa individual and
30corporate income tax any qualifying COVID-19 grant issued to an
31individual or business by the economic development authority,
32the Iowa finance authority, or the department of agriculture
33and land stewardship.
34Under the bill, a “qualifying COVID-19 grant” includes
35any grant identified by the department of revenue by rule
-9-1that was issued under a grant program administered by the
2economic development authority, Iowa finance authority, or
3the department of agriculture and land stewardship to provide
4financial assistance to individuals and businesses economically
5impacted by the COVID-19 pandemic.
6Under current law, financial assistance grants provided to
7small businesses by the economic development authority under
8the Iowa small business COVID-19 relief grant program are
9excluded from the calculation of Iowa individual and corporate
10income tax.
11The COVID-19 grant income tax exclusion provided in the bill
12is repealed on January 1, 2024, and does not apply to tax years
13beginning on or after that date.
14The division takes effect upon enactment and applies
15retroactively to March 23, 2020, for tax years ending on or
16after that date.
17DIVISION IV — HOOVER PRESIDENTIAL LIBRARY TAX CREDIT. The
18bill creates a Hoover presidential library tax credit available
19against the individual, corporate, franchise, insurance
20premium, and moneys and credits taxes.
21The amount of the credit shall equal 25 percent of a
22person’s donation during a tax year to the Hoover presidential
23foundation for the Hoover presidential library and museum
24renovation project fund, an organization exempt from federal
25taxation.
26The bill specifies that the amount of the donation for which
27the tax credit is claimed shall not be deductible for state
28income tax purposes.
29A credit provided in the bill in excess of tax liability is
30not refundable but the excess for the tax year may be credited
31to a person’s tax liability for the following five years or
32until depleted, whichever occurs first. The tax credit shall
33not be carried back to a tax year prior to the tax year in which
34the person claims the tax credit.
35The aggregate amount of tax credits authorized pursuant to
-10-1the bill shall not exceed $4 million.
2The maximum amount of tax credits granted to a person shall
3not exceed 5 percent of the aggregate amount of tax credits
4authorized under the bill.
5The bill provides that 10 percent of the aggregate amount of
6tax credits authorized shall be reserved for those donations
7in amounts of $30,000 or less. If any portion of the reserved
8tax credits have not been distributed by September 1, 2024, the
9remaining reserved tax credits shall be available to any other
10eligible person.
11The bill prohibits the transfer of the credit to any other
12person.
13The bill requires the economic development authority
14to develop a system for authorization of tax credits and
15shall control the distribution of all tax credits to persons
16providing a donation subject to this Code section.
17The bill applies to tax years beginning on or after January
181, 2022, but before January 1, 2025.
19The tax credit is repealed December 31, 2030, to account for
20the carryforward of any excess credit that may be credited to
21the person’s tax liability for up to five years.
22DIVISION V — FEDERAL PAYCHECK PROTECTION PROGRAM. Under
23current law, for the tax year 2020 and later, Iowa law fully
24conforms with the federal treatment of forgiven paycheck
25protection program loans and excludes such amounts from net
26income and allows certain deductions for business expenses
27paid using those loans. For fiscal-year filers who received
28paycheck protection program loans during the 2019 tax year,
29current law excludes such amounts from net income, but does
30not allow certain deductions for business expenses paid using
31those loans. The bill fully conforms with federal law for
32those fiscal-year filers who previously were excluded from such
33conformity and allows such filers to take business expense
34deductions using federal paycheck protection program loan
35proceeds that were forgiven.
-11-jm/jh
2contingencies, excluding certain grants from the computation
3of net income for the individual or corporate income tax,
4providing for tax credits and deductions, and including
5effective date and retroactive applicability provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2FUTURE TAX CHANGES
3 Section 1. 2018 Iowa Acts, chapter 1161, section 133, is
4amended by striking the section and inserting in lieu thereof
5the following:
6SEC. 133. EFFECTIVE DATE. This division of this Act takes
7effect January 1, 2023.
8DIVISION II
9INSTALLMENT SALES — CAPITAL GAINS
10 Sec. 2. 2018 Iowa Acts, chapter 1161, section 134, is
11amended to read as follows:
12SEC. 134. APPLICABILITY.
131. This division of this Act applies to tax years beginning
14on or after the effective date of this division of this Act.
152. The section of this division of this Act amending section
16422.7, subsection 21, as amended by 2019 Iowa Acts, chapter
17162, applies to sales consummated on or after the effective
18date of this division of this Act, and sales consummated prior
19to the effective date of this division of this Act shall be
20governed by law as it existed prior to the effective date of
21this division of this Act.
22DIVISION III
23COVID-19 RELATED GRANTS — TAXATION
24 Sec. 3. Section 422.7, subsection 62, Code 2021, is amended
25to read as follows:
2662. a. Subtract, to the extent included, the amount of
27any financial assistance qualifying COVID-19 grant provided to
28an eligible small issued to an individual or business by the
29economic development authority under the Iowa small business
30relief grant program created during calendar year 2020 to
31provide financial assistance to eligible small businesses
32economically impacted by the COVID-19 pandemic, the Iowa
33finance authority, or the department of agriculture and land
34stewardship.
35b. For purposes of this subsection, “qualifying COVID-19
-1-1grant” includes any grant identified by the department by rule
2that was issued under a grant program administered by the
3economic development authority, Iowa finance authority, or
4the department of agriculture and land stewardship to provide
5financial assistance to individuals and businesses economically
6impacted by the COVID-19 pandemic.
7c. The economic development authority, Iowa finance
8authority, or the department of agriculture and land
9stewardship shall notify the department of any COVID-19 grant
10program that may qualify under this subsection in the manner
11and form prescribed by the department.
12d. This subsection is repealed January 1, 2024, and does not
13apply to tax years beginning on or after that date.
14 Sec. 4. Section 422.35, subsection 30, Code 2021, is amended
15to read as follows:
1630. a. Subtract, to the extent included, the amount of
17any financial assistance qualifying COVID-19 grant provided
18to an eligible small issued to a business by the economic
19development authority under the Iowa small business relief
20grant program created during calendar year 2020 to provide
21financial assistance to eligible small businesses economically
22impacted by the COVID-19 pandemic, the Iowa finance authority,
23or the department of agriculture and land stewardship.
24b. For purposes of this subsection, “qualifying COVID-19
25grant” includes any grant identified by the department by rule
26that was issued under a grant program administered by the
27economic development authority, Iowa finance authority, or
28the department of agriculture and land stewardship to provide
29financial assistance to businesses economically impacted by the
30COVID-19 pandemic.
31c. The economic development authority, Iowa finance
32authority, or the department of agriculture and land
33stewardship shall notify the department of any COVID-19 grant
34program that may qualify under this subsection in the manner
35and form prescribed by the department.
-2- 1d. This subsection is repealed January 1, 2024, and does not
2apply to tax years beginning on or after that date.
3 Sec. 5. EFFECTIVE DATE. This division of this Act, being
4deemed of immediate importance, takes effect upon enactment.
5 Sec. 6. RETROACTIVE APPLICABILITY. This division of this
6Act applies retroactively to March 23, 2020, for tax years
7ending on or after that date.
8DIVISION IV
9HOOVER PRESIDENTIAL LIBRARY TAX CREDIT
10 Sec. 7. NEW SECTION. 15E.364 Hoover presidential library
11tax credit.
121. For tax years beginning on or after January 1, 2022,
13but before January 1, 2025, a tax credit shall be allowed
14against the taxes imposed in chapter 422, subchapters II, III,
15and V, and in chapter 432, and against the moneys and credits
16tax imposed in section 533.329, equal to twenty-five percent
17of a person’s donation during the tax year to the Hoover
18presidential foundation for the Hoover presidential library and
19museum renovation project fund. An individual may claim a tax
20credit under this section of a partnership, limited liability
21company, S corporation, estate, or trust electing to have
22income taxed directly to the individual. The amount claimed
23by the individual shall be based upon the pro rata share of the
24individual’s earnings from the partnership, limited liability
25company, S corporation, estate, or trust.
262. The amount of the donation for which the tax credit is
27claimed shall not be deductible in determining taxable income
28for state income tax purposes.
293. Any tax credit in excess of the person’s tax liability
30for the tax year may be credited to the tax liability for the
31following five years or until depleted, whichever occurs first.
32A tax credit shall not be carried back to a tax year prior to
33the tax year in which the person claims the tax credit.
344. a. The aggregate amount of tax credits authorized
35pursuant to this section shall not exceed a total of four
-3-1million dollars.
2b. The maximum amount of tax credits granted to a person
3shall not exceed five percent of the aggregate amount of tax
4credits authorized.
5c. Ten percent of the aggregate amount of tax credits
6authorized shall be reserved for those donations in amounts
7of thirty thousand dollars or less. If any portion of the
8reserved tax credits have not been distributed by September 1,
92024, the remaining reserved tax credits shall be available to
10any other eligible person.
115. The tax credit shall not be transferable to any other
12person.
136. The authority shall develop a system for authorization
14of tax credits under this section and shall control the
15distribution of all tax credits to persons providing a
16donation subject to this section. The authority shall
17adopt administrative rules pursuant to chapter 17A for the
18qualification and administration of the donations made pursuant
19to this section.
207. This section is repealed December 31, 2030.
21 Sec. 8. NEW SECTION. 422.12O Hoover presidential library
22tax credit.
23The tax imposed under this subchapter, less the credits
24allowed under section 422.12, shall be reduced by Hoover
25presidential library tax credit authorized pursuant to section
2615E.364.
27 Sec. 9. Section 422.33, Code 2021, is amended by adding the
28following new subsection:
29 NEW SUBSECTION. 31. The taxes imposed under this subchapter
30shall be reduced by a Hoover presidential library tax credit
31allowed under section 15E.364.
32 Sec. 10. Section 422.60, Code 2021, is amended by adding the
33following new subsection:
34 NEW SUBSECTION. 14. The taxes imposed under this subchapter
35shall be reduced by a Hoover presidential library tax credit
-4-1allowed under section 15E.364.
2 Sec. 11. NEW SECTION. 432.12N Hoover presidential library
3tax credit.
4The taxes imposed under this chapter shall be reduced by a
5Hoover presidential library tax credit allowed under section
615E.364.
7 Sec. 12. Section 533.329, subsection 2, Code 2021, is
8amended by adding the following new paragraph:
9 NEW PARAGRAPH. l. The moneys and credits tax imposed under
10this section shall be reduced by a Hoover presidential library
11tax credit allowed under section 15E.364.
12DIVISION V
13FEDERAL PAYCHECK PROTECTION PROGRAM
14 Sec. 13. FEDERAL PAYCHECK PROTECTION
15PROGRAM. Notwithstanding any other provision of the law
16to the contrary, for any tax year ending after March 27,
172020, Division N, Tit.II, Subtitle B, §276 of the federal
18Consolidated Appropriations Act, 2021, Pub.L. No.116-260,
19applies in computing net income for state tax purposes under
20section 422.7 or 422.35.
21EXPLANATION
22The inclusion of this explanation does not constitute agreement with
23the explanation’s substance by the members of the general assembly.
24This bill relates to state taxation by authorizing future
25tax contingencies, excludes certain grants from the computation
26of net income for individual or corporate income tax, creates a
27new tax credit, and provides for an exemption from the state
28sales and use tax.
29DIVISION I — FUTURE TAX CHANGES. The bill amends 2018 Iowa
30Acts, chapter 1161, section 133 (trigger), by striking the two
31conditions necessary for the trigger to occur, and specifies
32the provisions in 2018 Iowa Acts, chapter 1161, sections
3399-132, take effect January 1, 2023.
34Currently, the two conditions are necessary for the trigger
35to occur include net general fund revenues for the fiscal year
-5-1ending June 30, 2022, equaling or exceeding $8.3146 billion,
2and also equaling or exceeding 104 percent of the net general
3fund revenues for the fiscal year ending June 30, 2021. If
4these two conditions are not satisfied, current law institutes
5the changes for tax years beginning on or after the January 1
6following the first fiscal year for which the two conditions
7do occur. By striking the “trigger”, the bill sets in motion
8numerous tax changes for tax years beginning on or after
9January 1, 2023, described below.
10INDIVIDUAL INCOME TAX. The tax changes include reducing the
11number of individual income tax brackets from nine to four, and
12modifying the taxable income amounts and tax rates as follows:
13Income over:But not over:Tax Rate:
141)$0$6,0004.40%
152)$6,000$30,0004.82%
163)$30,000$75,0005.70%
174)$75,0006.50%
18For a married couple filing a joint return, the taxable
19income amounts in each bracket above are doubled. Also, the
20taxable income amounts in each bracket above will be indexed to
21inflation and increased in future tax years, beginning in the
22tax year following the 2023 tax year.
23INDIVIDUAL INCOME TAX CALCULATION. Under current law, the
24starting point for computing the Iowa individual income tax is
25federal adjusted gross income before the net operating loss
26deduction, which is generally a taxpayer’s gross income minus
27several deductions. From that point, Iowa requires several
28adjustments and then provides taxpayers with a deduction
29for federal income taxes paid, and the option to deduct a
30standard deduction or itemized deductions. The bill changes
31the starting point for computing the individual income tax
32to federal taxable income, which includes all deductions and
33adjustments taken at the federal level in computing tax,
34including a standard deduction or itemized deductions, and the
35qualified business income deduction allowed for certain income
-6-1earned from a pass-through entity. Because the starting point
2changes to federal taxable income, and federal law does not
3provide for the filing status of married filing separately
4on a combined return, the bill repeals that filing status
5option for Iowa tax purposes. Because net operating loss is
6no longer calculated at the state level, the bill requires a
7taxpayer to add back any federal net operating loss deduction
8carried over from a taxable year beginning prior to the 2023
9tax year, but allows taxpayers to deduct any remaining Iowa net
10operating loss from a prior taxable year. The bill repeals the
11individual alternative minimum tax (AMT), allows an individual
12to claim any remaining AMT credit against the individual’s
13regular tax liability for the 2023 tax year, and then repeals
14the AMT credit in the tax year following the 2023 tax year.
15The bill repeals most Iowa-specific deductions, exemptions,
16and adjustments currently available when computing net income
17and taxable income under Iowa law, including the Iowa optional
18standard deduction and all itemized deductions, and the ability
19to deduct federal income taxes, except for a one-year phase
20out in the 2023 tax year for taxes paid, or refunds received,
21that relate to a prior year. The bill maintains the add-back
22for income from securities that are federally exempt but not
23state-exempt, and for bonus depreciation amounts. The bill
24maintains the general pension exclusion and the deduction
25for income from federal securities. The bill maintains the
26deduction for contributions to the Iowa 529 plan, the Iowa ABLE
27plan, a first-time homebuyer savings account, and an individual
28development account. The bill also maintains the deductions
29for military pension income, military active duty pay, social
30security retirement benefits, certain payments received for
31providing unskilled in-home health care, certain amounts
32received from the veterans trust fund, victim compensation
33awards, biodiesel production refunds, certain wages paid
34to individuals with disabilities or individuals previously
35convicted of a felony, certain organ donations, and Segal
-7-1AmeriCorps education award payments. The bill modifies the
2existing deduction for health insurance payments in Code
3section 422.7(29) to make the deduction only applicable to
4taxpayers who are at least 65 years old and who have net
5income below $100,000. The bill also modifies the existing
6capital gain deduction in Code section 422.7(21) to restrict
7the deduction to the sale of real property used in farming
8businesses by permitting the taxpayer to take the deduction
9if either of the following apply: the taxpayer materially
10participated in the farming business for at least 10 years and
11held the real property for at least 10 years; or the taxpayer
12sold the real property to a relative. The bill expands the
13definition of “relative” to include an entity in which a
14relative of the taxpayer has a legal or equitable interest in
15the entity as an owner, member, partner, or beneficiary. The
16bill provides a new deduction for any income of an employee
17resulting from the payment by an employer, whether paid to
18the employee or a lender, of principal or interest on the
19employee’s qualified education loan. The bill also modifies
20the calculation of net income for purposes of the alternate
21tax calculation in Code section 422.5(3) and (3B), and the tax
22return filing thresholds in Code section 422.13, to require
23that any amount of itemized deduction, standard deduction,
24personal exemption deduction, or qualified business income
25deduction that was allowed in computing federal taxable income
26shall be added back.
27CORPORATE INCOME TAX AND FRANCHISE TAX CALCULATION. Under
28current law, the starting point for calculating the corporate
29income tax and franchise tax is federal taxable income before
30the net operating loss deduction, because net operating loss is
31calculated at the state level. The bill repeals the separate
32calculation of net operating loss at the state level. As a
33result, the bill requires taxpayers to add back any federal
34net operating loss deduction carried over from a taxable year
35beginning prior to the trigger year, but allows taxpayers to
-8-1deduct any remaining Iowa net operating loss from a prior
2taxable year. The bill also repeals most Iowa-specific
3deductions, exemptions, and adjustments currently available
4when computing net income and taxable income under Iowa law.
5The bill maintains the add-back for income from securities
6that are federally exempt but not state exempt, and for bonus
7depreciation amounts. The bill maintains the deductions for
8income from federal securities, for foreign dividend and
9subpart F income, for certain wages paid to individuals with
10disabilities or individuals previously convicted of a felony,
11and for biodiesel production refunds.
12DIVISION II — INSTALLMENT SALES — CAPITAL GAINS.
13 Currently, the capital gain individual income tax deduction is
14governed by Code section 422.7(21). The capital gain deduction
15in Code section 422.7(21) is amended when the trigger occurs
16in 2018 Iowa Acts, chapter 1161, section 113. The capital
17gain deduction in 2018 Iowa Acts, chapter 1161, section 113,
18was further amended by 2019 Iowa Acts, chapter 162. Division
19I of the bill removes the triggers and specifies that 2018
20Iowa Acts, chapter 1161, sections 99 through 132, take effect
21January 1, 2023, including the changes to the capital gain
22deduction mentioned above. The bill specifies that for
23sales occurring on or after January 1, 2023, the capital gain
24deduction is governed by 2019 Iowa Acts, chapter 162, and
25for sales occurring prior to January 1, 2023, the capital
26gain deduction is governed by existing law in Code section
27422.7(21).
28DIVISION III — COVID-19 RELATED GRANTS — TAXATION. The
29bill excludes from the calculation of Iowa individual and
30corporate income tax any qualifying COVID-19 grant issued to an
31individual or business by the economic development authority,
32the Iowa finance authority, or the department of agriculture
33and land stewardship.
34Under the bill, a “qualifying COVID-19 grant” includes
35any grant identified by the department of revenue by rule
-9-1that was issued under a grant program administered by the
2economic development authority, Iowa finance authority, or
3the department of agriculture and land stewardship to provide
4financial assistance to individuals and businesses economically
5impacted by the COVID-19 pandemic.
6Under current law, financial assistance grants provided to
7small businesses by the economic development authority under
8the Iowa small business COVID-19 relief grant program are
9excluded from the calculation of Iowa individual and corporate
10income tax.
11The COVID-19 grant income tax exclusion provided in the bill
12is repealed on January 1, 2024, and does not apply to tax years
13beginning on or after that date.
14The division takes effect upon enactment and applies
15retroactively to March 23, 2020, for tax years ending on or
16after that date.
17DIVISION IV — HOOVER PRESIDENTIAL LIBRARY TAX CREDIT. The
18bill creates a Hoover presidential library tax credit available
19against the individual, corporate, franchise, insurance
20premium, and moneys and credits taxes.
21The amount of the credit shall equal 25 percent of a
22person’s donation during a tax year to the Hoover presidential
23foundation for the Hoover presidential library and museum
24renovation project fund, an organization exempt from federal
25taxation.
26The bill specifies that the amount of the donation for which
27the tax credit is claimed shall not be deductible for state
28income tax purposes.
29A credit provided in the bill in excess of tax liability is
30not refundable but the excess for the tax year may be credited
31to a person’s tax liability for the following five years or
32until depleted, whichever occurs first. The tax credit shall
33not be carried back to a tax year prior to the tax year in which
34the person claims the tax credit.
35The aggregate amount of tax credits authorized pursuant to
-10-1the bill shall not exceed $4 million.
2The maximum amount of tax credits granted to a person shall
3not exceed 5 percent of the aggregate amount of tax credits
4authorized under the bill.
5The bill provides that 10 percent of the aggregate amount of
6tax credits authorized shall be reserved for those donations
7in amounts of $30,000 or less. If any portion of the reserved
8tax credits have not been distributed by September 1, 2024, the
9remaining reserved tax credits shall be available to any other
10eligible person.
11The bill prohibits the transfer of the credit to any other
12person.
13The bill requires the economic development authority
14to develop a system for authorization of tax credits and
15shall control the distribution of all tax credits to persons
16providing a donation subject to this Code section.
17The bill applies to tax years beginning on or after January
181, 2022, but before January 1, 2025.
19The tax credit is repealed December 31, 2030, to account for
20the carryforward of any excess credit that may be credited to
21the person’s tax liability for up to five years.
22DIVISION V — FEDERAL PAYCHECK PROTECTION PROGRAM. Under
23current law, for the tax year 2020 and later, Iowa law fully
24conforms with the federal treatment of forgiven paycheck
25protection program loans and excludes such amounts from net
26income and allows certain deductions for business expenses
27paid using those loans. For fiscal-year filers who received
28paycheck protection program loans during the 2019 tax year,
29current law excludes such amounts from net income, but does
30not allow certain deductions for business expenses paid using
31those loans. The bill fully conforms with federal law for
32those fiscal-year filers who previously were excluded from such
33conformity and allows such filers to take business expense
34deductions using federal paycheck protection program loan
35proceeds that were forgiven.
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