Print
Senate Study Bill 3154 - IntroducedA Bill ForAn Act 1 relating to state taxation and administration by
2modifying sales and use taxes, individual and corporate
3income taxes, the automobile rental excise tax, the
4franchise tax, and the insurance premiums tax, and including
5effective date, applicability, and retroactive applicability
6provisions.
7BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2SALES AND USE TAX ON SERVICES AND EXEMPTIONS
3 Section 1. Section 423.2, subsection 6, paragraph bu, Code
42022, is amended to read as follows:
5bu. Software as a service Cloud computing.
6 Sec. 2. Section 423.2, subsection 6, Code 2022, is amended
7by adding the following new paragraphs:
8 NEW PARAGRAPH. bv. Web hosting.
9 NEW PARAGRAPH. bw. Digital automated services.
10 NEW PARAGRAPH. bx. Scooter rentals.
11 Sec. 3. Section 423.3, subsection 8, paragraph d,
12subparagraph (1), Code 2022, is amended by adding the following
13new subparagraph division:
14 NEW SUBPARAGRAPH DIVISION. (e) A specified digital
15product.
16 Sec. 4. Section 423.3, subsection 47, paragraph a,
17subparagraph (4), Code 2022, is amended by striking the
18subparagraph.
19 Sec. 5. Section 423.3, subsection 68, paragraph c,
20subparagraph (1), subparagraph division (a), Code 2022, is
21amended to read as follows:
22(a) “Clothing” includes but is not limited to the
23following: aprons, household and shop; athletic supporters;
24baby receiving blankets; bathing suits and caps; beach capes
25and coats; belts and suspenders; boots; coats and jackets;
26costumes; diapers (children and adults, including disposable
27diapers); earmuffs; footlets; formal wear; garters and garter
28belts; girdles; gloves and mittens for general use; hats
29and caps; hosiery; insoles for shoes; lab coats; neckties;
30overshoes; pantyhose; rainwear; rubber pants; sandals;
31scarves; shoes and shoelaces; slippers; sneakers; socks and
32stockings; steel-toed shoes; underwear; uniforms, athletic and
33nonathletic; and wedding apparel.
34 Sec. 6. Section 423.3, subsection 104, paragraph a, Code
352022, is amended to read as follows:
-1- 1a. The sales price of specified digital products and of
2prewritten computer software sold, and of enumerated services
3described in section 423.2, subsection 1, paragraph “a”,
4subparagraph (5), or section 423.2, subsection 6, paragraphs
5“bq”, “br”, “bs”, and “bu”, “bv”, and “bw” furnished, to a
6commercial enterprise for use exclusively by the commercial
7enterprise. The use of prewritten computer software, a
8specified digital product, or service fails to qualify as a
9use exclusively by the commercial enterprise if its use for
10noncommercial purposes is more than de minimis.
11 Sec. 7. Section 423.3, subsection 104, paragraph b,
12subparagraph (1), Code 2022, is amended to read as follows:
13(1) “Commercial enterprise” means the same as defined in
14section 423.3, subsection 47, paragraph “d”, subparagraph (1),
15but also includes professions and occupations and includes
16public utilities as defined in section 476.1, subsection 3.
17 Sec. 8. Section 423.3, Code 2022, is amended by adding the
18following new subsections:
19 NEW SUBSECTION. 107. The sales price from the sale of
20period products. For purposes of this subsection, “period
21products” means sanitary napkins or pads, tampons, menstrual
22cups, or other similar items used in connection with the
23menstrual cycle.
24 NEW SUBSECTION. 108. The sales price from the sale of a
25child or adult diaper, whether cloth or disposable.
26 Sec. 9. EFFECTIVE DATE. This division of this Act takes
27effect January 1, 2023.
28DIVISION II
29AUTOMOBILE RENTAL EXCISE TAX
30 Sec. 10. Section 423.14A, subsection 1, paragraph b,
31subparagraph (3), Code 2022, is amended by striking the
32subparagraph.
33 Sec. 11. Section 423C.2, subsection 7, Code 2022, is amended
34by striking the subsection.
35 Sec. 12. Section 423C.3, subsection 3, paragraph b, Code
-2-12022, is amended by striking the paragraph.
2 Sec. 13. EFFECTIVE DATE. This division of this Act takes
3effect January 1, 2023.
4DIVISION III
5MANUFACTURED FOOD — SALES TAX EXEMPTION
6 Sec. 14. Section 423.3, subsection 49, Code 2022, is amended
7to read as follows:
849. a. The sales price from the sale of carbon dioxide
9in a liquid, solid, or gaseous form, electricity, steam, and
10other taxable services and the lease or rental of tangible
11personal property when used by a manufacturer of food products
12 to primarily produce marketable food products for human
13consumption food or food ingredients, including but not
14limited to treatment of material to change its form, context,
15or condition, in order to produce the food product or food
16ingredients, maintenance of quality or integrity of the
17food product or food ingredients, changing or maintenance of
18temperature levels necessary to avoid spoilage or to hold the
19food product or food ingredients in marketable condition,
20maintenance of environmental conditions necessary for the safe
21or efficient use of machinery and material used to produce
22the food product or food ingredients, sanitation and quality
23control activities, formation of packaging, placement into
24shipping containers, and movement of the material or food
25product or food ingredients until shipment from the building
26of manufacture.
27b. For purposes of this subsection, “food or food
28ingredients” means the same as “food and food ingredients” as
29defined in subsection 57, paragraph “d”, and includes tangible
30personal property that could be sold for ingestion or chewing
31by humans but is sold for another use.
32 Sec. 15. REFUNDS. Refunds of taxes, interest, or penalties
33which arise from the enactment of this division of this Act,
34for sales or services occurring between January 1, 2019, and
35the effective date of this division of this Act, shall be
-3-1limited to one hundred thousand dollars in the aggregate for
2any calendar year in which claims are eligible for a refund and
3shall not be allowed unless refund claims are filed by October
41, 2022, notwithstanding any other law to the contrary. If the
5amount of claims totals more than one hundred thousand dollars
6in the aggregate for any calendar year in which claims are
7eligible for a refund, the department of revenue shall prorate
8the one hundred thousand dollars in the aggregate among all the
9claimants for that particular calendar year in relation to the
10amounts of the claimants’ valid claims.
11 Sec. 16. EFFECTIVE DATE. This division of this Act, being
12deemed of immediate importance, takes effect upon enactment.
13 Sec. 17. RETROACTIVE APPLICABILITY. This division of this
14Act applies retroactively to January 1, 2019.
15DIVISION IV
16National guard Pay
17 Sec. 18. Section 422.7, Code 2022, is amended by adding the
18following new subsection:
19 NEW SUBSECTION. 42B. Subtract, to the extent included, up
20to twenty thousand dollars of pay received by the taxpayer for
21service pursuant to 32 U.S.C. §502.
22 Sec. 19. APPLICABILITY. This division of this Act applies
23to tax years beginning on or after January 1, 2023.
24DIVISION V
25NET OPERATING LOSS DEDUCTION
26 Sec. 20. 2018 Iowa Acts, chapter 1161, section 120, is
27amended by striking the section and inserting in lieu thereof
28the following:
29SEC. 120. Section 422.9, Code 2018, is amended by striking
30the section and inserting in lieu thereof the following:
31422.9 Calculation of Iowa net operating loss — deduction.
321. Any available net operating loss carryforward amount as
33described in subsection 3 shall be deducted from the Iowa net
34income of the taxpayer.
352. The deduction allowed under subsection 1 shall not exceed
-4-1eighty percent of the Iowa net income as determined under
2section 422.7 computed without regard to the deductions under
3this section and, to the extent included in the Iowa net income
4calculation, sections 199A and 250 of the Internal Revenue
5Code.
63. If, after applying all of the adjustments provided for in
7section 422.7 and the allocation provisions of section 422.8,
8and subject to the modifications provided in section 172(d)
9of the Internal Revenue Code, the taxable income results in
10a net operating loss, such Iowa net operating loss, if any,
11shall be carried forward and such carryforward amounts shall be
12available as a deduction under this section in future years.
13 Sec. 21. 2018 Iowa Acts, chapter 1161, section 129, is
14amended by striking the section and inserting in lieu thereof
15the following:
16SEC. 129. Section 422.35, subsection 11, Code 2018, is
17amended by striking the subsection and inserting in lieu
18thereof the following:
1911. a. Subtract to the extent available any net operating
20loss carryforward amount as described in this subsection not
21to exceed eighty percent of the Iowa net income as determined
22under this section, computed without regard to the deductions
23under this subsection and, to the extent included in the Iowa
24net income calculation, section 250 of the Internal Revenue
25Code.
26b. If after applying all of the adjustments provided for in
27this section and the allocation and apportionment provisions
28of section 422.33, the Iowa taxable income results in a net
29operating loss, such Iowa net operating loss shall be carried
30forward and such carryforward amounts shall be available as a
31deduction under this subsection in future years.
32c. Any portion of a net operating loss which was sustained
33from that portion of the trade or business carried on outside
34the state of Iowa shall not be deducted.
35d. The deductions described in this subsection are allowed
-5-1subject to the requirement that a corporation affected by the
2allocation provisions of section 422.33 shall be permitted to
3deduct only that portion of the deductions for net operating
4loss that is fairly and equitably allocable to Iowa, under
5rules prescribed by the director.
6 Sec. 22. EFFECTIVE DATE. This division of this Act takes
7effect January 1, 2023.
8 Sec. 23. APPLICABILITY. This division of this Act applies
9to tax years beginning on or after January 1, 2023.
10DIVISION VI
11CHANGES TO SALE OF CERTAIN QUALIFIED STOCK PROVISIONS
12 Sec. 24. Section 422.7, subsection 63, paragraph c,
13subparagraph (2), as enacted by 2022 Iowa Acts, House File
142317, section 1, is amended to read as follows:
15(2) “Employee-owner” means an individual who owns capital
16stock in a qualified corporation for at least ten years, which
17capital stock was acquired by the individual while employed and
18on account of employment by such any qualified corporation for
19at least ten cumulative years.
20 Sec. 25. Section 422.7, subsection 63, paragraph c,
21subparagraph (4), subparagraph division (b), as enacted by 2022
22Iowa Acts, House File 2317, section 1, is amended to read as
23follows:
24(b) “Qualified corporation” includes any member of an Iowa
25affiliated group if the Iowa affiliated group includes a member
26that has employed individuals in this state for at least ten
27years. For purposes of this subparagraph division, “Iowa
28affiliated group” means an affiliated group that has made is
29eligible to make a valid election to file an Iowa consolidated
30income tax return under section 422.37 in the year in which
31the deduction under this subsection is claimed. “Member”
32includes any entity that is eligible to be included in the a
33 consolidated return under section 422.37, subsection 2, for the
34tax year in which the deduction is claimed.
35 Sec. 26. EFFECTIVE DATE. This division of this Act takes
-6-1effect January 1, 2023.
2 Sec. 27. APPLICABILITY. This division of this Act applies
3to tax years beginning on or after January 1, 2023.
4DIVISION VII
5FRANCHISE TAX
6 Sec. 28. Section 422.63, Code 2022, is amended to read as
7follows:
8422.63 Amount of tax.
91. The franchise tax is imposed annually in an amount equal
10to five the percent specified in subsection 2 of the net income
11received or accrued during the taxable year. If the net income
12of the financial institution is derived from its business
13carried on entirely within the state, the tax shall be imposed
14on the entire net income, but if the business is carried on
15partly within and partly without the state, the portion of net
16income reasonably attributable to the business within the state
17shall be specifically allocated or equitably apportioned within
18and without the state under rules of the director.
192. a. For tax years beginning prior to January 1, 2023,
20five percent.
21b. For tax years beginning on or after January 1, 2023, but
22before January 1, 2024, four and four-fifths percent.
23c. For tax years beginning on or after January 1, 2024, but
24before January 1, 2025, four and three-fifths percent.
25d. For tax years beginning on or after January 1, 2025, but
26before January 1, 2026, four and two-fifths percent.
27e. For tax years beginning on or after January 1, 2026, but
28before January 1, 2027, four and one-fifth percent.
29f. For tax years beginning on or after January 1, 2027,
30three and nine-tenths percent.
31DIVISION VIII
32INSURANCE PREMIUMS TAX
33 Sec. 29. Section 432.1, subsection 2, Code 2022, is amended
34to read as follows:
352. The “applicable percent” for purposes of subsection 1 of
-7-1this section and section 432.2 is the following:
2a. For calendar years beginning before the 2003 calendar
3year, two percent.
4b. For the 2003 calendar year, one and three-fourths
5percent.
6c. For the 2004 calendar year, one and one-half percent.
7d. For the 2005 calendar year, one and one-fourth percent.
8e. For the 2006 and subsequent calendar years year through
9the 2022 calendar year, one percent.
10f. For the 2023 calendar year, ninety-five hundredths of one
11percent.
12g. For the 2024 and subsequent calendar years, nine-tenths
13of one percent.
14 Sec. 30. Section 432.1, subsection 4, Code 2022, is amended
15to read as follows:
164. The “applicable percent” for purposes of subsection 3 is
17the following:
18a. For calendar years beginning before the 2004 calendar
19year, two percent.
20b. For the 2004 calendar year, one and three-fourths
21percent.
22c. For the 2005 calendar year, one and one-half percent.
23d. For the 2006 calendar year, one and one-fourth percent.
24e. For the 2007 and subsequent calendar years year through
25the 2022 calendar year, one percent.
26f. For the 2023 calendar year, ninety-five hundredths of one
27percent.
28g. For the 2024 and subsequent calendar years, nine-tenths
29of one percent.
30EXPLANATION
31The inclusion of this explanation does not constitute agreement with
32the explanation’s substance by the members of the general assembly.
33This bill relates to state taxation and administration by
34modifying sales and use taxes, individual and corporate income
35taxes, the automobile rental excise tax, the franchise tax, and
-8-1the insurance premium tax.
2DIVISION I — SALES AND USE TAX ON SERVICES AND EXEMPTIONS.
3 The bill strikes “software as a service” and substitutes “cloud
4computing” as a service for purposes of imposing sales tax.
5The bill makes the following services subject to the sales tax:
6web hosting, digital automated services, and scooter. However,
7the bill exempts web hosting and digital automated services
8from the sales tax when furnished to a commercial enterprise
9for use exclusively by the commercial enterprise.
10The bill exempts “specified digital products” from the sales
11tax when used in agricultural production.
12The bill strikes the sales and use tax exemption on the
13sales price from the sale or rental of computer or computer
14peripherals by an insurance company, financial institution, or
15commercial enterprise.
16The bill exempts from the sales tax the sale of period
17products and child and adult diapers. Period products are
18defined in the bill.
19The bill strikes “professions and occupations” from
20the definition of “commercial enterprise” in Code section
21423.3(104) thus making sales to professions and occupations
22related to prewritten software, specified digital services,
23and other services subject to the sales tax. The bill expands
24the definition of “commercial enterprise” to include a “public
25utility” as defined in Code section 476.1(3). As a result, the
26sales price of specified digital products, prewritten computer
27software, and other enumerated digital and computer services
28furnished to a public utility are exempt from the sales tax, if
29exclusively used by the public utility.
30This division takes effect January 1, 2023.
31DIVISION II — AUTOMOBILE RENTAL EXCISE TAX. The bill
32repeals an exception for the collection of the automobile
33rental excise tax of a person or an affiliate of a person who
34owns, operates, or controls an automobile peer-to-peer sharing
35marketplace.
-9- 1This division takes effect January 1, 2023.
2DIVISION III — MANUFACTURED FOOD — SALES TAX EXEMPTION.
3 The bill exempts from the sales tax the sales of certain items
4and services used by a manufacturer to primarily produce food
5or food ingredients, including the lease or rental of tangible
6personal property used to primarily produce such food or food
7ingredients.
8The bill defines “food or food ingredients” to mean the same
9as defined in Code section 423.3(57)(d) and includes tangible
10personal property that could be sold for ingestion or chewing
11by humans but is sold for another use.
12Under current law, in order to receive the sales tax
13exemption the items or services must be used to produce
14marketable food products for human consumption.
15By operation of Code section 423.6, an item exempt from the
16imposition of the sales tax is also exempt from the use tax
17imposed in Code section 423.5.
18The bill requires refunds of taxes, interest, or penalties
19arising from claims resulting from the enactment of the bill
20for sales or services occurring between January 1, 2019, and
21the effective date of the bill to be filed prior to October
221, 2022. Refunds of taxes, interest, or penalties shall not
23exceed $100,000 in the aggregate in any calendar year in which
24claims are eligible for a refund. If the amount of claims
25totals more than $100,000 in the aggregate for any calendar
26year in which claims are eligible for a refund, the department
27of revenue shall prorate the $100,000 in the aggregate among
28all the claimants for that particular calendar year.
29This division takes effect upon enactment and applies
30retroactively to January 1, 2019.
31DIVISION IV — NATIONAL GUARD PAY. The bill exempts from the
32individual income tax up to $20,000 of pay received by a member
33of the national guard for any required drills, field exercises,
34or in the performance of any other orders under 32 U.S.C. §502.
35This division applies to tax years beginning on or after
-10-1January 1, 2023.
2DIVISION V — NET OPERATING LOSS DEDUCTION. For tax years
3beginning on or after January 1, 2023, 2018 Iowa Acts, chapter
41161, sections 120, 128, and 129, are set to go into effect,
5which provide that a net operating loss will no longer be
6calculated at the state level for individual and corporate
7income taxpayers, as applicable, and requires such taxpayers
8to add back any federal net operating loss deduction carried
9over from a tax year beginning prior to January 1, 2023, but
10such taxpayers are allowed to deduct any remaining Iowa net
11operating loss from a prior taxable year. The net operating
12loss deduction remains available to taxpayers at the federal
13level.
14INDIVIDUAL INCOME TAXPAYERS. For an individual income
15taxpayer with an available net operating loss carryforward
16amount prior to January 1, 2023, the bill limits the
17carryforward deduction amount to an amount not to exceed 80
18percent of Iowa net income without regard to the net operating
19loss deduction as calculated and, to the extent included in the
20Iowa net income calculation, without regard to sections 199A
21and 250 of the Internal Revenue Code.
22For individual income taxpayers, if a net Iowa operating
23loss is calculated for tax years beginning on or after January
241, 2023, the bill allows such a loss to be carried forward and
25be available as a deduction in future years.
26CORPORATE INCOME TAXPAYERS. For a corporate income taxpayer
27with an available net operating loss carryforward amount prior
28to January 1, 2023, the bill limits the carryforward deduction
29amount to an amount not to exceed 80 percent of Iowa net
30income without regard to the net operating loss deduction as
31calculated and, to the extent included in the Iowa net income
32calculation, without regard to section 250 of the Internal
33Revenue Code.
34For corporate income taxpayers, if a net Iowa operating loss
35is calculated for tax years beginning on or after January 1,
-11-12023, the bill allows such a loss to be carried forward and be
2available as a deduction in future years.
3EFFECTIVE DATE AND APPLICABILITY. This division takes
4effect January 1, 2023, and applies to tax years beginning on
5or after that date.
6DIVISION VI — CHANGES TO SALE OF CERTAIN QUALIFIED STOCK
7PROVISIONS. The bill makes changes to provisions related to
8the sale of certain qualified stock in 2022 Iowa Acts, House
9File 2317, as enacted. 2022 Iowa Acts, House File 2317,
10grants an employee-owner one irrevocable lifetime election
11to exclude from state individual income tax the net capital
12gain from the state of the capital stock on one qualified
13corporation. The bill expands the definition of “qualified
14corporation” to include any “member” of an Iowa affiliate group
15if the affiliated group is eligible to make a valid election
16to file an Iowa consolidated income tax return under Code
17section 422.37 in the year the qualified stock sale deduction
18is made. The bill expands the definition of “member” under
19the definition of “qualified corporation” in 2022 Iowa Acts,
20House File 2317, to include any entity that is eligible to be
21included in a consolidated return under Code section 422.37(2)
22if an election is made to file a consolidated return.
23This division takes effect January 1, 2023, and applies to
24tax years beginning on or after that date.
25DIVISION VII — FRANCHISE TAX. The bill phases in a
26reduction of the current franchise tax of 5 percent of net
27income as follows: Commencing with the tax years beginning
28during the 2023 calendar year, 4.80 percent; for tax years
29beginning during the 2024 calendar year, 4.60 percent; for tax
30years beginning during the 2025 calendar year, 4.40 percent;
31for tax years beginning during the 2026 calendar year, 4.20
32percent; and for all tax years beginning on or after January
331, 2027, 3.90 percent.
34DIVISION VIII — INSURANCE PREMIUMS TAX. The bill reduces
35the insurance premiums tax on the gross amount of premiums
-12-1received by an insurance company from 1 percent to .95 percent
2in calendar year 2023, and from .95 percent to .90 percent for
3the 2024 calendar year and subsequent calendar years.
-13-jm/jh
2modifying sales and use taxes, individual and corporate
3income taxes, the automobile rental excise tax, the
4franchise tax, and the insurance premiums tax, and including
5effective date, applicability, and retroactive applicability
6provisions.
7BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2SALES AND USE TAX ON SERVICES AND EXEMPTIONS
3 Section 1. Section 423.2, subsection 6, paragraph bu, Code
42022, is amended to read as follows:
5bu. Software as a service Cloud computing.
6 Sec. 2. Section 423.2, subsection 6, Code 2022, is amended
7by adding the following new paragraphs:
8 NEW PARAGRAPH. bv. Web hosting.
9 NEW PARAGRAPH. bw. Digital automated services.
10 NEW PARAGRAPH. bx. Scooter rentals.
11 Sec. 3. Section 423.3, subsection 8, paragraph d,
12subparagraph (1), Code 2022, is amended by adding the following
13new subparagraph division:
14 NEW SUBPARAGRAPH DIVISION. (e) A specified digital
15product.
16 Sec. 4. Section 423.3, subsection 47, paragraph a,
17subparagraph (4), Code 2022, is amended by striking the
18subparagraph.
19 Sec. 5. Section 423.3, subsection 68, paragraph c,
20subparagraph (1), subparagraph division (a), Code 2022, is
21amended to read as follows:
22(a) “Clothing” includes but is not limited to the
23following: aprons, household and shop; athletic supporters;
24baby receiving blankets; bathing suits and caps; beach capes
25and coats; belts and suspenders; boots; coats and jackets;
26costumes; diapers (children and adults, including disposable
27diapers); earmuffs; footlets; formal wear; garters and garter
28belts; girdles; gloves and mittens for general use; hats
29and caps; hosiery; insoles for shoes; lab coats; neckties;
30overshoes; pantyhose; rainwear; rubber pants; sandals;
31scarves; shoes and shoelaces; slippers; sneakers; socks and
32stockings; steel-toed shoes; underwear; uniforms, athletic and
33nonathletic; and wedding apparel.
34 Sec. 6. Section 423.3, subsection 104, paragraph a, Code
352022, is amended to read as follows:
-1- 1a. The sales price of specified digital products and of
2prewritten computer software sold, and of enumerated services
3described in section 423.2, subsection 1, paragraph “a”,
4subparagraph (5), or section 423.2, subsection 6, paragraphs
5“bq”, “br”, “bs”, and “bu”, “bv”, and “bw” furnished, to a
6commercial enterprise for use exclusively by the commercial
7enterprise. The use of prewritten computer software, a
8specified digital product, or service fails to qualify as a
9use exclusively by the commercial enterprise if its use for
10noncommercial purposes is more than de minimis.
11 Sec. 7. Section 423.3, subsection 104, paragraph b,
12subparagraph (1), Code 2022, is amended to read as follows:
13(1) “Commercial enterprise” means the same as defined in
14section 423.3, subsection 47, paragraph “d”, subparagraph (1),
15but also includes professions and occupations and includes
16public utilities as defined in section 476.1, subsection 3.
17 Sec. 8. Section 423.3, Code 2022, is amended by adding the
18following new subsections:
19 NEW SUBSECTION. 107. The sales price from the sale of
20period products. For purposes of this subsection, “period
21products” means sanitary napkins or pads, tampons, menstrual
22cups, or other similar items used in connection with the
23menstrual cycle.
24 NEW SUBSECTION. 108. The sales price from the sale of a
25child or adult diaper, whether cloth or disposable.
26 Sec. 9. EFFECTIVE DATE. This division of this Act takes
27effect January 1, 2023.
28DIVISION II
29AUTOMOBILE RENTAL EXCISE TAX
30 Sec. 10. Section 423.14A, subsection 1, paragraph b,
31subparagraph (3), Code 2022, is amended by striking the
32subparagraph.
33 Sec. 11. Section 423C.2, subsection 7, Code 2022, is amended
34by striking the subsection.
35 Sec. 12. Section 423C.3, subsection 3, paragraph b, Code
-2-12022, is amended by striking the paragraph.
2 Sec. 13. EFFECTIVE DATE. This division of this Act takes
3effect January 1, 2023.
4DIVISION III
5MANUFACTURED FOOD — SALES TAX EXEMPTION
6 Sec. 14. Section 423.3, subsection 49, Code 2022, is amended
7to read as follows:
849. a. The sales price from the sale of carbon dioxide
9in a liquid, solid, or gaseous form, electricity, steam, and
10other taxable services and the lease or rental of tangible
11personal property when used by a manufacturer of food products
12 to primarily produce marketable food products for human
13consumption food or food ingredients, including but not
14limited to treatment of material to change its form, context,
15or condition, in order to produce the food product or food
16ingredients, maintenance of quality or integrity of the
17food product or food ingredients, changing or maintenance of
18temperature levels necessary to avoid spoilage or to hold the
19food product or food ingredients in marketable condition,
20maintenance of environmental conditions necessary for the safe
21or efficient use of machinery and material used to produce
22the food product or food ingredients, sanitation and quality
23control activities, formation of packaging, placement into
24shipping containers, and movement of the material or food
25product or food ingredients until shipment from the building
26of manufacture.
27b. For purposes of this subsection, “food or food
28ingredients” means the same as “food and food ingredients” as
29defined in subsection 57, paragraph “d”, and includes tangible
30personal property that could be sold for ingestion or chewing
31by humans but is sold for another use.
32 Sec. 15. REFUNDS. Refunds of taxes, interest, or penalties
33which arise from the enactment of this division of this Act,
34for sales or services occurring between January 1, 2019, and
35the effective date of this division of this Act, shall be
-3-1limited to one hundred thousand dollars in the aggregate for
2any calendar year in which claims are eligible for a refund and
3shall not be allowed unless refund claims are filed by October
41, 2022, notwithstanding any other law to the contrary. If the
5amount of claims totals more than one hundred thousand dollars
6in the aggregate for any calendar year in which claims are
7eligible for a refund, the department of revenue shall prorate
8the one hundred thousand dollars in the aggregate among all the
9claimants for that particular calendar year in relation to the
10amounts of the claimants’ valid claims.
11 Sec. 16. EFFECTIVE DATE. This division of this Act, being
12deemed of immediate importance, takes effect upon enactment.
13 Sec. 17. RETROACTIVE APPLICABILITY. This division of this
14Act applies retroactively to January 1, 2019.
15DIVISION IV
16National guard Pay
17 Sec. 18. Section 422.7, Code 2022, is amended by adding the
18following new subsection:
19 NEW SUBSECTION. 42B. Subtract, to the extent included, up
20to twenty thousand dollars of pay received by the taxpayer for
21service pursuant to 32 U.S.C. §502.
22 Sec. 19. APPLICABILITY. This division of this Act applies
23to tax years beginning on or after January 1, 2023.
24DIVISION V
25NET OPERATING LOSS DEDUCTION
26 Sec. 20. 2018 Iowa Acts, chapter 1161, section 120, is
27amended by striking the section and inserting in lieu thereof
28the following:
29SEC. 120. Section 422.9, Code 2018, is amended by striking
30the section and inserting in lieu thereof the following:
31422.9 Calculation of Iowa net operating loss — deduction.
321. Any available net operating loss carryforward amount as
33described in subsection 3 shall be deducted from the Iowa net
34income of the taxpayer.
352. The deduction allowed under subsection 1 shall not exceed
-4-1eighty percent of the Iowa net income as determined under
2section 422.7 computed without regard to the deductions under
3this section and, to the extent included in the Iowa net income
4calculation, sections 199A and 250 of the Internal Revenue
5Code.
63. If, after applying all of the adjustments provided for in
7section 422.7 and the allocation provisions of section 422.8,
8and subject to the modifications provided in section 172(d)
9of the Internal Revenue Code, the taxable income results in
10a net operating loss, such Iowa net operating loss, if any,
11shall be carried forward and such carryforward amounts shall be
12available as a deduction under this section in future years.
13 Sec. 21. 2018 Iowa Acts, chapter 1161, section 129, is
14amended by striking the section and inserting in lieu thereof
15the following:
16SEC. 129. Section 422.35, subsection 11, Code 2018, is
17amended by striking the subsection and inserting in lieu
18thereof the following:
1911. a. Subtract to the extent available any net operating
20loss carryforward amount as described in this subsection not
21to exceed eighty percent of the Iowa net income as determined
22under this section, computed without regard to the deductions
23under this subsection and, to the extent included in the Iowa
24net income calculation, section 250 of the Internal Revenue
25Code.
26b. If after applying all of the adjustments provided for in
27this section and the allocation and apportionment provisions
28of section 422.33, the Iowa taxable income results in a net
29operating loss, such Iowa net operating loss shall be carried
30forward and such carryforward amounts shall be available as a
31deduction under this subsection in future years.
32c. Any portion of a net operating loss which was sustained
33from that portion of the trade or business carried on outside
34the state of Iowa shall not be deducted.
35d. The deductions described in this subsection are allowed
-5-1subject to the requirement that a corporation affected by the
2allocation provisions of section 422.33 shall be permitted to
3deduct only that portion of the deductions for net operating
4loss that is fairly and equitably allocable to Iowa, under
5rules prescribed by the director.
6 Sec. 22. EFFECTIVE DATE. This division of this Act takes
7effect January 1, 2023.
8 Sec. 23. APPLICABILITY. This division of this Act applies
9to tax years beginning on or after January 1, 2023.
10DIVISION VI
11CHANGES TO SALE OF CERTAIN QUALIFIED STOCK PROVISIONS
12 Sec. 24. Section 422.7, subsection 63, paragraph c,
13subparagraph (2), as enacted by 2022 Iowa Acts, House File
142317, section 1, is amended to read as follows:
15(2) “Employee-owner” means an individual who owns capital
16stock in a qualified corporation for at least ten years, which
17capital stock was acquired by the individual while employed and
18on account of employment by such any qualified corporation for
19at least ten cumulative years.
20 Sec. 25. Section 422.7, subsection 63, paragraph c,
21subparagraph (4), subparagraph division (b), as enacted by 2022
22Iowa Acts, House File 2317, section 1, is amended to read as
23follows:
24(b) “Qualified corporation” includes any member of an Iowa
25affiliated group if the Iowa affiliated group includes a member
26that has employed individuals in this state for at least ten
27years. For purposes of this subparagraph division, “Iowa
28affiliated group” means an affiliated group that has made is
29eligible to make a valid election to file an Iowa consolidated
30income tax return under section 422.37 in the year in which
31the deduction under this subsection is claimed. “Member”
32includes any entity that is eligible to be included in the a
33 consolidated return under section 422.37, subsection 2, for the
34tax year in which the deduction is claimed.
35 Sec. 26. EFFECTIVE DATE. This division of this Act takes
-6-1effect January 1, 2023.
2 Sec. 27. APPLICABILITY. This division of this Act applies
3to tax years beginning on or after January 1, 2023.
4DIVISION VII
5FRANCHISE TAX
6 Sec. 28. Section 422.63, Code 2022, is amended to read as
7follows:
8422.63 Amount of tax.
91. The franchise tax is imposed annually in an amount equal
10to five the percent specified in subsection 2 of the net income
11received or accrued during the taxable year. If the net income
12of the financial institution is derived from its business
13carried on entirely within the state, the tax shall be imposed
14on the entire net income, but if the business is carried on
15partly within and partly without the state, the portion of net
16income reasonably attributable to the business within the state
17shall be specifically allocated or equitably apportioned within
18and without the state under rules of the director.
192. a. For tax years beginning prior to January 1, 2023,
20five percent.
21b. For tax years beginning on or after January 1, 2023, but
22before January 1, 2024, four and four-fifths percent.
23c. For tax years beginning on or after January 1, 2024, but
24before January 1, 2025, four and three-fifths percent.
25d. For tax years beginning on or after January 1, 2025, but
26before January 1, 2026, four and two-fifths percent.
27e. For tax years beginning on or after January 1, 2026, but
28before January 1, 2027, four and one-fifth percent.
29f. For tax years beginning on or after January 1, 2027,
30three and nine-tenths percent.
31DIVISION VIII
32INSURANCE PREMIUMS TAX
33 Sec. 29. Section 432.1, subsection 2, Code 2022, is amended
34to read as follows:
352. The “applicable percent” for purposes of subsection 1 of
-7-1this section and section 432.2 is the following:
2a. For calendar years beginning before the 2003 calendar
3year, two percent.
4b. For the 2003 calendar year, one and three-fourths
5percent.
6c. For the 2004 calendar year, one and one-half percent.
7d. For the 2005 calendar year, one and one-fourth percent.
8e. For the 2006 and subsequent calendar years year through
9the 2022 calendar year, one percent.
10f. For the 2023 calendar year, ninety-five hundredths of one
11percent.
12g. For the 2024 and subsequent calendar years, nine-tenths
13of one percent.
14 Sec. 30. Section 432.1, subsection 4, Code 2022, is amended
15to read as follows:
164. The “applicable percent” for purposes of subsection 3 is
17the following:
18a. For calendar years beginning before the 2004 calendar
19year, two percent.
20b. For the 2004 calendar year, one and three-fourths
21percent.
22c. For the 2005 calendar year, one and one-half percent.
23d. For the 2006 calendar year, one and one-fourth percent.
24e. For the 2007 and subsequent calendar years year through
25the 2022 calendar year, one percent.
26f. For the 2023 calendar year, ninety-five hundredths of one
27percent.
28g. For the 2024 and subsequent calendar years, nine-tenths
29of one percent.
30EXPLANATION
31The inclusion of this explanation does not constitute agreement with
32the explanation’s substance by the members of the general assembly.
33This bill relates to state taxation and administration by
34modifying sales and use taxes, individual and corporate income
35taxes, the automobile rental excise tax, the franchise tax, and
-8-1the insurance premium tax.
2DIVISION I — SALES AND USE TAX ON SERVICES AND EXEMPTIONS.
3 The bill strikes “software as a service” and substitutes “cloud
4computing” as a service for purposes of imposing sales tax.
5The bill makes the following services subject to the sales tax:
6web hosting, digital automated services, and scooter. However,
7the bill exempts web hosting and digital automated services
8from the sales tax when furnished to a commercial enterprise
9for use exclusively by the commercial enterprise.
10The bill exempts “specified digital products” from the sales
11tax when used in agricultural production.
12The bill strikes the sales and use tax exemption on the
13sales price from the sale or rental of computer or computer
14peripherals by an insurance company, financial institution, or
15commercial enterprise.
16The bill exempts from the sales tax the sale of period
17products and child and adult diapers. Period products are
18defined in the bill.
19The bill strikes “professions and occupations” from
20the definition of “commercial enterprise” in Code section
21423.3(104) thus making sales to professions and occupations
22related to prewritten software, specified digital services,
23and other services subject to the sales tax. The bill expands
24the definition of “commercial enterprise” to include a “public
25utility” as defined in Code section 476.1(3). As a result, the
26sales price of specified digital products, prewritten computer
27software, and other enumerated digital and computer services
28furnished to a public utility are exempt from the sales tax, if
29exclusively used by the public utility.
30This division takes effect January 1, 2023.
31DIVISION II — AUTOMOBILE RENTAL EXCISE TAX. The bill
32repeals an exception for the collection of the automobile
33rental excise tax of a person or an affiliate of a person who
34owns, operates, or controls an automobile peer-to-peer sharing
35marketplace.
-9- 1This division takes effect January 1, 2023.
2DIVISION III — MANUFACTURED FOOD — SALES TAX EXEMPTION.
3 The bill exempts from the sales tax the sales of certain items
4and services used by a manufacturer to primarily produce food
5or food ingredients, including the lease or rental of tangible
6personal property used to primarily produce such food or food
7ingredients.
8The bill defines “food or food ingredients” to mean the same
9as defined in Code section 423.3(57)(d) and includes tangible
10personal property that could be sold for ingestion or chewing
11by humans but is sold for another use.
12Under current law, in order to receive the sales tax
13exemption the items or services must be used to produce
14marketable food products for human consumption.
15By operation of Code section 423.6, an item exempt from the
16imposition of the sales tax is also exempt from the use tax
17imposed in Code section 423.5.
18The bill requires refunds of taxes, interest, or penalties
19arising from claims resulting from the enactment of the bill
20for sales or services occurring between January 1, 2019, and
21the effective date of the bill to be filed prior to October
221, 2022. Refunds of taxes, interest, or penalties shall not
23exceed $100,000 in the aggregate in any calendar year in which
24claims are eligible for a refund. If the amount of claims
25totals more than $100,000 in the aggregate for any calendar
26year in which claims are eligible for a refund, the department
27of revenue shall prorate the $100,000 in the aggregate among
28all the claimants for that particular calendar year.
29This division takes effect upon enactment and applies
30retroactively to January 1, 2019.
31DIVISION IV — NATIONAL GUARD PAY. The bill exempts from the
32individual income tax up to $20,000 of pay received by a member
33of the national guard for any required drills, field exercises,
34or in the performance of any other orders under 32 U.S.C. §502.
35This division applies to tax years beginning on or after
-10-1January 1, 2023.
2DIVISION V — NET OPERATING LOSS DEDUCTION. For tax years
3beginning on or after January 1, 2023, 2018 Iowa Acts, chapter
41161, sections 120, 128, and 129, are set to go into effect,
5which provide that a net operating loss will no longer be
6calculated at the state level for individual and corporate
7income taxpayers, as applicable, and requires such taxpayers
8to add back any federal net operating loss deduction carried
9over from a tax year beginning prior to January 1, 2023, but
10such taxpayers are allowed to deduct any remaining Iowa net
11operating loss from a prior taxable year. The net operating
12loss deduction remains available to taxpayers at the federal
13level.
14INDIVIDUAL INCOME TAXPAYERS. For an individual income
15taxpayer with an available net operating loss carryforward
16amount prior to January 1, 2023, the bill limits the
17carryforward deduction amount to an amount not to exceed 80
18percent of Iowa net income without regard to the net operating
19loss deduction as calculated and, to the extent included in the
20Iowa net income calculation, without regard to sections 199A
21and 250 of the Internal Revenue Code.
22For individual income taxpayers, if a net Iowa operating
23loss is calculated for tax years beginning on or after January
241, 2023, the bill allows such a loss to be carried forward and
25be available as a deduction in future years.
26CORPORATE INCOME TAXPAYERS. For a corporate income taxpayer
27with an available net operating loss carryforward amount prior
28to January 1, 2023, the bill limits the carryforward deduction
29amount to an amount not to exceed 80 percent of Iowa net
30income without regard to the net operating loss deduction as
31calculated and, to the extent included in the Iowa net income
32calculation, without regard to section 250 of the Internal
33Revenue Code.
34For corporate income taxpayers, if a net Iowa operating loss
35is calculated for tax years beginning on or after January 1,
-11-12023, the bill allows such a loss to be carried forward and be
2available as a deduction in future years.
3EFFECTIVE DATE AND APPLICABILITY. This division takes
4effect January 1, 2023, and applies to tax years beginning on
5or after that date.
6DIVISION VI — CHANGES TO SALE OF CERTAIN QUALIFIED STOCK
7PROVISIONS. The bill makes changes to provisions related to
8the sale of certain qualified stock in 2022 Iowa Acts, House
9File 2317, as enacted. 2022 Iowa Acts, House File 2317,
10grants an employee-owner one irrevocable lifetime election
11to exclude from state individual income tax the net capital
12gain from the state of the capital stock on one qualified
13corporation. The bill expands the definition of “qualified
14corporation” to include any “member” of an Iowa affiliate group
15if the affiliated group is eligible to make a valid election
16to file an Iowa consolidated income tax return under Code
17section 422.37 in the year the qualified stock sale deduction
18is made. The bill expands the definition of “member” under
19the definition of “qualified corporation” in 2022 Iowa Acts,
20House File 2317, to include any entity that is eligible to be
21included in a consolidated return under Code section 422.37(2)
22if an election is made to file a consolidated return.
23This division takes effect January 1, 2023, and applies to
24tax years beginning on or after that date.
25DIVISION VII — FRANCHISE TAX. The bill phases in a
26reduction of the current franchise tax of 5 percent of net
27income as follows: Commencing with the tax years beginning
28during the 2023 calendar year, 4.80 percent; for tax years
29beginning during the 2024 calendar year, 4.60 percent; for tax
30years beginning during the 2025 calendar year, 4.40 percent;
31for tax years beginning during the 2026 calendar year, 4.20
32percent; and for all tax years beginning on or after January
331, 2027, 3.90 percent.
34DIVISION VIII — INSURANCE PREMIUMS TAX. The bill reduces
35the insurance premiums tax on the gross amount of premiums
-12-1received by an insurance company from 1 percent to .95 percent
2in calendar year 2023, and from .95 percent to .90 percent for
3the 2024 calendar year and subsequent calendar years.
-13-jm/jh