Senate File 179 - IntroducedA Bill ForAn Act 1temporarily updating the Code references to the Internal
2Revenue Code and decoupling from certain federal bonus
3depreciation provisions, and including effective date and
4retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1   Section 1.  INTERNAL REVENUE CODE REFERENCES FOR
22016.
  Notwithstanding the definition of “Internal Revenue
3Code” in section 15.335, subsection 7, section 422.3,
4subsection 5, section 422.10, subsection 3, section 422.32,
5subsection 1, and section 422.33, subsection 5, Code 2017,
6the following shall apply for the period beginning January 1,
72016, and ending December 31, 2016, and for tax years beginning
8during the 2016 calendar year:
   91.  The definition of “Internal Revenue Code” for purposes
10of section 15.335, subsection 7, section 422.10, subsection 3,
11and section 422.33, subsection 5, Code 2017, and for purposes
12of references in the 2017 Iowa Code and 2017 Iowa Acts to the
13definition of “Internal Revenue Code” in those sections, shall
14mean the Internal Revenue Code in effect on January 1, 2017.
   152.  The definition of “Internal Revenue Code” for purposes
16of sections 422.3 and 422.32, Code 2017, and for purposes of
17references in the 2017 Iowa Code and 2017 Iowa Acts to the
18definition of “Internal Revenue Code” in those sections, shall
19mean the Internal Revenue Code of 1954, prior to the date of
20its redesignation as the Internal Revenue Code of 1986 by the
21Tax Reform Act of 1986, or means the Internal Revenue Code of
221986 as amended to and including January 1, 2017.
23   Sec. 2.  DEDUCTION FOR STATE SALES AND USE TAX FOR
242016.
  Notwithstanding section 422.9, subsection 2, paragraph
25“i”, Code 2017, the deduction for state sales and use taxes is
26allowable under section 422.9 for tax years beginning during
27the 2016 calendar year, but only if the taxpayer elected to
28deduct the state sales and use taxes in lieu of state income
29taxes under section 164 of the Internal Revenue Code. The
30deduction for state sales and use taxes is not allowed if the
31taxpayer has taken the deduction for state income taxes or
32claimed the standard deduction under section 63 of the Internal
33Revenue Code.
34   Sec. 3.  BONUS DEPRECIATION FOR 2016.
   351.  Notwithstanding section 1 of this Act, or any other
-1-1provision of law to the contrary, the additional first-year
2depreciation allowance authorized in section 168(k) of the
3Internal Revenue Code, as enacted by Pub.L. No.114-113,
4§143, does not apply in computing net income for state tax
5purposes for tax years ending on or after January 1, 2016. If
6the taxpayer has taken the additional first-year depreciation
7allowance for purposes of computing federal adjusted gross
8income or federal taxable income, as the case may be, then
9the taxpayer, when computing net income for purposes of the
10individual income tax under section 422.7 or the corporation
11income tax or franchise tax under section 422.35, shall make
12the adjustments described in section 422.7, subsection 39A,
13paragraphs “a” through “c”, Code 2017, or described in section
14422.35, subsection 19A, paragraphs “a” through “c”, Code 2017,
15as applicable.
   162.  In addition to the requirements of section 422.5,
17subsection 2, paragraph “b”, subparagraph (1), Code 2017,
18for purposes of the state alternative minimum taxable income
19calculation in section 422.5, subsection 2, paragraph “b”,
20subparagraph (1), to the extent that any preference or
21adjustment is determined by an individual’s federal adjusted
22gross income, the individual’s federal adjusted gross income is
23computed in accordance with subsection 1 of this section for
24tax years beginning during the 2016 calendar year.
   253.  In addition to the requirements of section 422.9,
26subsection 2, paragraph “h”, Code 2017, for purposes of
27calculating the deductions in section 422.9 that are authorized
28under the Internal Revenue Code, and to the extent that
29any such deduction is determined by an individual’s federal
30adjusted gross income, the individual’s federal adjusted gross
31income is computed in accordance with subsection 1 of this
32section for tax years beginning during the 2016 calendar year.
33   Sec. 4.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of
34immediate importance, takes effect upon enactment.
35   Sec. 5.  RETROACTIVE APPLICABILITY.  This Act applies
-2-1retroactively to January 1, 2016.
2EXPLANATION
3The inclusion of this explanation does not constitute agreement with
4the explanation’s substance by the members of the general assembly.
   5Under current law, Iowa Code references to the Internal
6Revenue Code include the Internal Revenue Code in effect on
7January 1, 2015, meaning federal income tax revisions made
8by Congress in 2015 and 2016 are not applicable for Iowa tax
9purposes for the 2016 tax year. This bill temporarily updates
10for 2016 certain Iowa Code references to the Internal Revenue
11Code to make federal income tax revisions enacted by Congress
12in 2015 and 2016 applicable for a certain period of time,
13to allow the deduction for state sales and use tax, and to
14decouple with certain bonus depreciation provisions.
   15INTERNAL REVENUE CODE REFERENCES. The bill provides that
16notwithstanding several Code provisions as specified in the
17bill, the definitions of “Internal Revenue Code” in those Code
18provisions and, by internal reference, in other sections of the
19Iowa Code and Iowa Acts shall mean the Internal Revenue Code
20in effect on, or as amended to and including, January 1, 2017.
21This definition change applies only to the period beginning
22January 1, 2016, and ending December 31, 2016, and for tax
23years beginning during the 2016 calendar year.
   24The affected Code provisions include Code sections 422.3
25and 422.32, general definition sections in the chapter of the
26Code that governs corporate and individual income tax and the
27franchise tax, and Code sections 15.335, 422.10, and 422.33,
28which contain references to the Internal Revenue Code for the
29state research activities credit for individuals, corporations,
30and corporations participating in certain economic development
31programs.
   32Code section 422.9 provides individuals a deduction from
33net income for state sales and use taxes if the individual
34chose to deduct sales and use tax in lieu of state income taxes
35or the standard deduction for federal income tax purposes.
-3-1This deduction was set to expire under both federal and Iowa
2law for tax years beginning on or after January 1, 2015. The
3federal Protecting Americans from Tax Hikes Act of 2015 made
4the federal deduction permanent. The bill allows the Iowa
5deduction for tax years beginning during the 2016 calendar
6year.
   7BONUS DEPRECIATION. The bill decouples, for Iowa income
8tax purposes for tax years ending on or after January 1,
92016, from the federal additional first-year depreciation
10allowance in section 168(k) of the Internal Revenue Code
11(bonus depreciation) which was modified and extended through
122019 by the federal Protecting Americans from Tax Hikes Act
13of 2015. Taxpayers who claim bonus depreciation for federal
14tax purposes are, for the applicable tax year, required to add
15such depreciation amounts back to Iowa net income, but are
16then allowed under existing state law to deduct the amount of
17depreciation that would otherwise be allowable under federal
18law, without regard to the bonus depreciation allowance.
   19Under current law, taxpayers are in some instances required,
20when calculating alternative minimum tax under Code section
21422.5(2) and itemized deductions under Code section 422.9(2),
22to recompute their federal adjusted gross income to take
23into account the fact that Iowa has decoupled from bonus
24depreciation. The bill provides that taxpayers must make those
25same adjustments to federal adjusted gross income for tax year
262016 to account for the fact that Iowa has decoupled from bonus
27depreciation as described above.
   28The bill takes effect upon enactment and applies
29retroactively to January 1, 2016.
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