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Senate File 552 - IntroducedA Bill ForAn Act 1relating to individual and corporate income taxes, the
2insurance premium tax, and including the contingent repeal
3of the individual income tax, and including retroactive
4applicability and effective date provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2future INDIVIDUAL INCOME TAX RATE CHANGES
3 Section 1. Section 422.5, subsection 2, paragraph b,
4subparagraph (2), Code 2023, is amended to read as follows:
5(2) (a) (i) (A) For the tax year beginning on or after
6January 1, 2023, but before January 1, 2024, the alternate tax
7rate is 6.00 percent.
8(B) For the tax year beginning on or after January 1, 2024,
9but before January 1, 2025, the alternate tax rate is 5.70
10percent.
11(C) For the tax year beginning on or after January 1, 2025,
12but before January 1, 2026, the alternate tax rate is 5.20 4.80
13 percent.
14(D) For the tax year beginning on or after January 1, 2026,
15but before January 1, 2027, the alternate tax rate is 3.95
16percent.
17(E) For the tax year beginning on or after January 1, 2027,
18but before January 1, 2028, the alternate tax rate is 3.35
19percent.
20(ii) This subparagraph division (a) is repealed January 1,
212026 2028.
22(b) For tax years beginning on or after January 1, 2026
23 2028, the alternate tax rate is 4.40 3.00 percent.
24 Sec. 2. Section 422.5, subsection 3, paragraph b,
25subparagraph (2), Code 2023, is amended to read as follows:
26(2) (a) (i) (A) For the tax year beginning on or after
27January 1, 2023, but before January 1, 2024, the alternate tax
28rate is 6.00 percent.
29(B) For the tax year beginning on or after January 1, 2024,
30but before January 1, 2025, the alternate tax rate is 5.70
31percent.
32(C) For the tax year beginning on or after January 1, 2025,
33but before January 1, 2026, the alternate tax rate is 5.20 4.80
34 percent.
35(D) For the tax year beginning on or after January 1, 2026,
-1-1but before January 1, 2027, the alternate tax rate is 3.95
2percent.
3(E) For the tax year beginning on or after January 1, 2027,
4but before January 1, 2028, the alternate tax rate is 3.35
5percent.
6(ii) This subparagraph division (a) is repealed January 1,
72026 2028.
8(b) For tax years beginning on or after January 1, 2026
9 2028, the alternate tax rate is 4.40 3.00 percent.
10 Sec. 3. Section 422.5A, subsection 1, paragraph a,
11subparagraph (3), Code 2023, is amended to read as follows:
12(3) For the tax year beginning on or after January 1, 2025,
13but before January 1, 2026:
14(a) On taxable income from 0 through $12,000, the rate of
154.40 4.00 percent.
16(b) On taxable income exceeding $12,000, the rate of 4.82
17 4.40 percent.
18 Sec. 4. Section 422.5A, subsection 1, paragraph b,
19subparagraph (3), Code 2023, is amended to read as follows:
20(3) For the tax year beginning on or after January 1, 2025,
21but before January 1, 2026:
22(a) On taxable income from 0 through $6,000, the rate of
234.40 4.00 percent.
24(b) On taxable income exceeding $6,000, the rate of 4.82
25 4.40 percent.
26 Sec. 5. 2022 Iowa Acts, chapter 1002, section 20, is amended
27to read as follows:
28SEC. 20. Section 422.5, subsection 1, paragraph a, Code
292022, is amended to read as follows:
30a. (1) A tax is imposed upon every resident and nonresident
31of the state which tax shall be levied, collected, and paid
32annually upon and with respect to the entire taxable income as
33defined in this subchapter at a rate of three and nine-tenths
34percent. the following rates in the following tax years:
35(a) For the tax year beginning on or after January 1, 2026,
-2-1but before January 1, 2027, the rate of 3.55 percent.
2(b) For the tax year beginning on or after January 1, 2027,
3but before January 1, 2028, the rate of 2.95 percent.
4(c) For tax years beginning on or after January 1, 2028, the
5rate of 2.50 percent.
6(2) (a) Notwithstanding the rate in subparagraph (1), the
7department of revenue shall determine the individual income
8tax rate as provided in this subparagraph. The tax rate in
9subparagraph (1) shall remain in effect until the rate is
10adjusted pursuant to this subparagraph. A rate adjusted in
11this subparagraph shall remain in effect until the rate is
12adjusted again pursuant to this subparagraph.
13(b) By November 1, 2029, and by November 1 each year
14thereafter, until the individual income tax rate equals zero,
15the department of management shall determine the amount of
16moneys available in the taxpayer relief fund in section 8.57E,
17and the net individual income tax receipts at the close of the
18preceding fiscal year. The department of revenue shall adjust
19and apply a new rate based upon the amount of moneys available
20in the taxpayer relief fund as provided in subparagraph
21division (c).
22(c) (i) The rate shall be adjusted in such a way that the
23rate would have generated an amount equal to the net receipts
24generated from the rate in the preceding fiscal year less the
25amount available in the taxpayer relief fund in section 8.57E
26that is used in the calculation in this subparagraph division.
27(ii) The rate shall not be adjusted unless the rate is able
28to be adjusted at least one-tenth of one percent. The rate,
29when adjusted, shall be rounded down to the nearest one-tenth
30of one percent.
31(iii) If a determination is made by the department of
32revenue that the rate is subject to adjustment, the department
33of revenue shall adjust the rate specified in subparagraph
34(1), or if the rate has been previously adjusted, adjust the
35previously adjusted rate.
-3- 1(d) If an adjustment is made pursuant to subparagraph
2division (c), the amount of moneys in the taxpayer relief fund
3used in the calculation in subparagraph division (c) shall be
4transferred to the general fund of the state in the fiscal year
5the rate is adjusted.
6(e) If a rate is adjusted pursuant to subparagraph division
7(c), the director of revenue shall cause an advisory notice
8containing the new individual income tax rate to be published
9in the Iowa administrative bulletin and on the internet site
10of the department of revenue. The calculation and publication
11of the adjusted tax rate by the director of revenue is exempt
12from chapter 17A, and shall be submitted for publication by the
13first December 31 following the determination date to adjust
14the rate.
15DIVISION II
16future CORPORATE INCOME TAX RATE CHANGES
17 Sec. 6. Section 422.33, subsection 1, paragraph b,
18subparagraph (1), subparagraph division (b), Code 2023, is
19amended to read as follows:
20(b) By November 1, 2022, and by November 1 each year
21thereafter, the department of management shall determine
22the net corporate income tax receipts for the fiscal year
23preceding the determination date. If net corporate income
24tax receipts for the preceding fiscal year exceed seven six
25 hundred eighty million dollars, the department of revenue shall
26adjust and apply new corporate income tax rates as provided in
27subparagraph (2).
28 Sec. 7. Section 422.33, subsection 1, paragraph b,
29subparagraph (2), subparagraph division (a), Code 2023, is
30amended to read as follows:
31(a) If a determination has been made that net corporate
32income tax receipts for the preceding fiscal year exceeded
33seven six hundred eighty million dollars, the department of
34revenue shall adjust the tax rates specified in paragraph “a”,
35subparagraphs (3) and (4), and apply the adjusted rates for tax
-4-1years beginning on or after the next January 1 following the
2determination date.
3 Sec. 8. Section 422.33, subsection 1, paragraph b,
4subparagraph (2), subparagraph division (b), subparagraph
5subdivision (i), Code 2023, is amended to read as follows:
6(i) The tax rates subject to adjustment shall be adjusted
7in such a way that when combined with all the other rates
8specified in paragraph “a”, the tax rates would have generated
9net corporate income tax receipts that equal seven six hundred
10eighty million dollars in the preceding fiscal year.
11 Sec. 9. Section 422.33, subsection 1, paragraph b,
12subparagraph (2), subparagraph division (b), subparagraph
13subdivision (iii), Code 2023, is amended to read as follows:
14(iii) The tax rates adjusted pursuant to this paragraph
15shall not be adjusted below five and one-half four and
16three-fourths percent.
17 Sec. 10. 2022 Iowa Acts, chapter 1002, sections 57 and 58,
18are amended to read as follows:
19SEC. 57. Section 422.33, subsection 1, Code 2022, is amended
20by striking the subsection and inserting in lieu thereof the
21following:
221. A tax is imposed annually upon each corporation doing
23business in this state, or deriving income from sources within
24this state, in an amount computed by applying the rate of five
25and one-half four and three-fourths percent to the net income
26received by the corporation during the income year.
27SEC. 58. CONTINGENT EFFECTIVE DATE. This division of
28this Act takes effect on the first January 1 after each rate
29of taxation on the net income received by a corporation is
30equalized to equal five and one-half four and three-fourths
31 percent pursuant to section 422.33, subsection 1, paragraph
32“b”, as amended by this Act. The director of revenue shall
33inform the Code editor upon the occurrence of this contingency.
34DIVISION III
35insurance premium tax
-5-1 Sec. 11. Section 432.1, subsection 2, Code 2023, is amended
2to read as follows:
32. The “applicable percent” for purposes of subsection 1 of
4this section and section 432.2 is the following:
5a. For calendar years beginning before the 2003 calendar
6year, two percent.
7b. For the 2003 calendar year, one and three-fourths
8percent.
9c. For the 2004 calendar year, one and one-half percent.
10d. For the 2005 calendar year, one and one-fourth percent.
11e. For the 2006 and subsequent calendar years year through
12the 2024 calendar year, one percent.
13f. For the 2025 calendar year, ninety-five hundredths of one
14percent.
15g. For the 2026 and subsequent calendar years, nine-tenths
16of one percent.
17 Sec. 12. Section 432.1, subsection 4, Code 2023, is amended
18to read as follows:
194. The “applicable percent” for purposes of subsection 3 is
20the following:
21a. For calendar years beginning before the 2004 calendar
22year, two percent.
23b. For the 2004 calendar year, one and three-fourths
24percent.
25c. For the 2005 calendar year, one and one-half percent.
26d. For the 2006 calendar year, one and one-fourth percent.
27e. For the 2007 and subsequent calendar years year through
28the 2024 calendar year, one percent.
29f. For the 2025 calendar year, ninety-five hundredths of one
30percent.
31g. For the 2026 and subsequent calendar years, nine-tenths
32of one percent.
33DIVISION IV
34SALE OF CERTAIN QUALIFIED STOCK — NET CAPITAL GAIN EXCLUSION
35 Sec. 13. Section 422.7, subsection 43, paragraph c,
-6-1subparagraph (2), Code 2023, is amended to read as follows:
2(2) “Employee-owner” means an individual who owns capital
3stock in a qualified corporation for at least ten years, which
4capital stock was acquired by the individual while employed and
5on account of employment by such any qualified corporation for
6at least ten cumulative years.
7 Sec. 14. Section 422.7, subsection 43, paragraph c,
8subparagraph (4), subparagraph division (b), Code 2023, is
9amended to read as follows:
10(b) “Qualified corporation” includes any member of an Iowa
11affiliated group if the Iowa affiliated group includes a member
12that has employed individuals in this state for at least ten
13years. For purposes of this subparagraph division, “Iowa
14affiliated group” means an affiliated group that has made is
15eligible to make a valid election to file an Iowa consolidated
16income tax return under section 422.37 in the year in which
17the deduction under this subsection is claimed. “Member”
18includes any entity that is eligible to be included in the a
19 consolidated return under section 422.37, subsection 2, for the
20tax year in which the deduction is claimed.
21 Sec. 15. EFFECTIVE DATE. This division of this Act, being
22deemed of immediate importance, takes effect upon enactment.
23 Sec. 16. RETROACTIVE APPLICABILITY. This division of this
24Act applies retroactively to January 1, 2023, for tax years
25beginning on or after that date.
26EXPLANATION
27The inclusion of this explanation does not constitute agreement with
28the explanation’s substance by the members of the general assembly.
29This bill reduces the individual and corporate income tax
30rates and the insurance premium tax rates.
31DIVISION I — FUTURE INDIVIDUAL INCOME TAX RATE CHANGES.
32 The bill reduces the individual income tax rates for the tax
33year beginning January 1, 2025, but before January 1, 2026, as
34follows:
35Married filing jointly
-7- 1Income over:But not over:Tax rate:
21) $0$12,0004.00%
32) $12,0004.40%
4All other filers other than married filing jointly
5Income over:But not over:Tax rate:
61) $0$6,0004.00%
72) $6,0004.40%
8The bill further reduces the 3.90 percent individual flat
9income tax rate established for tax years beginning on or after
10January 1, 2026, in 2022 Iowa Acts, chapter 1002, section 20.
11For the tax year beginning on or after January 1, 2026, but
12before January 1, 2027, the bill reduces the individual tax
13rate to 3.55 percent. For the tax year beginning on or after
14January 1, 2027, but before January 1, 2028, the bill reduces
15the individual income tax rate to 2.95 percent. For tax years
16beginning on or after January 1, 2028, the bill reduces the
17individual income tax rate to 2.50 percent.
18Currently, an alternate income tax calculation exists in
19Code section 422.5. The alternate income tax is an alternate
20method of calculating income tax liability in lieu of the
21regular income tax calculation for taxpayers with income
22slightly above the income tax filing thresholds. The alternate
23method multiplies the taxpayer’s taxable income above the
24income tax filing thresholds in Code section 422.5(2)(b) or
25422.5(3)(b) by the highest existing individual income tax
26rate until the taxpayer’s tax liability is equal to the tax
27liability that would have been calculated under the regular
28income tax calculation method, then after such point the
29regular income tax calculation with the regular income tax
30rates are used. The bill phases in changes to the alternate
31tax rate until the rate is set at 3.00 percent commencing with
32tax years beginning on or after January 1, 2028.
33After reducing the individual income tax rate to 2.50
34percent, the bill establishes a procedure where the individual
35income tax rate may be adjusted commencing with tax years
-8-1beginning on or after January 1, 2030. The bill specifies
2the individual income tax rate shall be adjusted each tax
3year until the rate is zero, if sufficient funds to make the
4adjustment are available in the taxpayer relief fund.
5By November 1, 2029, and by November 1 each year thereafter,
6the department of management shall determine the amount of
7moneys available in the taxpayer relief fund, and the net
8individual income tax receipts at the close of the preceding
9fiscal year. The department of revenue shall adjust and apply
10a new individual income tax rate based upon the amount of money
11available in the taxpayer relief fund. The bill specifies the
12department of revenue shall adjust and apply a new individual
13income tax rate in such a way that the rate would have
14generated an amount equal to the net receipts generated from
15the rate in the preceding fiscal year less the amount used in
16the calculation in the taxpayer relief fund.
17The bill prohibits the rate from being adjusted unless the
18rate is able to be adjusted at least one-tenth of 1 percent.
19The rate, when adjusted, shall be rounded down to the nearest
20one-tenth of 1 percent.
21The bill requires the moneys in the taxpayer relief fund be
22transferred to the general fund of the state in the fiscal year
23the rate is adjusted.
24If a tax rate is adjusted, the bill requires the director
25of revenue to cause an advisory notice containing the new
26individual income tax rate to be published in the Iowa
27administrative bulletin and on the internet site of the
28department of revenue. The calculation and publication of the
29adjusted tax rate by the director of revenue is exempt from
30Code chapter 17A, and shall be submitted for publication by the
31first December 31 following the determination date to adjust
32the tax rates.
33DIVISION II — FUTURE CORPORATE INCOME TAX RATE CHANGES.
34 Under current law, by November 1 of each year, the department
35of management shall determine the net corporate income tax
-9-1receipts for the previous fiscal year, if a determination
2has been made that net corporate income tax receipts for the
3preceding fiscal year exceeded $700 million, the department
4of revenue shall reduce the corporate tax rates and apply the
5adjusted rates for tax years beginning on or after the next
6January 1 following such a determination, but the tax rate
7shall not be adjusted below 5.50 percent. The bill reduces the
8threshold amount for determining if taxes are to be reduced
9from $700 million net corporate income tax receipts to $680
10million net corporate income tax receipts, and reduces the
11lowest possible adjusted corporate tax rate to 4.75 percent.
12DIVISION III — INSURANCE PREMIUMS TAX. The bill reduces
13the insurance premium tax on the gross amount of premiums
14received by an insurance company from 1 percent to .95 percent
15in calendar year 2025, and from .95 percent to .90 percent for
16the 2026 calendar year and subsequent calendar years.
17DIVISION IV — SALE OF QUALIFIED STOCK — CAPITAL GAIN
18EXCLUSION. The bill amends Code section 422.7(43), which
19excludes the net capital gain on the sale of certain qualified
20stock and was enacted during the 2022 legislative session.
21Under the bill, the definition of “employee-owner” is
22modified to include employment at any qualified corporation
23rather than an individual who owns capital stock in a qualified
24corporation for at least 10 years while employed and on account
25of that corporation. The bill modifies the definition of
26“Iowa affiliated group” within the definition of “qualified
27corporation” to include an affiliated group that is eligible to
28make a valid election to file an Iowa consolidated income tax
29return rather than an affiliated group that has made a valid
30election to file an Iowa consolidated income tax return. The
31bill modifies the definition of “member” within the definition
32of “qualified corporation” to include any entity that is
33eligible to be included in a consolidated return rather than
34any entity included in the consolidated return.
35The division takes effect upon enactment and applies
-10-1retroactively to January 1, 2023, for tax years beginning on
2or after that date.
-11-jm/jh
2insurance premium tax, and including the contingent repeal
3of the individual income tax, and including retroactive
4applicability and effective date provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2future INDIVIDUAL INCOME TAX RATE CHANGES
3 Section 1. Section 422.5, subsection 2, paragraph b,
4subparagraph (2), Code 2023, is amended to read as follows:
5(2) (a) (i) (A) For the tax year beginning on or after
6January 1, 2023, but before January 1, 2024, the alternate tax
7rate is 6.00 percent.
8(B) For the tax year beginning on or after January 1, 2024,
9but before January 1, 2025, the alternate tax rate is 5.70
10percent.
11(C) For the tax year beginning on or after January 1, 2025,
12but before January 1, 2026, the alternate tax rate is 5.20 4.80
13 percent.
14(D) For the tax year beginning on or after January 1, 2026,
15but before January 1, 2027, the alternate tax rate is 3.95
16percent.
17(E) For the tax year beginning on or after January 1, 2027,
18but before January 1, 2028, the alternate tax rate is 3.35
19percent.
20(ii) This subparagraph division (a) is repealed January 1,
212026 2028.
22(b) For tax years beginning on or after January 1, 2026
23 2028, the alternate tax rate is 4.40 3.00 percent.
24 Sec. 2. Section 422.5, subsection 3, paragraph b,
25subparagraph (2), Code 2023, is amended to read as follows:
26(2) (a) (i) (A) For the tax year beginning on or after
27January 1, 2023, but before January 1, 2024, the alternate tax
28rate is 6.00 percent.
29(B) For the tax year beginning on or after January 1, 2024,
30but before January 1, 2025, the alternate tax rate is 5.70
31percent.
32(C) For the tax year beginning on or after January 1, 2025,
33but before January 1, 2026, the alternate tax rate is 5.20 4.80
34 percent.
35(D) For the tax year beginning on or after January 1, 2026,
-1-1but before January 1, 2027, the alternate tax rate is 3.95
2percent.
3(E) For the tax year beginning on or after January 1, 2027,
4but before January 1, 2028, the alternate tax rate is 3.35
5percent.
6(ii) This subparagraph division (a) is repealed January 1,
72026 2028.
8(b) For tax years beginning on or after January 1, 2026
9 2028, the alternate tax rate is 4.40 3.00 percent.
10 Sec. 3. Section 422.5A, subsection 1, paragraph a,
11subparagraph (3), Code 2023, is amended to read as follows:
12(3) For the tax year beginning on or after January 1, 2025,
13but before January 1, 2026:
14(a) On taxable income from 0 through $12,000, the rate of
154.40 4.00 percent.
16(b) On taxable income exceeding $12,000, the rate of 4.82
17 4.40 percent.
18 Sec. 4. Section 422.5A, subsection 1, paragraph b,
19subparagraph (3), Code 2023, is amended to read as follows:
20(3) For the tax year beginning on or after January 1, 2025,
21but before January 1, 2026:
22(a) On taxable income from 0 through $6,000, the rate of
234.40 4.00 percent.
24(b) On taxable income exceeding $6,000, the rate of 4.82
25 4.40 percent.
26 Sec. 5. 2022 Iowa Acts, chapter 1002, section 20, is amended
27to read as follows:
28SEC. 20. Section 422.5, subsection 1, paragraph a, Code
292022, is amended to read as follows:
30a. (1) A tax is imposed upon every resident and nonresident
31of the state which tax shall be levied, collected, and paid
32annually upon and with respect to the entire taxable income as
33defined in this subchapter at a rate of three and nine-tenths
34percent. the following rates in the following tax years:
35(a) For the tax year beginning on or after January 1, 2026,
-2-1but before January 1, 2027, the rate of 3.55 percent.
2(b) For the tax year beginning on or after January 1, 2027,
3but before January 1, 2028, the rate of 2.95 percent.
4(c) For tax years beginning on or after January 1, 2028, the
5rate of 2.50 percent.
6(2) (a) Notwithstanding the rate in subparagraph (1), the
7department of revenue shall determine the individual income
8tax rate as provided in this subparagraph. The tax rate in
9subparagraph (1) shall remain in effect until the rate is
10adjusted pursuant to this subparagraph. A rate adjusted in
11this subparagraph shall remain in effect until the rate is
12adjusted again pursuant to this subparagraph.
13(b) By November 1, 2029, and by November 1 each year
14thereafter, until the individual income tax rate equals zero,
15the department of management shall determine the amount of
16moneys available in the taxpayer relief fund in section 8.57E,
17and the net individual income tax receipts at the close of the
18preceding fiscal year. The department of revenue shall adjust
19and apply a new rate based upon the amount of moneys available
20in the taxpayer relief fund as provided in subparagraph
21division (c).
22(c) (i) The rate shall be adjusted in such a way that the
23rate would have generated an amount equal to the net receipts
24generated from the rate in the preceding fiscal year less the
25amount available in the taxpayer relief fund in section 8.57E
26that is used in the calculation in this subparagraph division.
27(ii) The rate shall not be adjusted unless the rate is able
28to be adjusted at least one-tenth of one percent. The rate,
29when adjusted, shall be rounded down to the nearest one-tenth
30of one percent.
31(iii) If a determination is made by the department of
32revenue that the rate is subject to adjustment, the department
33of revenue shall adjust the rate specified in subparagraph
34(1), or if the rate has been previously adjusted, adjust the
35previously adjusted rate.
-3- 1(d) If an adjustment is made pursuant to subparagraph
2division (c), the amount of moneys in the taxpayer relief fund
3used in the calculation in subparagraph division (c) shall be
4transferred to the general fund of the state in the fiscal year
5the rate is adjusted.
6(e) If a rate is adjusted pursuant to subparagraph division
7(c), the director of revenue shall cause an advisory notice
8containing the new individual income tax rate to be published
9in the Iowa administrative bulletin and on the internet site
10of the department of revenue. The calculation and publication
11of the adjusted tax rate by the director of revenue is exempt
12from chapter 17A, and shall be submitted for publication by the
13first December 31 following the determination date to adjust
14the rate.
15DIVISION II
16future CORPORATE INCOME TAX RATE CHANGES
17 Sec. 6. Section 422.33, subsection 1, paragraph b,
18subparagraph (1), subparagraph division (b), Code 2023, is
19amended to read as follows:
20(b) By November 1, 2022, and by November 1 each year
21thereafter, the department of management shall determine
22the net corporate income tax receipts for the fiscal year
23preceding the determination date. If net corporate income
24tax receipts for the preceding fiscal year exceed seven six
25 hundred eighty million dollars, the department of revenue shall
26adjust and apply new corporate income tax rates as provided in
27subparagraph (2).
28 Sec. 7. Section 422.33, subsection 1, paragraph b,
29subparagraph (2), subparagraph division (a), Code 2023, is
30amended to read as follows:
31(a) If a determination has been made that net corporate
32income tax receipts for the preceding fiscal year exceeded
33seven six hundred eighty million dollars, the department of
34revenue shall adjust the tax rates specified in paragraph “a”,
35subparagraphs (3) and (4), and apply the adjusted rates for tax
-4-1years beginning on or after the next January 1 following the
2determination date.
3 Sec. 8. Section 422.33, subsection 1, paragraph b,
4subparagraph (2), subparagraph division (b), subparagraph
5subdivision (i), Code 2023, is amended to read as follows:
6(i) The tax rates subject to adjustment shall be adjusted
7in such a way that when combined with all the other rates
8specified in paragraph “a”, the tax rates would have generated
9net corporate income tax receipts that equal seven six hundred
10eighty million dollars in the preceding fiscal year.
11 Sec. 9. Section 422.33, subsection 1, paragraph b,
12subparagraph (2), subparagraph division (b), subparagraph
13subdivision (iii), Code 2023, is amended to read as follows:
14(iii) The tax rates adjusted pursuant to this paragraph
15shall not be adjusted below five and one-half four and
16three-fourths percent.
17 Sec. 10. 2022 Iowa Acts, chapter 1002, sections 57 and 58,
18are amended to read as follows:
19SEC. 57. Section 422.33, subsection 1, Code 2022, is amended
20by striking the subsection and inserting in lieu thereof the
21following:
221. A tax is imposed annually upon each corporation doing
23business in this state, or deriving income from sources within
24this state, in an amount computed by applying the rate of five
25and one-half four and three-fourths percent to the net income
26received by the corporation during the income year.
27SEC. 58. CONTINGENT EFFECTIVE DATE. This division of
28this Act takes effect on the first January 1 after each rate
29of taxation on the net income received by a corporation is
30equalized to equal five and one-half four and three-fourths
31 percent pursuant to section 422.33, subsection 1, paragraph
32“b”, as amended by this Act. The director of revenue shall
33inform the Code editor upon the occurrence of this contingency.
34DIVISION III
35insurance premium tax
-5-1 Sec. 11. Section 432.1, subsection 2, Code 2023, is amended
2to read as follows:
32. The “applicable percent” for purposes of subsection 1 of
4this section and section 432.2 is the following:
5a. For calendar years beginning before the 2003 calendar
6year, two percent.
7b. For the 2003 calendar year, one and three-fourths
8percent.
9c. For the 2004 calendar year, one and one-half percent.
10d. For the 2005 calendar year, one and one-fourth percent.
11e. For the 2006 and subsequent calendar years year through
12the 2024 calendar year, one percent.
13f. For the 2025 calendar year, ninety-five hundredths of one
14percent.
15g. For the 2026 and subsequent calendar years, nine-tenths
16of one percent.
17 Sec. 12. Section 432.1, subsection 4, Code 2023, is amended
18to read as follows:
194. The “applicable percent” for purposes of subsection 3 is
20the following:
21a. For calendar years beginning before the 2004 calendar
22year, two percent.
23b. For the 2004 calendar year, one and three-fourths
24percent.
25c. For the 2005 calendar year, one and one-half percent.
26d. For the 2006 calendar year, one and one-fourth percent.
27e. For the 2007 and subsequent calendar years year through
28the 2024 calendar year, one percent.
29f. For the 2025 calendar year, ninety-five hundredths of one
30percent.
31g. For the 2026 and subsequent calendar years, nine-tenths
32of one percent.
33DIVISION IV
34SALE OF CERTAIN QUALIFIED STOCK — NET CAPITAL GAIN EXCLUSION
35 Sec. 13. Section 422.7, subsection 43, paragraph c,
-6-1subparagraph (2), Code 2023, is amended to read as follows:
2(2) “Employee-owner” means an individual who owns capital
3stock in a qualified corporation for at least ten years, which
4capital stock was acquired by the individual while employed and
5on account of employment by such any qualified corporation for
6at least ten cumulative years.
7 Sec. 14. Section 422.7, subsection 43, paragraph c,
8subparagraph (4), subparagraph division (b), Code 2023, is
9amended to read as follows:
10(b) “Qualified corporation” includes any member of an Iowa
11affiliated group if the Iowa affiliated group includes a member
12that has employed individuals in this state for at least ten
13years. For purposes of this subparagraph division, “Iowa
14affiliated group” means an affiliated group that has made is
15eligible to make a valid election to file an Iowa consolidated
16income tax return under section 422.37 in the year in which
17the deduction under this subsection is claimed. “Member”
18includes any entity that is eligible to be included in the a
19 consolidated return under section 422.37, subsection 2, for the
20tax year in which the deduction is claimed.
21 Sec. 15. EFFECTIVE DATE. This division of this Act, being
22deemed of immediate importance, takes effect upon enactment.
23 Sec. 16. RETROACTIVE APPLICABILITY. This division of this
24Act applies retroactively to January 1, 2023, for tax years
25beginning on or after that date.
26EXPLANATION
27The inclusion of this explanation does not constitute agreement with
28the explanation’s substance by the members of the general assembly.
29This bill reduces the individual and corporate income tax
30rates and the insurance premium tax rates.
31DIVISION I — FUTURE INDIVIDUAL INCOME TAX RATE CHANGES.
32 The bill reduces the individual income tax rates for the tax
33year beginning January 1, 2025, but before January 1, 2026, as
34follows:
35Married filing jointly
-7- 1Income over:But not over:Tax rate:
21) $0$12,0004.00%
32) $12,0004.40%
4All other filers other than married filing jointly
5Income over:But not over:Tax rate:
61) $0$6,0004.00%
72) $6,0004.40%
8The bill further reduces the 3.90 percent individual flat
9income tax rate established for tax years beginning on or after
10January 1, 2026, in 2022 Iowa Acts, chapter 1002, section 20.
11For the tax year beginning on or after January 1, 2026, but
12before January 1, 2027, the bill reduces the individual tax
13rate to 3.55 percent. For the tax year beginning on or after
14January 1, 2027, but before January 1, 2028, the bill reduces
15the individual income tax rate to 2.95 percent. For tax years
16beginning on or after January 1, 2028, the bill reduces the
17individual income tax rate to 2.50 percent.
18Currently, an alternate income tax calculation exists in
19Code section 422.5. The alternate income tax is an alternate
20method of calculating income tax liability in lieu of the
21regular income tax calculation for taxpayers with income
22slightly above the income tax filing thresholds. The alternate
23method multiplies the taxpayer’s taxable income above the
24income tax filing thresholds in Code section 422.5(2)(b) or
25422.5(3)(b) by the highest existing individual income tax
26rate until the taxpayer’s tax liability is equal to the tax
27liability that would have been calculated under the regular
28income tax calculation method, then after such point the
29regular income tax calculation with the regular income tax
30rates are used. The bill phases in changes to the alternate
31tax rate until the rate is set at 3.00 percent commencing with
32tax years beginning on or after January 1, 2028.
33After reducing the individual income tax rate to 2.50
34percent, the bill establishes a procedure where the individual
35income tax rate may be adjusted commencing with tax years
-8-1beginning on or after January 1, 2030. The bill specifies
2the individual income tax rate shall be adjusted each tax
3year until the rate is zero, if sufficient funds to make the
4adjustment are available in the taxpayer relief fund.
5By November 1, 2029, and by November 1 each year thereafter,
6the department of management shall determine the amount of
7moneys available in the taxpayer relief fund, and the net
8individual income tax receipts at the close of the preceding
9fiscal year. The department of revenue shall adjust and apply
10a new individual income tax rate based upon the amount of money
11available in the taxpayer relief fund. The bill specifies the
12department of revenue shall adjust and apply a new individual
13income tax rate in such a way that the rate would have
14generated an amount equal to the net receipts generated from
15the rate in the preceding fiscal year less the amount used in
16the calculation in the taxpayer relief fund.
17The bill prohibits the rate from being adjusted unless the
18rate is able to be adjusted at least one-tenth of 1 percent.
19The rate, when adjusted, shall be rounded down to the nearest
20one-tenth of 1 percent.
21The bill requires the moneys in the taxpayer relief fund be
22transferred to the general fund of the state in the fiscal year
23the rate is adjusted.
24If a tax rate is adjusted, the bill requires the director
25of revenue to cause an advisory notice containing the new
26individual income tax rate to be published in the Iowa
27administrative bulletin and on the internet site of the
28department of revenue. The calculation and publication of the
29adjusted tax rate by the director of revenue is exempt from
30Code chapter 17A, and shall be submitted for publication by the
31first December 31 following the determination date to adjust
32the tax rates.
33DIVISION II — FUTURE CORPORATE INCOME TAX RATE CHANGES.
34 Under current law, by November 1 of each year, the department
35of management shall determine the net corporate income tax
-9-1receipts for the previous fiscal year, if a determination
2has been made that net corporate income tax receipts for the
3preceding fiscal year exceeded $700 million, the department
4of revenue shall reduce the corporate tax rates and apply the
5adjusted rates for tax years beginning on or after the next
6January 1 following such a determination, but the tax rate
7shall not be adjusted below 5.50 percent. The bill reduces the
8threshold amount for determining if taxes are to be reduced
9from $700 million net corporate income tax receipts to $680
10million net corporate income tax receipts, and reduces the
11lowest possible adjusted corporate tax rate to 4.75 percent.
12DIVISION III — INSURANCE PREMIUMS TAX. The bill reduces
13the insurance premium tax on the gross amount of premiums
14received by an insurance company from 1 percent to .95 percent
15in calendar year 2025, and from .95 percent to .90 percent for
16the 2026 calendar year and subsequent calendar years.
17DIVISION IV — SALE OF QUALIFIED STOCK — CAPITAL GAIN
18EXCLUSION. The bill amends Code section 422.7(43), which
19excludes the net capital gain on the sale of certain qualified
20stock and was enacted during the 2022 legislative session.
21Under the bill, the definition of “employee-owner” is
22modified to include employment at any qualified corporation
23rather than an individual who owns capital stock in a qualified
24corporation for at least 10 years while employed and on account
25of that corporation. The bill modifies the definition of
26“Iowa affiliated group” within the definition of “qualified
27corporation” to include an affiliated group that is eligible to
28make a valid election to file an Iowa consolidated income tax
29return rather than an affiliated group that has made a valid
30election to file an Iowa consolidated income tax return. The
31bill modifies the definition of “member” within the definition
32of “qualified corporation” to include any entity that is
33eligible to be included in a consolidated return rather than
34any entity included in the consolidated return.
35The division takes effect upon enactment and applies
-10-1retroactively to January 1, 2023, for tax years beginning on
2or after that date.
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