Print
Senate Study Bill 1142 - IntroducedA Bill ForAn Act 1exempting from the individual income tax the amount of
2income resulting from the discharge of certain student loan
3debt on account of death or total and permanent disability
4and including retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.7, Code 2017, is amended by adding
2the following new subsection:
3 NEW SUBSECTION. 18. a. Subtract, to the extent included,
4the amount of income resulting from a discharge of qualified
5student loan debt under either of the following circumstances:
6(1) The discharge occurs pursuant to the provisions of 20
7U.S.C. ch.28, subch.IV, on account of the death or total and
8permanent disability of the student or borrower.
9(2) The discharge occurs on account of the death or total
10and permanent disability of the student or borrower. For
11purposes of this subparagraph, “total and permanent disability”
12has the same meaning as “totally and permanently disabled” in 34
13C.F.R. §685.102(b), and shall be proven by the taxpayer using
14the documentation described in 34 C.F.R. §685.213(b)(2), or 34
15C.F.R. §685.213(c)(1), as applicable, and pursuant to rules
16prescribed by the director.
17b. For purposes of this subsection, “qualified student loan”
18means a student loan as defined in section 108(f)(2) of the
19Internal Revenue Code or a private education loan as defined in
2015 U.S.C. §1650(a)(7).
21 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies
22retroactively to January 1, 2017, for tax years beginning on
23or after that date.
24EXPLANATION
25The inclusion of this explanation does not constitute agreement with
26the explanation’s substance by the members of the general assembly.
27Under current law for federal income tax purposes and Iowa
28income tax purposes, a discharge (cancellation) of student
29loan debt on account of death or permanent disability results
30in taxable income to the debtor for the amount of the debt
31discharged. This bill exempts, for Iowa individual income
32tax purposes, income resulting from a discharge of qualified
33student loan debt on account of the death or total and
34permanent disability of the student or borrower.
35“Qualified student loan” is defined in the bill, but
-1-1generally includes postsecondary education student loans made
2by the United States or a federal agency or instrumentality, a
3state or political subdivision of a state, a tax-exempt public
4benefit corporation controlling a hospital, certain educational
5organizations, or private educational lenders.
6The exemption applies to qualified student loans discharged
7on account of the death or total and permanent disability of
8the student or borrower pursuant to provisions of title IV
9of the federal Higher Education Act of 1965 (federal student
10financial aid programs).
11Alternatively, the exemption applies to qualified student
12loans otherwise discharged on account of the death or total and
13permanent disability of the student or borrower. For purposes
14of the bill, “total and permanent disability” is defined to
15mean the same as it does for purposes of the federal student
16financial aid programs, which generally include individuals who
17are unable to engage in substantial gainful activity by reason
18of a physical or mental impairment that can be expected to
19result in death and that has lasted or will last for at least 60
20months, or individuals who are determined by the secretary of
21veterans affairs to be unemployable due to a service-connected
22disability. For this alternative, the bill requires total and
23permanent disability to be proven using the same documentation
24required for purposes of the federal student financial
25aid programs, which require a physician certification, a
26social security administration disability determination, or
27documentation from the department of veterans affairs.
28The bill applies retroactively to January 1, 2017, for tax
29years beginning on or after that date.
-2-mm/rn/sc
2income resulting from the discharge of certain student loan
3debt on account of death or total and permanent disability
4and including retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.7, Code 2017, is amended by adding
2the following new subsection:
3 NEW SUBSECTION. 18. a. Subtract, to the extent included,
4the amount of income resulting from a discharge of qualified
5student loan debt under either of the following circumstances:
6(1) The discharge occurs pursuant to the provisions of 20
7U.S.C. ch.28, subch.IV, on account of the death or total and
8permanent disability of the student or borrower.
9(2) The discharge occurs on account of the death or total
10and permanent disability of the student or borrower. For
11purposes of this subparagraph, “total and permanent disability”
12has the same meaning as “totally and permanently disabled” in 34
13C.F.R. §685.102(b), and shall be proven by the taxpayer using
14the documentation described in 34 C.F.R. §685.213(b)(2), or 34
15C.F.R. §685.213(c)(1), as applicable, and pursuant to rules
16prescribed by the director.
17b. For purposes of this subsection, “qualified student loan”
18means a student loan as defined in section 108(f)(2) of the
19Internal Revenue Code or a private education loan as defined in
2015 U.S.C. §1650(a)(7).
21 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies
22retroactively to January 1, 2017, for tax years beginning on
23or after that date.
24EXPLANATION
25The inclusion of this explanation does not constitute agreement with
26the explanation’s substance by the members of the general assembly.
27Under current law for federal income tax purposes and Iowa
28income tax purposes, a discharge (cancellation) of student
29loan debt on account of death or permanent disability results
30in taxable income to the debtor for the amount of the debt
31discharged. This bill exempts, for Iowa individual income
32tax purposes, income resulting from a discharge of qualified
33student loan debt on account of the death or total and
34permanent disability of the student or borrower.
35“Qualified student loan” is defined in the bill, but
-1-1generally includes postsecondary education student loans made
2by the United States or a federal agency or instrumentality, a
3state or political subdivision of a state, a tax-exempt public
4benefit corporation controlling a hospital, certain educational
5organizations, or private educational lenders.
6The exemption applies to qualified student loans discharged
7on account of the death or total and permanent disability of
8the student or borrower pursuant to provisions of title IV
9of the federal Higher Education Act of 1965 (federal student
10financial aid programs).
11Alternatively, the exemption applies to qualified student
12loans otherwise discharged on account of the death or total and
13permanent disability of the student or borrower. For purposes
14of the bill, “total and permanent disability” is defined to
15mean the same as it does for purposes of the federal student
16financial aid programs, which generally include individuals who
17are unable to engage in substantial gainful activity by reason
18of a physical or mental impairment that can be expected to
19result in death and that has lasted or will last for at least 60
20months, or individuals who are determined by the secretary of
21veterans affairs to be unemployable due to a service-connected
22disability. For this alternative, the bill requires total and
23permanent disability to be proven using the same documentation
24required for purposes of the federal student financial
25aid programs, which require a physician certification, a
26social security administration disability determination, or
27documentation from the department of veterans affairs.
28The bill applies retroactively to January 1, 2017, for tax
29years beginning on or after that date.
-2-mm/rn/sc