House Study Bill 671 - IntroducedA Bill ForAn Act 1relating to state and local revenue and finance by
2modifying the income taxes, the sales and use taxes and
3local option sales tax, the hotel and motel excise tax, the
4automobile rental excise tax, the Iowa educational savings
5plan trust, and the disabilities expenses savings plan
6trust, making penalties applicable, and including immediate
7effective date and retroactive and other applicability
8provisions.
9BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2INCOME TAX CHANGES FOR TAX YEAR 2018
3   Section 1.  EARNED INCOME TAX CREDIT FOR 2018.
  4Notwithstanding the definition of “Internal Revenue Code”
5in section 422.3, for tax years beginning during the 2018
6calendar year, any reference to the term “Internal Revenue
7Code” in section 422.12B shall mean the Internal Revenue Code
8of 1954, prior to the date of its redesignation as the Internal
9Revenue Code of 1986 by the Tax Reform Act of 1986, or means
10the Internal Revenue Code of 1986 as amended and in effect on
11January 1, 2016, but shall not be construed to include any
12amendment to the Internal Revenue Code enacted after January 1,
132016, including any amendment with retroactive applicability
14or effectiveness.
15   Sec. 2.  ACCOUNTING METHOD AND OTHER MISCELLANEOUS
16COUPLING PROVISIONS FOR TAX YEAR 2018.
  Notwithstanding any
17other provision of law to the contrary, amendments to the
18Internal Revenue Code enacted in Pub.L. No.115-97, §13102,
19§13221, §13504, §13541, §13543, §13611, and §13613, apply in
20calculating federal adjusted gross income or federal taxable
21income, as applicable, for state tax purposes for purposes of
22chapter 422 for tax years beginning during the 2018 calendar
23year to the extent those amendments affect the calculation of
24federal adjusted gross income or federal taxable income, as
25applicable, for federal tax purposes for tax years beginning
26during the 2018 calendar year.
27   Sec. 3.  TEACHER EXPENSE DEDUCTION.  Notwithstanding any
28other provision of law to the contrary, for tax years beginning
29during the 2018 calendar year, a taxpayer is allowed to take
30the deduction for certain expenses of elementary and secondary
31school teachers allowed under section 62(a)(2)(D) of the
32Internal Revenue Code, as amended by Pub.L. No.114-113,
33division Q, §104, in computing net income for state tax
34purposes.
35   Sec. 4.  EFFECTIVE DATE.  This division of this Act, being
-1-1deemed of immediate importance, takes effect upon enactment.
2   Sec. 5.  RETROACTIVE APPLICABILITY.  This division of this
3Act applies retroactively to January 1, 2018, for tax years
4beginning on or after that date, but before January 1, 2019.
5DIVISION II
6INDIVIDUAL INCOME TAX CHANGES BEGINNING IN TAX YEAR 2019
7   Sec. 6.  Section 422.4, subsection 1, paragraphs b and c,
8Code 2018, are amended to read as follows:
   9b.  “Cumulative inflation factor” means the product of the
10annual inflation factor for the 1988 2019 calendar year and
11all annual inflation factors for subsequent calendar years
12as determined pursuant to this subsection. The cumulative
13inflation factor applies to all tax years beginning on or after
14January 1 of the calendar year for which the latest annual
15inflation factor has been determined.
   16c.  The annual inflation factor for the 1988 2019 calendar
17year is one hundred percent.
18   Sec. 7.  Section 422.4, subsection 2, paragraph b, Code 2018,
19is amended to read as follows:
   20b.  “Cumulative standard deduction factor” means the product
21of the annual standard deduction factor for the 1989 calendar
22year years set forth in section 422.21, subsection 5, paragraph
23“b”,
and all annual standard deduction factors for subsequent
24calendar years as determined pursuant to this subsection.
25The cumulative standard deduction factor applies to all tax
26years beginning on or after January 1 of the calendar year for
27which the latest annual standard deduction factor has been
28determined.
29   Sec. 8.  Section 422.4, Code 2018, is amended by adding the
30following new subsection:
31   NEW SUBSECTION.  9A.  “Internal Revenue Code” means the
32Internal Revenue Code of 1954, prior to the date of its
33redesignation as the Internal Revenue Code of 1986 by the Tax
34Reform Act of 1986, or means the Internal Revenue Code of 1986
35as amended and in effect on January 1, 2018. This definition
-2-1shall not be construed to include any amendment to the
2Internal Revenue Code enacted after the date specified in the
3preceding sentence, including any amendment with retroactive
4applicability or effectiveness.
5   Sec. 9.  Section 422.4, subsection 16, Code 2018, is amended
6to read as follows:
   716.  The words “taxable income” mean the net income as
8defined in section 422.7 minus the deductions allowed by
9section 422.9, in the case of individuals; in the case of
10estates or trusts, the words “taxable income” mean the taxable
11income (without a deduction for personal exemption) as
12computed for federal income tax purposes under the Internal
13Revenue Code, but with the following adjustments specified in
14section 422.7 plus the Iowa income tax deducted in computing
15the federal taxable income and minus federal income taxes as
16provided in section 422.9.
:
   17a.  Add back the personal exemption deduction taken in
18computing federal taxable income.
   19b.  Make the adjustments specified in section 422.7.
   20c.  Add back Iowa income tax deducted in computing federal
21taxable income.
   22d.  Subtract federal income taxes as provided in section
23422.9, if available.
   24e.  Add back seventy-five percent of the qualified business
25income deduction under section 199A of the Internal Revenue
26Code taken in calculating federal taxable income.
27   Sec. 10.  Section 422.5, subsection 1, Code 2018, is amended
28to read as follows:
   291.  a.  A tax is imposed upon every resident and nonresident
30of the state which tax shall be levied, collected, and paid
31annually upon and with respect to the entire taxable income
32as defined in this division at rates as follows: provided in
33section 422.5A.

   34a.  On all taxable income from zero through one thousand
35dollars, thirty-six hundredths of one percent.
-3-
   1b.  On all taxable income exceeding one thousand dollars but
2not exceeding two thousand dollars, seventy-two hundredths of
3one percent.
   4c.  On all taxable income exceeding two thousand dollars
5but not exceeding four thousand dollars, two and forty-three
6hundredths percent.
   7d.  On all taxable income exceeding four thousand dollars but
8not exceeding nine thousand dollars, four and one-half percent.
   9e.  On all taxable income exceeding nine thousand dollars
10but not exceeding fifteen thousand dollars, six and twelve
11hundredths percent.
   12f.  On all taxable income exceeding fifteen thousand dollars
13but not exceeding twenty thousand dollars, six and forty-eight
14hundredths percent.
   15g.  On all taxable income exceeding twenty thousand dollars
16but not exceeding thirty thousand dollars, six and eight-tenths
17percent.
   18h.  On all taxable income exceeding thirty thousand dollars
19but not exceeding forty-five thousand dollars, seven and
20ninety-two hundredths percent.
   21i.  On all taxable income exceeding forty-five thousand
22dollars, eight and ninety-eight hundredths percent.
   23j.    b.  (1)  The tax imposed upon the taxable income of a
24nonresident shall be computed by reducing the amount determined
25pursuant to paragraphs “a” through “i” paragraph “a” by the
26amounts of nonrefundable credits under this division and by
27multiplying this resulting amount by a fraction of which the
28nonresident’s net income allocated to Iowa, as determined in
29section 422.8, subsection 2, paragraph “a”, is the numerator and
30the nonresident’s total net income computed under section 422.7
31is the denominator. This provision also applies to individuals
32who are residents of Iowa for less than the entire tax year.
   33(2)  (a)  The tax imposed upon the taxable income of a
34resident shareholder in an S corporation or of an estate
35or trust with a situs in Iowa that is a shareholder in an S
-4-1corporation, which S corporation has in effect for the tax
2year an election under subchapter S of the Internal Revenue
3Code and carries on business within and without the state,
4may be computed by reducing the amount determined pursuant
5to paragraphs “a” through “i” paragraph “a” by the amounts of
6nonrefundable credits under this division and by multiplying
7this resulting amount by a fraction of which the resident’s
8or estate’s or trust’s net income allocated to Iowa, as
9determined in section 422.8, subsection 2, paragraph “b”, is
10the numerator and the resident’s or estate’s or trust’s total
11net income computed under section 422.7 is the denominator. If
12a resident shareholder, or an estate or trust with a situs in
13Iowa that is a shareholder, has elected to take advantage of
14this subparagraph (2), and for the next tax year elects not to
15take advantage of this subparagraph, the resident or estate or
16trust shareholder shall not reelect to take advantage of this
17subparagraph for the three tax years immediately following the
18first tax year for which the shareholder elected not to take
19advantage of this subparagraph, unless the director consents to
20the reelection. This subparagraph also applies to individuals
21who are residents of Iowa for less than the entire tax year.
   22(b)  This subparagraph (2) shall not affect the amount of
23the taxpayer’s checkoffs under this division, the credits from
24tax provided under this division, and the allocation of these
25credits between spouses if the taxpayers filed separate returns
26or separately on combined returns.
27   Sec. 11.  NEW SECTION.  422.5A  Tax rates — net tax receipts
28calculation — revenue targets.
   291.  Tax rate categories.  One of the categories of tax rates
30in category I, II, III, IV, or V, below apply for each tax year
31beginning on or after January 1, 2019, as determined pursuant
32to subsections 2 through 9:
   33IIIIIIIVV
   34a.  On all
35taxable income
-5-1from 0 through
2$1,628:0.32%0.32%0.30%0.30%0.30%
   3b.  On all
4taxable income
5exceeding $1,628
6but not exceeding
7$3,256:0.64%0.64%0.60%0.60%0.60%
   8c.  On all
9taxable income
10exceeding $3,256
11but not exceeding
12$6,512:2.10%2.10%2.00%2.00%2.00%
   13d.  On all
14taxable income
15exceeding $6,512
16but not exceeding
17$14,652:4.05%4.05%4.00%4.00%4.00%
   18e.  On all
19taxable income
20exceeding $14,652
21but not exceeding
22$24,420:5.40%5.40%5.30%5.30%5.20%
   23f.  On all
24taxable income
25exceeding $24,420
26but not exceeding
27$48,840:5.70%5.70%5.60%5.60%5.40%
   28g.  On all
29taxable income
30exceeding $48,840
31but not exceeding
32$150,000:6.70%6.70%6.30%6.30%6.30%
   33h.  On all
34taxable income
35exceeding
-6-1$150,000:7.60%7.40%7.00%7.00%6.90%
   22.  Net tax receipts calculation.
   3a.  For purposes of this section, “net tax receipts” means
4total tax receipts adjusted by net accruals, less the sum of
5tax refunds and school infrastructure transfers made on an
6accrual basis, as computed for purposes of the comprehensive
7annual financial reports of the state.
   8b.  Net tax receipts shall be calculated by the department
9of revenue, in consultation with the department of management,
10for each fiscal year of the fiscal period beginning on or
11after July 1, 2018, but prior to July 1, 2024, in accordance
12with rules adopted by the director of revenue. The director
13of revenue shall adopt rules pursuant to chapter 17A for
14calculating net tax receipts as defined in paragraph “a”,
15including rules defining “total tax receipts”, “net accruals”,
16“tax refunds”, and “school infrastructure transfers” for purposes
17of the calculation of net tax receipts, including the types
18and categories of receipts that will be included within each
19definition and in the calculation of net tax receipts.
   20c.  The department of revenue shall submit an annual report
21to the governor and general assembly by November 1 following
22the close of each fiscal year of the fiscal period beginning on
23or after July 1, 2018, but prior to July 1, 2024, which report
24shall identify the net tax receipts for the fiscal year and
25the individual income tax rates that will be in effect for tax
26years beginning on or after January 1 of the following calendar
27year, and shall include a detailed description of the net tax
28receipts calculation made by the department of revenue.
   293.  Tax rates beginning in 2019.  The tax rates in category I
30provided in subsection 1 shall apply for tax years beginning on
31or after January 1, 2019.
   324.  Fiscal year 2019 revenue target.  If one or more of the
33contingencies in paragraph “a” or “b” of this subsection 4
34are met for the fiscal year ending June 30, 2019, then this
35subsection 4 shall apply for tax years beginning on or after
-7-1January 1, 2020, notwithstanding subsection 3.
   2a.  If net tax receipts for the fiscal year ending June 30,
32019, equal or exceed seven billion one hundred six million
4five hundred thousand dollars, then the tax rates in category
5II provided in subsection 1 shall apply for tax years beginning
6on or after January 1, 2020.
   7b.  Notwithstanding paragraph “a”, if net tax receipts for
8the fiscal year ending June 30, 2019, equal or exceed seven
9billion three hundred twenty-three million eight hundred
10thousand dollars, then the tax rates in category III provided
11in subsection 1 shall apply for tax years beginning on or after
12January 1, 2020.
   135.  Fiscal year 2020 revenue target.  If one or more of the
14contingencies in paragraphs “a” through “d” of this subsection
155 are met for the fiscal year ending June 30, 2020, then this
16subsection 5 shall apply for tax years beginning on or after
17January 1, 2021, notwithstanding subsections 3 and 4.
   18a.  If the tax rates in category I provided in subsection 1
19applied for tax years beginning on or after January 1, 2020,
20and if net tax receipts for the fiscal year ending June 30,
212020, equal or exceed seven billion three hundred nineteen
22million seven hundred thousand dollars, then the tax rates in
23category II provided in subsection 1 shall apply for tax years
24beginning on or after January 1, 2021.
   25b.  Notwithstanding paragraph “a”, if the tax rates in
26category I provided in subsection 1 applied for tax years
27beginning on or after January 1, 2020, and if net tax receipts
28for the fiscal year ending June 30, 2020, equal or exceed
29seven billion five hundred forty-three million five hundred
30thousand dollars, then the tax rates in category III provided
31in subsection 1 shall apply for tax years beginning on or after
32January 1, 2021.
   33c.  If the tax rates in category II provided in subsection 1
34applied for tax years beginning on or after January 1, 2020,
35and if net tax receipts for the fiscal year ending June 30,
-8-12020, equal or exceed seven billion three hundred twenty-three
2million eight hundred thousand dollars, then the tax rates in
3category III provided in subsection 1 shall apply for tax years
4beginning on or after January 1, 2021.
   5d.  Notwithstanding paragraphs “a” through “c”, if net tax
6receipts for the fiscal year ending June 30, 2020, equal or
7exceed seven billion five hundred twenty-five million five
8hundred thousand dollars, then the tax rates in category IV
9provided in subsection 1 shall apply for tax years beginning on
10or after January 1, 2021.
   116.  Fiscal year 2021 revenue target.  If one or more of the
12contingencies in paragraphs “a” through “e” of this subsection
13are met for the fiscal year ending June 30, 2021, then this
14subsection 6 shall apply for tax years beginning on or after
15January 1, 2022, notwithstanding subsections 3, 4, and 5.
   16a.  If the tax rates in category I provided in subsection 1
17applied for tax years beginning on or after January 1, 2021,
18and the net tax receipts for the fiscal year ending June 30,
192021, equal or exceed seven billion five hundred thirty-nine
20million three hundred thousand dollars, the tax rates in
21category II provided in subsection 1 shall apply for tax years
22beginning on or after January 1, 2022.
   23b.  Notwithstanding paragraph “a”, if the tax rates in
24category I or II provided in subsection 1 applied for tax years
25beginning on or after January 1, 2021, and the net tax receipts
26for the fiscal year ending June 30, 2021, equal or exceed seven
27billion five hundred forty-three million five hundred thousand
28dollars, the tax rates in category III provided in subsection
291 shall apply for tax years beginning on or after January 1,
302022.
   31c.  Notwithstanding paragraphs “a” and “b”, if the tax rates
32in category I or II provided in subsection 1 applied for tax
33years beginning on or after January 1, 2021, and the net tax
34receipts for the fiscal year ending June 30, 2021, equal or
35exceed seven billion seven hundred fifty-one million three
-9-1hundred thousand dollars, the tax rates in category IV provided
2in subsection 1 shall apply for tax years beginning on or after
3January 1, 2022.
   4d.  If the tax rates in category III provided in subsection
51 applied for tax years beginning on or after January 1, 2021,
6and the net tax receipts for the fiscal year ending June 30,
72021, equal or exceed seven billion five hundred twenty-five
8million five hundred thousand dollars, the tax rates in
9category IV provided in subsection 1 shall apply for tax years
10beginning on or after January 1, 2022.
   11e.  Notwithstanding paragraphs “a” through “d”, if the net
12tax receipts for the fiscal year ending June 30, 2021, equal
13or exceed seven billion seven hundred sixty-five million four
14hundred thousand dollars, the tax rates in category V provided
15in subsection 1 shall apply for tax years beginning on or after
16January 1, 2022.
   177.  Fiscal year 2022 revenue target.  If one or more of the
18contingencies in paragraphs “a” through “e” of this subsection
19are met for the fiscal year ending June 30, 2022, then this
20subsection 7 shall apply for tax years beginning on or after
21January 1, 2023, notwithstanding subsections 3, 4, 5, and 6.
   22a.  If the tax rates in category I provided in subsection 1
23applied for tax years beginning on or after January 1, 2022,
24and the net tax receipts for the fiscal year ending June 30,
252022, equal or exceed seven billion seven hundred sixty-five
26million five hundred thousand dollars, the tax rates in
27category II provided in subsection 1 shall apply for tax years
28beginning on or after January 1, 2023.
   29b.  Notwithstanding paragraph “a”, if the tax rates in
30category I or II provided in subsection 1 applied for tax years
31beginning on or after January 1, 2022, and the net tax receipts
32for the fiscal year ending June 30, 2022, equal or exceed seven
33billion seven hundred sixty-nine million eight hundred thousand
34dollars, the tax rates in category III provided in subsection
351 shall apply for tax years beginning on or after January 1,
-10-12023.
   2c.  Notwithstanding paragraphs “a” and “b”, if the tax rates
3in category I, II, or III provided in subsection 1 applied for
4tax years beginning on or after January 1, 2022, and the net
5tax receipts for the fiscal year ending June 30, 2022, equal
6or exceed seven billion seven hundred fifty-one million three
7hundred thousand dollars, the tax rates in category IV provided
8in subsection 1 shall apply for tax years beginning on or after
9January 1, 2023.
   10d.  Notwithstanding paragraphs “a” through “c”, if the
11tax rates in category I, II, or III provided in subsection 1
12applied for tax years beginning on or after January 1, 2022,
13and the net tax receipts for the fiscal year ending June 30,
142022, equal or exceed seven billion nine hundred ninety-eight
15million four hundred thousand dollars, the tax rates in
16category V provided in subsection 1 shall apply for tax years
17beginning on or after January 1, 2023.
   18e.  If the tax rates in category IV provided in subsection 1
19applied for tax years beginning on or after January 1, 2022,
20and the net tax receipts for the fiscal year ending June 30,
212022, equal or exceed seven billion seven hundred sixty-five
22million four hundred thousand dollars, the tax rates in
23category V provided in subsection 1 shall apply for tax years
24beginning on or after January 1, 2023.
   258.  Fiscal year 2023 revenue target.  If one or more of the
26contingencies in paragraphs “a” through “d” of this subsection
27are met for the fiscal year ending June 30, 2023, then this
28subsection 8 shall apply for tax years beginning on or after
29January 1, 2024, notwithstanding subsections 3, 4, 5, 6, and 7.
   30a.  If the tax rates in category I provided in subsection 1
31applied for tax years beginning on or after January 1, 2023,
32and the net tax receipts for the fiscal year ending June 30,
332023, equal or exceed seven billion nine hundred ninety-eight
34million five hundred thousand dollars, the tax rates in
35category II provided in subsection 1 shall apply for tax years
-11-1beginning on or after January 1, 2024.
   2b.  Notwithstanding paragraph “a”, if the tax rates in
3category I or II provided in subsection 1 applied for tax years
4beginning on or after January 1, 2023, and the net tax receipts
5for the fiscal year ending June 30, 2023, equal or exceed eight
6billion two million nine hundred thousand dollars, the tax
7rates in category III provided in subsection 1 shall apply for
8tax years beginning on or after January 1, 2024.
   9c.  Notwithstanding paragraphs “a” and “b”, if the tax rates
10in category I, II, or III provided in subsection 1 applied for
11tax years beginning on or after January 1, 2023, and the net
12tax receipts for the fiscal year ending June 30, 2023, equal or
13exceed seven billion nine hundred eighty-three million eight
14hundred thousand dollars, the tax rates in category IV provided
15in subsection 1 shall apply for tax years beginning on or after
16January 1, 2024.
   17d.  Notwithstanding paragraphs “a” through “c”, if the tax
18rates in category I, II, III, or IV provided in subsection 1
19applied for tax years beginning on or after January 1, 2023,
20and the net tax receipts for the fiscal year ending June 30,
212023, equal or exceed seven billion nine hundred ninety-eight
22million four hundred thousand dollars, the tax rates in
23category V provided in subsection 1 shall apply for tax years
24beginning on or after January 1, 2024.
   259.  Fiscal year 2024 revenue target.  If one or more of the
26contingencies in paragraphs “a” through “d” of this subsection
27are met for the fiscal year ending June 30, 2024, then this
28subsection 9 shall apply for tax years beginning on or after
29January 1, 2025, notwithstanding subsections 3, 4, 5, 6, 7, and
308.
   31a.  If the tax rates in category I provided in subsection 1
32applied for tax years beginning on or after January 1, 2024,
33and the net tax receipts for the fiscal year ending June 30,
342024, equal or exceed eight billion two hundred thirty-eight
35million five hundred thousand dollars, the tax rates in
-12-1category II provided in subsection 1 shall apply for tax years
2beginning on or after January 1, 2025.
   3b.  Notwithstanding paragraph “a”, if the tax rates in
4category I or II provided in subsection 1 applied for tax years
5beginning on or after January 1, 2024, and the net tax receipts
6for the fiscal year ending June 30, 2024, equal or exceed eight
7billion two hundred forty-three million dollars, the tax rates
8in category III provided in subsection 1 shall apply for tax
9years beginning on or after January 1, 2025.
   10c.  Notwithstanding paragraphs “a” and “b”, if the tax rates
11in category I, II, or III provided in subsection 1 applied for
12tax years beginning on or after January 1, 2024, and the net
13tax receipts for the fiscal year ending June 30, 2024, equal
14or exceed eight billion two hundred twenty-three million three
15hundred thousand dollars, the tax rates in category IV provided
16in subsection 1 shall apply for tax years beginning on or after
17January 1, 2025.
   18d.  Notwithstanding paragraphs “a” through “c”, if the tax
19rates in category I, II, III, or IV provided in subsection 1
20applied for tax years beginning on or after January 1, 2024,
21and the net tax receipts for the fiscal year ending June 30,
222024, equal or exceed eight billion two hundred thirty-eight
23million four hundred thousand dollars, the tax rates in
24category V provided in subsection 1 shall apply for tax years
25beginning on or after January 1, 2025.
26   Sec. 12.  Section 422.5, subsection 2, Code 2018, is amended
27by striking the subsection.
28   Sec. 13.  Section 422.5, subsection 3, paragraph b, Code
292018, is amended to read as follows:
   30b.  In lieu of the computation in subsection 1 or 2, or in
31paragraph “a” of this subsection, if the married persons’,
32filing jointly or filing separately on a combined return,
33head of household’s, or surviving spouse’s net income exceeds
34thirteen thousand five hundred dollars, the regular tax imposed
35under this division shall be the lesser of the maximum state
-13-1individual income tax rate for the tax year times the portion
2of the net income in excess of thirteen thousand five hundred
3dollars or the regular tax liability computed without regard
4to this sentence. Taxpayers electing to file separately shall
5compute the alternate tax described in this paragraph using the
6total net income of the husband and wife. The alternate tax
7described in this paragraph does not apply if one spouse elects
8to carry back or carry forward the loss as provided in section
9422.9, subsection 3.
10   Sec. 14.  Section 422.5, subsection 3B, paragraph b, Code
112018, is amended to read as follows:
   12b.  In lieu of the computation in subsection 1, 2, or 3, if
13the married persons’, filing jointly or filing separately on
14a combined return, head of household’s, or surviving spouse’s
15net income exceeds thirty-two thousand dollars, the regular tax
16imposed under this division shall be the lesser of the maximum
17state individual income tax rate for the tax year times the
18portion of the net income in excess of thirty-two thousand
19dollars or the regular tax liability computed without regard
20to this sentence. Taxpayers electing to file separately shall
21compute the alternate tax described in this paragraph using the
22total net income of the husband and wife. The alternate tax
23described in this paragraph does not apply if one spouse elects
24to carry back or carry forward the loss as provided in section
25422.9, subsection 3.
26   Sec. 15.  Section 422.5, subsection 6, Code 2018, is amended
27to read as follows:
   286.  Upon determination of the latest cumulative inflation
29factor, the director shall multiply each dollar amount set
30forth in subsection 1, paragraphs “a” through “i” section
31422.5A, subsection 1,
by this cumulative inflation factor,
32shall round off the resulting product to the nearest one
33dollar, and shall incorporate the result into the income tax
34forms and instructions for each tax year beginning on or after
35January 1, 2019
.
-14-
1   Sec. 16.  Section 422.7, subsection 39A, unnumbered
2paragraph 1, Code 2018, is amended to read as follows:
   3The additional first-year depreciation allowance authorized
4in section 168(k) of the Internal Revenue Code, as enacted by
5Pub.L. No.110-185, §103, Pub.L. No.111-5, §1201, Pub.L.
6No.111-240, §2022, Pub.L. No.111-312, §401, Pub.L. No.
7112-240, §331, and Pub.L. No.113-295, §125, Pub.L. No.
8114-113, division Q, §143, and Pub.L. No.115-97, §13201,
does
9not apply in computing net income for state tax purposes. If
10the taxpayer has taken the additional first-year depreciation
11allowance for purposes of computing federal adjusted gross
12income, then the taxpayer shall make the following adjustments
13to federal adjusted gross income when computing net income for
14state tax purposes:
15   Sec. 17.  Section 422.7, Code 2018, is amended by adding the
16following new subsections:
17   NEW SUBSECTION.  51.  a.  The increased expensing allowance
18under section 179 of the Internal Revenue Code applies in
19computing net income for state tax purposes for tax years
20beginning on or after January 1, 2019, subject to the
21limitations in this subsection.
   22b.  If the taxpayer has taken the increased expensing
23allowance under section 179 of the Internal Revenue Code for
24purposes of computing federal adjusted gross income for tax
25years beginning on or after January 1, 2019, then the taxpayer
26shall make the following adjustments to federal adjusted gross
27income when computing net income for state tax purposes for the
28same tax year:
   29(1)  Add the total amount of expense deduction taken on
30section 179 property allowable for federal tax purposes under
31section 179 of the Internal Revenue Code.
   32(2)  Subtract the amount of expense deduction on section
33179 property allowable for federal tax purposes under section
34179 of the Internal Revenue Code, not to exceed one hundred
35thousand dollars. The subtraction in this subparagraph shall
-15-1be reduced, but not below zero, by the amount by which the
2total cost of section 179 property placed in service by the
3taxpayer during the tax year exceeds four hundred thousand
4dollars.
   5(3)  Any other adjustments to gains or losses necessary to
6reflect adjustments made in subparagraphs (1) and (2).
   7c.  The director shall adopt rules pursuant to chapter 17A
8to administer this subsection.
9   NEW SUBSECTION.  52.  a.  For tax years beginning on or
10after January 1, 2019, a taxpayer may elect to take advantage
11of this subsection if the taxpayer’s total expensing allowance
12deduction for federal tax purposes under section 179 of the
13Internal Revenue Code that is allocated to the taxpayer from
14one or more partnerships, S corporations, or limited liability
15companies electing to have the income taxed directly to the
16individual exceeds one hundred thousand dollars and would,
17except as provided in this subsection, be limited for purposes
18of computing net income for state tax purposes pursuant to
19subsection 51.
   20b.  A taxpayer who elects to take advantage of this
21subsection shall make the following adjustments to federal
22adjusted gross income when computing net income for state tax
23purposes:
   24(1)  Add the total amount of section 179 expense
25deduction allocated to the taxpayer from all partnerships, S
26corporations, or limited liability companies electing to have
27the income taxed directly to the individual, to the extent the
28allocated amount was allowed as a deduction to the taxpayer for
29federal tax purposes for the tax year.
   30(2)  From the amount added in subparagraph (1), subtract
31the first one hundred thousand dollars of expensing allowance
32deduction on section 179 property.
   33(3)  The remaining amount, equal to the difference between
34the amount added in subparagraph (1), and the amount subtracted
35in subparagraph (2), may be deducted by the taxpayer but such
-16-1deduction shall be amortized equally over five tax years
2beginning in the following tax year.
   3(4)  Any other adjustments to gains or losses necessary to
4reflect adjustments made in subparagraphs (1) through (3).
   5c.  A taxpayer who elects to take advantage of this
6subsection shall not take the increased expensing allowance
7under section 179 of the Internal Revenue Code for any section
8179 property placed in service by the taxpayer in computing
9adjusted gross income for state tax purposes. If the taxpayer
10has taken any such deduction for purposes of computing federal
11adjusted gross income, the taxpayer shall make the following
12adjustments to federal adjusted gross income when computing net
13income for state tax purposes:
   14(1)  Add the total amount of expense deduction for federal
15tax purposes taken on section 179 property placed in service by
16the taxpayer under section 179 of the Internal Revenue Code.
   17(2)  Subtract the amount of depreciation allowable on such
18property under the modified accelerated cost recovery system
19described in section 168 of the Internal Revenue Code, without
20regard to section 168(k) of the Internal Revenue Code. The
21taxpayer shall continue to take depreciation on the applicable
22property in future tax years to the extent allowed under the
23modified accelerated cost recovery system described in section
24168 of the Internal Revenue Code, without regard to section
25168(k) of the Internal Revenue Code.
   26(3)  Any other adjustments to gains or losses necessary to
27reflect the adjustments made in subparagraphs (1) and (2).
   28d.  The election made under this subsection is for one tax
29year and the taxpayer may elect or not elect to take advantage
30of this subsection in any subsequent tax year. However, not
31electing to take advantage of this subsection in a subsequent
32tax year shall not affect the taxpayer’s ability to claim the
33tax deduction under paragraph “b”, subparagraph (3), that
34originated from a previous tax year.
   35e.  The director shall adopt rules pursuant to chapter 17A
-17-1to administer this subsection.
2   Sec. 18.  Section 422.8, subsection 2, paragraph a, Code
32018, is amended to read as follows:
   4a.  Nonresident’s net income allocated to Iowa is the net
5income, or portion of net income, which is derived from a
6business, trade, profession, or occupation carried on within
7this state or income from any property, trust, estate, or
8other source within Iowa. However, income derived from a
9business, trade, profession, or occupation carried on within
10this state and income from any property, trust, estate, or
11other source within Iowa shall not include distributions from
12pensions, including defined benefit or defined contribution
13plans, annuities, individual retirement accounts, and deferred
14compensation plans or any earnings attributable thereto so long
15as the distribution is directly related to an individual’s
16documented retirement and received while the individual is a
17nonresident of this state. If a business, trade, profession,
18or occupation is carried on partly within and partly without
19the state, only the portion of the net income which is fairly
20and equitably attributable to that part of the business,
21trade, profession, or occupation carried on within the state
22is allocated to Iowa for purposes of section 422.5, subsection
231, paragraph “j” “b”, and section 422.13 and income from any
24property, trust, estate, or other source partly within and
25partly without the state is allocated to Iowa in the same
26manner, except that annuities, interest on bank deposits and
27interest-bearing obligations, and dividends are allocated
28to Iowa only to the extent to which they are derived from a
29business, trade, profession, or occupation carried on within
30the state. Net income described in section 29C.24, subsection
313, paragraph “a”, subparagraph (3), and paragraph “b”,
32subparagraph (2), shall not be allocated and apportioned to the
33state, as provided in section 29C.24.
34   Sec. 19.  Section 422.8, subsection 4, Code 2018, is amended
35by striking the subsection.
-18-
1   Sec. 20.  Section 422.9, unnumbered paragraph 1, Code 2018,
2is amended to read as follows:
   31.  In computing taxable income of individuals, there
4shall be deducted from net income the larger of the following
5 amounts: computed under subsection 1A or 2, plus the amount
6computed under subsection 2A.

7   Sec. 21.  Section 422.9, subsection 1, Code 2018, is amended
8by striking the subsection.
9   Sec. 22.  Section 422.9, Code 2018, is amended by adding the
10following new subsections:
11   NEW SUBSECTION.  1A.  a.  An optional standard deduction
12equal to the sum of the amount in subparagraph (1) or (2), plus
13the amounts in subparagraphs (3) and (4) as applicable:
   14(1)  For a married person who files separately or a single
15person, four thousand dollars.
   16(2)  For a married couple who file a joint return, a
17surviving spouse, or a head of household, eight thousand
18dollars.
   19(3)  If an individual described in subparagraph (1) or (2) is
20at least sixty-five years old on December 31 of the tax year,
21an additional amount equal to one of the following:
   22(a)  For each tax year beginning on or after January 1, 2019,
23but before January 1 of the first tax year for which the tax
24rates in tax category III, IV, or V, as provided in section
25422.5A, subsection 1, take effect, if at all, one thousand five
26hundred dollars per individual who is at least sixty-five on
27December 31 of the tax year.
   28(b)  For each tax year beginning on or after January 1 of the
29first tax year for which the tax rates in tax category III, IV,
30or V, as provided in section 422.5A, subsection 1, take effect,
31if at all, two thousand seventy dollars per individual who is
32at least sixty-five on December 31 of the tax year.
   33(4)  If an individual described in subparagraph (1) or (2)
34is blind on December 31 of the tax year as described in section
35422.12, subsection 2, paragraph “a”, subparagraph (5), an
-19-1additional amount equal to one of the following:
   2(a)  For each tax year beginning on or after January 1, 2019,
3but before January 1 of the first tax year for which the tax
4rates in tax category III, IV, or V, as provided in section
5422.5A, subsection 1, take effect, if at all, one thousand five
6hundred dollars per individual who is blind on December 31 of
7the tax year.
   8(b)  For each tax year beginning on or after January 1 of the
9first tax year for which the tax rates in tax category III, IV,
10or V, as provided in section 422.5A, subsection 1, take effect,
11if at all, two thousand seventy dollars per individual who is
12blind on December 31 of the tax year.
   13b.  The optional standard deduction in this subsection
14shall be applied after the deduction for federal income tax as
15provided in subsection 2, paragraph “b”, and shall not exceed
16the amount remaining after deduction of the federal income tax.
17This paragraph is repealed January 1, 2022.
18   NEW SUBSECTION.  2A.  a.  Twenty-five percent of the amount
19deductible by the taxpayer for federal income tax purposes
20under section 199A of the Internal Revenue Code.
   21b.  Notwithstanding paragraph “a”, and section 422.4,
22subsection 16, paragraph “e”, for an entity electing or required
23to file a composite return under section 422.13, subsection 5,
24the deduction allowed under this subsection for purposes of
25the composite return shall be an amount equal to twenty-five
26percent of the deduction that would be allowable for federal
27income tax purposes under section 199A of the Internal Revenue
28Code by an individual taxpayer reporting the same items of
29income and loss that are included in the composite return.
30   Sec. 23.  Section 422.9, subsection 2, paragraphs b, h, and
31i, Code 2018, are amended to read as follows:
   32b.  (1)  Add Subject to the limitations in subparagraphs
33(2) and (3), add
the amount of federal income taxes paid or
34accrued, as the case may be, during the tax year and subtract
35any federal income tax refunds received during the tax year.
-20-
   1(2)  Where married persons, who have filed a joint federal
2income tax return, file separately, such total shall be divided
3between them according to the portion of the total paid or
4accrued, as the case may be, by each. Federal income taxes
5paid for a tax year in which an Iowa return was not required
6to be filed shall not be added and federal income tax refunds
7received from a tax year in which an Iowa return was not
8required to be filed shall not be subtracted.
   9(3)  For tax years beginning on or after January 1, 2019,
10the deduction of federal income tax is limited and shall be
11calculated as follows:
   12(a)  For tax years beginning in the 2019 calendar year,
13add an amount equal to the sum of the federal income tax paid
14during the tax year to the extent payment is for a tax year
15beginning prior to January 1, 2019, and twenty-five percent of
16the federal income tax paid during the tax year to the extent
17payment is for a tax year beginning in the 2019 calendar year,
18and subtract any federal income tax refunds received during the
19tax year.
   20(b)  For each tax year beginning on or after January 1,
212020, add an amount equal to the sum of twenty-five percent
22of the federal income tax paid during the tax year to the
23extent payment is for a tax year during which the tax rates in
24tax category I as provided in section 422.5A, subsection 1,
25applied, and fifteen percent of the federal income tax paid
26during the tax year to the extent payment is for a tax year
27during which the tax rates in tax category II as provided in
28section 422.5A, subsection 1, applied, and subtract any federal
29income tax refunds received during the tax year to the extent
30the federal income tax was deducted for a prior tax year.
   31(c)  Federal income tax paid during a tax year shall not be
32deducted if the payment is for a tax year during which the tax
33rates in category III, IV, or V, as provided in section 422.5A,
34subsection 1, applied.
   35h.  For purposes of calculating the deductions in this
-21-1subsection that are authorized under the Internal Revenue Code,
2and to the extent that any of such deductions is determined by
3an individual’s federal adjusted gross income, the individual’s
4federal adjusted gross income is computed in accordance with
5section 422.7, subsections 39, 39A, 39B, 51, 52, and 53.
   6i.  The deduction for state sales and use taxes is allowable
7only if the taxpayer elected to deduct the state sales and use
8taxes in lieu of state income taxes under section 164 of the
9Internal Revenue Code. A deduction for state sales and use
10taxes is not allowed if the taxpayer has taken the deduction
11for state income taxes or claimed the standard deduction under
12section 63 of the Internal Revenue Code. This paragraph
13applies to taxable years beginning after December 31, 2003, and
14before January 1, 2008, and to taxable years beginning after
15December 31, 2009, and before January 1, 2015
 December 31,
162018
.
17   Sec. 24.  Section 422.9, subsection 2, Code 2018, is amended
18by adding the following new paragraph:
19   NEW PARAGRAPH.  l.  The limitation on the deduction of
20certain taxes in section 164(b)(6) of the Internal Revenue
21Code does not apply in computing taxable income for state tax
22purposes. A taxpayer is allowed to deduct taxes in computing
23taxable income as otherwise provided in this subsection without
24regard to section 164(b)(6), as enacted by Pub.L. No.115-97,
25§11042.
26   Sec. 25.  Section 422.9, subsection 3, paragraph d, Code
272018, is amended to read as follows:
   28d.  Notwithstanding paragraph “a”, for a taxpayer who is
29engaged in the trade or business of farming as defined in
30section 263A(e)(4) of the Internal Revenue Code and has a loss
31from farming as defined in section 172(b)(1)(F) 172(b)(1)(B) of
32the Internal Revenue Code including modifications prescribed by
33rule by the director, the Iowa loss from the trade or business
34of farming is a net operating loss which may be carried back
35five taxable years prior to the taxable year of the loss.
-22-
1   Sec. 26.  Section 422.9, subsection 5, Code 2018, is amended
2to read as follows:
   35.  A taxpayer affected by section 422.8 shall, if the
4optional standard deduction is not used,
be permitted to deduct
5only such portion of the total referred to in subsection
6
 subsections 2 above and 2A as is fairly and equitably allocable
7to Iowa under the rules prescribed by the director.
8   Sec. 27.  Section 422.9, subsections 6 and 7, Code 2018, are
9amended by striking the subsections.
10   Sec. 28.  Section 422.11B, Code 2018, is amended to read as
11follows:
   12422.11B  Minimum tax credit.
   131.  a.  There For tax years beginning before January 1, 2020,
14there
is allowed as a credit against the tax determined in
15section 422.5, subsection 1, paragraphs “a” through “j” for a
16tax year an amount equal to the minimum tax credit for that tax
17year.
   18b.  The minimum tax credit for a tax year is the excess, if
19any, of the net minimum tax imposed for all prior tax years
20beginning on or after January 1, 1987, but before January 1,
212019,
over the amount allowable as a credit under this section
22for those prior tax years.
   232.  a.  The allowable credit under subsection 1 for a
24tax year beginning before January 1, 2019, shall not exceed
25the excess, if any, of the tax determined in section 422.5,
26subsection 1, paragraphs “a” through “j” over the state
27alternative minimum tax as determined in section 422.5,
28subsection 2, Code 2018The allowable credit under subsection
291 for a tax year beginning in the 2019 calendar year shall not
30exceed the tax determined under section 422.5, subsection 1.

   31b.  The net minimum tax for a tax year is the excess, if
32any, of the tax determined in section 422.5, subsection 2,
 33Code 2018, for the tax year over the tax determined in section
34422.5, subsection 1, paragraphs “a” through “j” for the tax
35year.
-23-
   13.  This section is repealed January 1, 2020, for tax years
2beginning on or after January 1, 2020.
3   Sec. 29.  Section 422.13, subsection 1, paragraph c, Code
42018, is amended by striking the paragraph.
5   Sec. 30.  Section 422.21, subsection 5, Code 2018, is amended
6to read as follows:
   75.  a.  The director shall determine for the 1989 2019
8 and each subsequent calendar year the annual and cumulative
9inflation factors for each calendar year to be applied to tax
10years beginning on or after January 1 of that calendar year.
11The director shall compute the new dollar amounts as specified
12to be adjusted in section 422.5 by the latest cumulative
13inflation factor and round off the result to the nearest one
14dollar. The annual and cumulative inflation factors determined
15by the director are not rules as defined in section 17A.2,
16subsection 11.
   17b.  The director shall determine for the 1990 2020 calendar
18year and each subsequent calendar year the annual and
19cumulative standard deduction factors to be applied to tax
20years beginning on or after January 1 of that calendar year for
21purposes of the standard deduction amounts in section 422.9,
22subsection 1A, paragraph “a”, subparagraphs (1) and (2), and
23subparagraph (3), subparagraph division (a), and subparagraph
24(4), subparagraph division (a)
The director shall determine
25for the calendar following the first calendar year for which
26the tax rates in tax category III, IV, or V, as provided in
27section 422.5A, subsection 1, take effect, if at all, and
28for each subsequent calendar year, the annual and cumulative
29standard deduction factors to be applied to tax years beginning
30on or after January 1 of that calendar year for purposes of the
31standard deduction amounts in section 422.9, subsection 1A,
32paragraph “a”, subparagraph (3), subparagraph division (b),
33and subparagraph (4), subparagraph division (b).
The director
34shall compute the new dollar amounts of the standard deductions
35specified in section 422.9, subsection 1, by the applicable
-24-1 latest cumulative standard deduction factor and round off the
2result to the nearest ten dollars. The annual and cumulative
3standard deduction factors determined by the director are not
4rules as defined in section 17A.2, subsection 11.
5   Sec. 31.  EFFECTIVE DATE.  This division of this Act takes
6effect January 1, 2019.
7   Sec. 32.  APPLICABILITY.  This division of this Act applies
8to tax years beginning on or after January 1, 2019.
9DIVISION III
10CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST AND IOWA ABLE
11SAVINGS PLAN TRUST
12   Sec. 33.  Section 12D.1, Code 2018, is amended to read as
13follows:
   1412D.1  Purpose and definitions.
   151.  The general assembly finds that the general welfare and
16well-being of the state are directly related to educational
17levels and skills of the citizens of the state, and that a
18vital and valid public purpose is served by the creation and
19implementation of programs which encourage and make possible
20the attainment of higher formal education by the greatest
21number of citizens of the state. The state has limited
22resources to provide additional programs for higher education
23funding and the continued operation and maintenance of the
24state’s public institutions of higher education and the
general
25welfare of the citizens of the state will be enhanced by
26establishing a program which allows citizens of the state to
27invest money in a public trust for future application to the
28payment of higher education costs qualified education expenses.
29The creation of the means of encouragement for citizens to
30invest in such a program represents the carrying out of a
31vital and valid public purpose. In order to make available
32to the citizens of the state an opportunity to fund future
33higher formal education needs, it is necessary that a public
34trust be established in which moneys may be invested for future
35educational use.
-25-
   12.  As used in this chapter, unless the context otherwise
2requires:
   3a.  “Account balance limit” means the maximum allowable
4aggregate balance of accounts established for the same
5beneficiary. Account earnings, if any, are included in the
6account balance limit.
   7b.  “Administrative fund” means the administrative fund
8established under section 12D.4.
   9c.  “Beneficiary” means the individual designated by a
10participation agreement to benefit from advance payments of
11higher education costs qualified education expenses on behalf
12of the beneficiary.
   13d.  “Benefits” means the payment of higher education costs
14
 qualified education expenses on behalf of a beneficiary by the
15trust during the beneficiary’s attendance at an institution of
16higher education
 a qualified educational institution.
   17e.  “Higher education costs” means the same as “qualified
18higher education expenses” as defined insection 529(e)(3) of
19the Internal Revenue Code.
   20f.    e.  “Institution of higher education” means an institution
21described in section 481 of the federal Higher Education Act of
221965, 20 U.S.C. §1088, which is eligible to participate in the
23United States department of education’s student aid programs.
   24g.    f.  “Internal Revenue Code” means the same as defined
25insection 12I.1.
   26h.    g.  “Iowa educational savings plan trust” or “trust” means
27the trust created under section 12D.2.
   28i.    h.  “Participant” means an individual, individual’s legal
29representative, trust, estate, or an organization described
30in section 501(c)(3) of the Internal Revenue Code and exempt
31from taxation under section 501(a) of the Internal Revenue
32Code, that has entered into a participation agreement under
33this chapter for the advance payment of higher education costs
34
 qualified education expenses on behalf of a beneficiary.
   35j.    i.  “Participation agreement” means an agreement between
-26-1a participant and the trust entered into under this chapter.
   2k.    j.  “Program fund” means the program fund established
3under section 12D.4.
   4k.  “Qualified education expenses” means the same as
5“qualified higher education expenses” as defined in section
6529(e)(3) of the Internal Revenue Code, as amended by Pub.L.
7No.115-97, and shall include elementary and secondary school
8expenses for tuition described in section 529(c)(7) of the
9Internal Revenue Code, subject to the limitations imposed by
10section 529(e)(3)(A) of the Internal Revenue Code.
   11l.  “Qualified educational institution” means an institution
12of higher education, or any elementary or secondary public,
13private, or religious school described in section 529(c)(7) of
14the Internal Revenue Code.
   15l.    m.  “Tuition and fees” “Tuition” means the quarter, or
16 semester, or annual charges imposed to attend an institution
17of higher education
 a qualified educational institution and
18required as a condition of enrollment or attendance.
19   Sec. 34.  Section 12D.2, subsections 2, 5, 9, and 14, Code
202018, are amended to read as follows:
   212.  Enter into agreements with any institution of higher
22education
 qualified educational institution, the state, or any
23federal or other state agency, or other entity as required to
24implement this chapter.
   255.  Carry out studies and projections so the treasurer of
26state may advise participants regarding present and estimated
27future higher education costs qualified education expenses
28 and levels of financial participation in the trust required
29in order to enable participants to achieve their educational
30funding objectives.
   319.  Make payments to institutions of higher education
32
 qualified educational institutions, participants, or
33beneficiaries, pursuant to participation agreements on behalf
34of beneficiaries.
   3514.  Establish, impose, and collect administrative fees
-27-1and charges in connection with transactions of the trust, and
2provide for reasonable service charges, including penalties for
3cancellations and late payments with respect to participation
4agreements
.
5   Sec. 35.  Section 12D.3, subsections 1 and 2, Code 2018, are
6amended to read as follows:
   71.  a.  Each participation agreement may require a
8participant to agree to invest a specific amount of money in
9the trust for a specific period of time for the benefit of a
10specific beneficiary. A participant shall not be required to
11make an annual contribution on behalf of a beneficiary. The
12maximum contribution that may be deducted for Iowa income tax
13purposes shall not exceed two thousand dollars per beneficiary
14per year adjusted annually to reflect increases in the consumer
15price index. The treasurer of state shall set an account
16balance limit to maintain compliance with section 529 of the
17Internal Revenue Code. A contribution shall not be permitted
18to the extent it causes the aggregate balance of all accounts
19established for the same beneficiary under the trust to exceed
20the applicable account balance limit.
   21b.  Participation agreements may be amended to provide for
22adjusted levels of payments based upon changed circumstances or
23changes in educational plans.
   242.  The execution of a participation agreement by the trust
25shall not guarantee in any way that higher education costs
26
 qualified education expenses will be equal to projections
27and estimates provided by the trust or that the beneficiary
28named in any participation agreement will attain any of the
29following:
   30a.  Be admitted to an institution of higher education a
31qualified educational institution
.
   32b.  If admitted, be determined a resident for tuition
33purposes by the institution of higher education qualified
34educational institution
.
   35c.  Be allowed to continue attendance at the institution of
-28-1higher education
 qualified educational institution following
2admission.
   3d.  Graduate from the institution of higher education
4
 qualified educational institution.
5   Sec. 36.  Section 12D.3, Code 2018, is amended by adding the
6following new subsection:
7   NEW SUBSECTION.  5.  A participant may designate a successor
8in accordance with rules adopted by the treasurer of state.
9The designated successor shall succeed to the ownership of the
10account in the event of the death of the participant. In the
11event a participant dies and has not designated a successor to
12the account, the following criteria shall apply:
   13a.  The beneficiary of the account, if eighteen years of
14age or older, shall become the owner of the account as well as
15remain the beneficiary upon filing the appropriate forms in
16accordance with rules adopted by the treasurer of state.
   17b.  If the beneficiary of the account is under the age of
18eighteen, account ownership shall be transferred to the first
19surviving parent or other legal guardian of the beneficiary to
20file the appropriate forms in accordance with rules adopted by
21the treasurer of state.
22   Sec. 37.  Section 12D.4, Code 2018, is amended to read as
23follows:
   2412D.4  Program and administrative funds — investment and
25payments.
   261.  a.  The treasurer of state shall segregate moneys
27received by the trust into two funds: the program fund and the
28administrative fund.
   29b.  All moneys paid by participants in connection with
30participation agreements shall be deposited as received into
31separate accounts within the program fund.
   32c.  Contributions to the trust made by participants may only
33be made in the form of cash.
   34d.  A participant or beneficiary shall not provide investment
35direction regarding program contributions or earnings held by
-29-1the trust
 may, directly or indirectly, direct the investment of
2any contributions to the trust or any earnings thereon no more
3than two times in a calendar year
.
   4e.  The amount of cash distributions from the trust and all
5other qualified state tuition programs under section 529 of
6the Internal Revenue Code to a beneficiary during any taxable
7year shall, in the aggregate, include no more than ten thousand
8dollars in expenses for tuition in connection with enrollment
9at an elementary or secondary public, private, or religious
10school incurred during the taxable year.
   112.  Moneys accrued by participants in the program fund of
12the trust may be used for payments to any institution of higher
13education
 qualified educational institution. Payments can be
14made to the qualified educational institution, the participant,
15or the beneficiary.
16   Sec. 38.  Section 12D.6, subsection 1, paragraph a, Code
172018, is amended to read as follows:
   18a.  A participant retains ownership of all payments made
19under a participation agreement up to the date of utilization
20for payment of higher education costs qualified education
21expenses
for the beneficiary.
22   Sec. 39.  Section 12D.6, subsections 2, 3, and 5, Code 2018,
23are amended to read as follows:
   242.  In the event the program is terminated prior to payment
25of higher education costs qualified education expenses for the
26beneficiary, the participant is entitled to a refund of the
27participant’s account balance.
   283.  The institution of higher education qualified
29educational institution
shall obtain ownership of the payments
30made for the higher education costs qualified education
31expenses
paid to the institution at the time each payment is
32made to the institution.
   335.  A participant may transfer ownership rights to another
34eligible individual, including a gift of the ownership rights
35to a minor beneficiary
 participant, or may transfer funds to
-30-1another plan under the trust or to an ABLE account as permitted
2under section 529(c)(3)(C) of the Internal Revenue Code
.
3The transfer shall be made and the property distributed in
4accordance with rules adopted by the treasurer of state or with
5the terms of the participation agreement.
6   Sec. 40.  Section 12D.7, Code 2018, is amended to read as
7follows:
   812D.7  Effect of payments on determination of need and
9eligibility for student financial aid.
   10A student loan program, student grant program, or other
11program administered by any agency of the state, except as
12may be otherwise provided by federal law or the provisions
13of any specific grant applicable to that law, shall not take
14into account and shall not consider amounts available for
15the payment of higher education costs qualified education
16expenses
pursuant to the Iowa educational savings plan trust in
17determining need and eligibility for student aid.
18   Sec. 41.  Section 12D.9, subsection 1, paragraph a, Code
192018, is amended to read as follows:
   20a.  Pursuant to section 12D.3, subsection 1, paragraph “a”,
21a participant may make contributions to an account which is
22established for the purpose of meeting the qualified higher
23 education expenses of the designated beneficiary of the
24account.
25   Sec. 42.  Section 422.7, subsection 32, paragraph c, Code
262018, is amended by striking the paragraph and inserting in
27lieu thereof the following:
   28c.  (1)  Add, to the extent previously deducted as a
29contribution to the trust, the amount resulting from a
30withdrawal or transfer made by the taxpayer from the Iowa
31educational savings plan trust for purposes other than any of
32the following:
   33(a)  The payment of qualified higher education expenses.
   34(b)  The payment of tuition to an elementary or secondary
35school if the tuition amounts are qualified education expenses.
-31-
   1(c)  A change in beneficiaries under, or transfer to another
2account within, the Iowa educational savings plan trust, or a
3transfer to the Iowa ABLE savings plan trust, provided such
4change or transfer is permitted under section 12D.6, subsection
55.
   6(2)  For purposes of this paragraph:
   7(a)  “Elementary or secondary school” means an elementary
8or secondary school in this state which is accredited under
9section 256.11, and adheres to the provisions of the federal
10Civil Rights Act of 1964 and chapter 216.
   11(b)  “Institution of higher education” and “tuition” all mean
12the same as defined in section 12D.1, subsection 2.
   13(c)  (i)  “Qualified higher education expenses” means the same
14as defined in section 529(e)(3) of the Internal Revenue Code.
   15(ii)  For purposes of this subparagraph division (c),
16“Internal Revenue Code” means the Internal Revenue Code of
171954, prior to the date of its redesignation as the Internal
18Revenue Code of 1986 by the Tax Reform Act of 1986, or means
19the Internal Revenue Code of 1986 as amended and in effect on
20January 1, 2018. This definition shall not be construed to
21include any amendment to the Internal Revenue Code enacted
22after the date specified in the preceding sentence, including
23any amendment with retroactive applicability or effectiveness.
24   Sec. 43.  Section 422.7, subsection 34, Code 2018, is amended
25to read as follows:
   2634.  a.  (1)  Subtract the amount contributed during the tax
27year on behalf of a designated beneficiary that is a resident
28of this state to the Iowa ABLE savings plan trust or to the
29qualified ABLE program with which the state has contracted
30pursuant to section 12I.10, not to exceed the maximum
31contribution level established in section 12I.3, subsection 1,
32paragraph “d”, or section 12I.10, subsection 2, paragraph “a”,
33as applicable.
   34(2)  This paragraph “a” shall not apply to any amount
35of contribution that represents a transfer from the Iowa
-32-1educational savings plan trust created in chapter 12D that
2meets the requirements of subsection 32, paragraph “c”,
3subparagraph (1), subparagraph division (c), and that was
4previously deducted as a contribution to the Iowa educational
5savings plan trust.
   6b.  Add the amount resulting from the cancellation of a
7participation agreement refunded to the taxpayer as an account
8owner in the Iowa ABLE savings plan trust or the qualified
9ABLE program with which the state has contracted pursuant to
10section 12I.10 to the extent previously deducted pursuant
11to this subsection by the taxpayer or any other person as a
12contribution to the trust or qualified ABLE program, or to the
13extent the amount was previously deducted by the taxpayer or
14any other person pursuant to subsection 32, paragraph “a”, and
15qualified as a transfer under paragraph “a”, subparagraph (2),
16of this subsection
.
   17c.  Add the amount resulting from a withdrawal made by a
18taxpayer from the Iowa ABLE savings plan trust or the qualified
19ABLE program with which the state has contracted pursuant to
20section 12I.10 for purposes other than the payment of qualified
21disability expenses to the extent previously deducted pursuant
22to this subsection by the taxpayer or any other person as a
23contribution to the trust or qualified ABLE program, or to the
24extent the amount was previously deducted by the taxpayer or
25any other person pursuant to subsection 32, paragraph “a”, and
26qualified as a transfer under paragraph “a”, subparagraph (2),
27of this subsection
.
28   Sec. 44.  Section 627.6, Code 2018, is amended by adding the
29following new subsection:
30   NEW SUBSECTION.  17.  The debtor’s interest, whether as
31participant or beneficiary, in contributions and assets,
32including the accumulated earnings and market increases in
33value, held in an account in the Iowa educational savings plan
34trust organized under chapter 12D.
35   Sec. 45.  EFFECTIVE DATE.  This division of this Act, being
-33-1deemed of immediate importance, takes effect upon enactment.
2   Sec. 46.  RETROACTIVE APPLICABILITY.
   31.  Except as provided in subsection 2, this division of this
4Act applies retroactively to January 1, 2018, for withdrawals
5from the Iowa educational savings plan trust made on or after
6that date.
   72.  The sections of this division of this Act amending
8section 422.7 apply retroactively to January 1, 2018, for tax
9years beginning on or after that date, and for withdrawals from
10the Iowa educational savings plan trust made on or after that
11date.
12DIVISION IV
13SALES AND USE TAXES
14   Sec. 47.  Section 15J.4, subsection 3, paragraph f, Code
152018, is amended to read as follows:
   16f.  The total aggregate amount of state sales tax revenues
17and state hotel and motel tax revenues that may be approved by
18the board for remittance to all municipalities and that may
19be transferred to the state reinvestment district fund under
20section 423.2, subsection 11, 423.2A or section 423A.6, and
21remitted to all municipalities having a reinvestment district
22under this chapter shall not exceed one hundred million
23dollars.
24   Sec. 48.  Section 15J.5, subsection 1, paragraph a, Code
252018, is amended to read as follows:
   26a.  The department shall calculate quarterly the amount of
27new state sales tax revenues for each district established in
28the state to be deposited in the state reinvestment district
29fund created in section 15J.6, pursuant to section 423.2,
30subsection 11
, paragraph “b” 423.2A, subsection 2, subject to
31remittance limitations established by the board pursuant to
32section 15J.4, subsection 3.
33   Sec. 49.  Section 15J.6, subsection 1, Code 2018, is amended
34to read as follows:
   351.  A state reinvestment district fund is established in the
-34-1state treasury under the control of the department consisting
2of the new state sales tax revenues collected within each
3district and deposited in the fund pursuant to section 423.2,
4subsection 11
, paragraph “b” 423.2A, subsection 2, and the
5new state hotel and motel tax revenues collected within each
6district and deposited in the fund pursuant to section 423A.6.
7Moneys deposited in the fund are appropriated to the department
8for the purposes of this section. Moneys in the fund shall
9only be used for the purposes of this section.
10   Sec. 50.  Section 418.11, subsection 1, Code 2018, is amended
11to read as follows:
   121.  The department of revenue shall calculate quarterly the
13amount of increased sales tax revenues for each governmental
14entity approved to use sales tax increment revenues and the
15amount of such revenues to be transferred to the sales tax
16increment fund pursuant to section 423.2, subsection 11,
17paragraph “b”
 423.2A, subsection 2.
18   Sec. 51.  Section 418.12, subsection 1, Code 2018, is amended
19to read as follows:
   201.  A sales tax increment fund is established as a separate
21and distinct fund in the state treasury under the control of
22the department of revenue consisting of the amount of the
23increased state sales and services tax revenues collected by
24the department of revenue within each applicable area specified
25in section 418.11, subsection 3, and deposited in the fund
26pursuant to section 423.2, subsection 11, paragraph “b” 423.2A,
27subsection 2
. Moneys deposited in the fund are appropriated
28to the department of revenue for the purposes of this section.
29Moneys in the fund shall only be used for the purposes of this
30section.
31   Sec. 52.  Section 421.26, Code 2018, is amended to read as
32follows:
   33421.26  Personal liability for tax due.
   34If a licensee or other person under section 452A.65, a
35retailer or purchaser under chapter 423A, 423B, or 423E, or
-35-1section sections 423.14, 423.14A, 423.29, 423.31, 423.32, or
2423.33, or a retailer or purchaser under section 423.32, or
3 a user under section 423.34, or a permit holder or licensee
4under section 453A.13, 453A.16, or 453A.44 fails to pay a tax
5under those sections when due, an officer of a corporation
6or association, notwithstanding section 489.304, a member or
7manager of a limited liability company, or a partner of a
8partnership, having control or supervision of or the authority
9for remitting the tax payments and having a substantial legal
10or equitable interest in the ownership of the corporation,
11association, limited liability company, or partnership, who has
12intentionally failed to pay the tax is personally liable for
13the payment of the tax, interest, and penalty due and unpaid.
14However, this section shall not apply to taxes on accounts
15receivable. The dissolution of a corporation, association,
16limited liability company, or partnership shall not discharge a
17person’s liability for failure to remit the tax due.
18   Sec. 53.  Section 423.1, Code 2018, is amended by adding the
19following new subsection:
20   NEW SUBSECTION.  22A.  “Information services” means every
21activity, process, or function by which a seller accumulates,
22prepares, organizes, conveys, analyzes, or delivers data,
23facts, knowledge, procedures, information, and other similar
24services to a purchaser through any tangible, intangible,
25or electronic medium. Information accumulated, prepared,
26or organized for a purchaser is an information service even
27though it may incorporate preexisting components of data or
28other information. “Information services” includes but is not
29limited to database files, research information, genealogical
30information, and other similar services.
31   Sec. 54.  Section 423.1, subsection 24, paragraph a, Code
322018, is amended to read as follows:
   33a.  “Lease or rental” means any transfer of possession
34or control of, or access to, tangible personal property or
35specified digital products
for a fixed or indeterminate term
-36-1for consideration. A “lease or rental” may include future
2options to purchase or extend.
3   Sec. 55.  Section 423.1, subsection 37, Code 2018, is amended
4to read as follows:
   537.  “Place of business” means any warehouse, store,
6place, office, building, or structure where goods, wares, or
7merchandise
 tangible personal property, specified digital
8products, or services
are offered for sale at retail or where
9any taxable amusement is conducted, or each office where gas,
10water, heat, communication, or electric services are offered
11for sale at retail. When a retailer or amusement operator
12sells merchandise by means of vending machines or operates
13music or amusement devices by coin-operated machines at more
14than one location within the state, the office, building, or
15place where the books, papers, and records of the taxpayer are
16kept shall be deemed to be the taxpayer’s place of business.
17   Sec. 56.  Section 423.1, Code 2018, is amended by adding the
18following new subsection:
19   NEW SUBSECTION.  36A.  “Personal property” includes but is
20not limited to tangible personal property and specified digital
21products.
22   Sec. 57.  Section 423.1, subsection 43, paragraph a,
23subparagraph (3), Code 2018, is amended to read as follows:
   24(3)  Taking possession or making first use of digital goods
25
 specified digital products, whichever comes first.
26   Sec. 58.  Section 423.1, subsection 47, Code 2018, is amended
27to read as follows:
   2847.  “Retailer” means and includes every person engaged
29in the business of selling tangible personal property,
30specified digital products,
or taxable services at retail, or
31the furnishing of gas, electricity, water, or communication
32service, and tickets or admissions to places of amusement
33and athletic events or operating amusement devices or other
34forms of commercial amusement from which revenues are derived.
35However, when in the opinion of the director it is necessary
-37-1for the efficient administration of this chapter to regard
2any salespersons, representatives, truckers, peddlers, or
3canvassers as agents of the dealers, distributors, supervisors,
4employers, or persons under whom they operate or from whom
5they obtain tangible personal property, services, or specified
6digital products
sold by them irrespective of whether or not
7they are making sales on their own behalf or on behalf of such
8dealers, distributors, supervisors, employers, or persons,
9the director may so regard them, and may regard such dealers,
10distributors, supervisors, employers, or persons as retailers
11for the purposes of this chapter. “Retailer” includes a seller
12obligated to collect sales or use tax, including any person
13obligated to collect sales and use tax pursuant to section
14423.14A
.
15   Sec. 59.  Section 423.1, subsection 48, paragraph a, Code
162018, is amended to read as follows:
   17a.  “Retailer maintaining a place of business in this state”
18or any like term includes any of the following:
   19(1)   Aretailer having or maintaining within this state,
20directly or by a subsidiary, an office, distribution house,
21sales house, warehouse, or other place of business, or any
22representative operating within this state under the authority
23of the retailer or its subsidiary, irrespective of whether that
24place of business or representative is located here permanently
25or temporarily, or whether the retailer or subsidiary is
26admitted to do business within this state pursuant to chapter
27490.
   28(2)  A person obligated to collect sales and use tax pursuant
29to section 423.14A.
30   Sec. 60.  Section 423.1, subsection 48, paragraph b,
31subparagraph (1), unnumbered paragraph 1, Code 2018, is amended
32to read as follows:
   33A retailer shall be presumed to be maintaining a place of
34business in this state, as defined in for purposes of paragraph
35“a”subparagraph (1), if any person that has substantial nexus
-38-1in this state, other than a person acting in its capacity as a
2common carrier, does any of the following:
3   Sec. 61.  Section 423.1, subsection 48, paragraph b,
4subparagraph (1), subparagraph division (b), Code 2018, is
5amended to read as follows:
   6(b)  Maintains an office, distribution facility, warehouse,
7storage place, or similar place of business in this state to
8facilitate the delivery of personal property or services sold
9by the retailer to the retailer’s customers.
10   Sec. 62.  Section 423.1, subsection 50, Code 2018, is amended
11to read as follows:
   1250.  “Sales” or “sale” means any transfer, exchange, or
13barter, conditional or otherwise, in any manner or by any means
14whatsoever, for consideration, including but not limited to any
15such transfer, exchange, or barter on a subscription basis
.
16   Sec. 63.  Section 423.1, Code 2018, is amended by adding the
17following new subsection:
18   NEW SUBSECTION.  55A.  “Sold at retail in the state” and
19other references to sales “in the state” or “in this state”
20includes but is not limited to sales sourced to this state
21under this chapter.
22   Sec. 64.  Section 423.1, Code 2018, is amended by adding the
23following new subsection:
24   NEW SUBSECTION.  55B.  a.  “Specified digital products” means
25electronically transferred digital audio-visual works, digital
26audio works, digital books, or other digital products.
   27b.  For purposes of this subsection:
   28(1)  “Digital audio-visual works” means a series of related
29images which, when shown in succession, impart an impression of
30motion, together with accompanying sounds, if any.
   31(2)  “Digital audio works” means works that result from
32the fixation of a series of musical, spoken, or other sounds,
33including but not limited to ringtones. For purposes of this
34subparagraph, “ringtones” means digitized sound files that are
35downloaded onto a device and that may be used to alert the
-39-1customer with respect to a communication.
   2(3)  “Digital books” means works that are generally
3recognized in the ordinary and usual sense as books.
   4(4)  “Electronically transferred” means obtained or accessed
5by the purchaser by means other than tangible storage media,
6including but not limited to a specified digital product
7purchased through a computer software application, commonly
8referred to as an in-app purchase, or through another specified
9digital product, or through any other means.
   10(5)  “Other digital products” means greeting cards, images,
11video or electronic games or entertainment, news or information
12products, and computer software applications.
13   Sec. 65.  Section 423.1, Code 2018, is amended by adding the
14following new subsection:
15   NEW SUBSECTION.  57A.  “Subscription” means any arrangement
16in which a person has the right or ability to access,
17receive, use, obtain, purchase, or otherwise acquire tangible
18personal property, specified digital products, or services
19on a permanent or less than permanent basis, regardless of
20whether the person actually accesses, receives, uses, obtains,
21purchases, or otherwise acquires such tangible personal
22property, specified digital product, or service.
23   Sec. 66.  Section 423.1, subsections 62, 63, and 64, Code
242018, are amended to read as follows:
   2562.  “Use” means and includes the exercise by any person of
26any right or power over or access to tangible personal property
 27or a specified digital product incident to the ownership of
28that property, or any right or power over or access to the
29product or result of a service
. A retailer’s or building
30contractor’s sale of manufactured housing for use in this
31state, whether in the form of tangible personal property or
32of realty, is a use of that property for the purposes of this
33chapter.
   3463.  “Use tax” means the tax levied under subchapter III of
35this chapter for which the retailer collects and remits tax to
-40-1the department
.
   264.  “User” means the immediate recipient of the personal
3property or
services who is entitled to exercise a right of or
4 power over or access to the personal property, or the product
 5or result of such services.
6   Sec. 67.  Section 423.2, subsection 1, paragraph a,
7subparagraph (1), Code 2018, is amended to read as follows:
   8(1)  Sales of engraving, photography, retouching, printing,
9and binding services.
10   Sec. 68.  Section 423.2, subsection 6, Code 2018, is amended
11to read as follows:
   126.  a.  The sales price of any of the following enumerated
13services is subject to the tax imposed by subsection 5:
   14a.  alteration Alteration and garment repair; armored.
   15b.   Armoredcar; vehicle.
   16c.   Vehiclerepair; battery.
   17d.  Battery, tire, and allied; investment.
   18e.   Investmentcounseling; service.
   19f.   Servicecharges of all financial institutions; barber.
20For the purposes of this paragraph, “financial institutions”
21 means all national banks, federally chartered savings and loan
22associations, federally chartered savings banks, federally
23chartered credit unions, banks organized under chapter 524,
24credit unions organized under chapter 533, and all banks,
25savings banks, credit unions, and savings and loan associations
26chartered or otherwise created under the laws of any state and
27doing business in Iowa.

   28g.   Barberand beauty; boat.
   29h.   Boatrepair; vehicle.
   30i.  Vehicle wash and wax; campgrounds; carpentry; roof.
   31j.  Campgrounds.
   32k.  Carpentry.
   33l.  Roof, shingle, and glass repair; dance.
   34m.   Danceschools and dance studios; dating.
   35n.   Datingservices; dry.
-41-
   1o.   Drycleaning, pressing, dyeing, and laundering excluding
2the use of self-pay washers and dryers; electrical.
   3p.   Electricaland electronic repair and installation;
4excavating
.
   5q.   Excavatingand grading; farm.
   6r.   Farmimplement repair of all kinds; flying.
   7s.   Flyingservice; furniture.
   8t.  Furniture, rug, carpet, and upholstery repair and
9cleaning; fur.
   10u.   Furstorage and repair; golf.
   11v.   Golfand country clubs and all commercial recreation;
12gun
.
   13w.   Gunand camera repair; house.
   14x.   Houseand building moving; household.
   15y.   Householdappliance, television, and radio repair;
16janitorial
.
   17z.   Janitorialand building maintenance or cleaning; jewelry.
   18aa.   Jewelryand watch repair; lawn.
   19ab.   Lawncare, landscaping, and tree trimming and removal;.
   20ac.   Personal transportation service, including but not
21limited to taxis, driver service, ride sharing service, rides
22for hire, and
limousine service, including driver; machine.
   23ad.   Machineoperator; machine.
   24ae.   Machinerepair of all kinds; motor.
   25af.   Motorrepair; motorcycle.
   26ag.  Motorcycle, scooter, and bicycle repair; oilers.
   27ah.   Oilersand lubricators; office.
   28ai.   Officeand business machine repair; painting.
   29aj.  Painting, papering, and interior decorating; parking.
   30ak.   Parkingfacilities; pay.
   31al.   Paytelevision; pet, including but not limited to
32streaming video, video on-demand, and pay-per-view.

   33am.   Petgrooming; pipe.
   34an.   Pipefitting and plumbing; wood.
   35ao.   Woodpreparation; executive.
-42-
   1ap.   Executivesearch agencies; private.
   2aq.   Privateemployment agencies, excluding services for
3placing a person in employment where the principal place of
4employment of that person is to be located outside of the
5state; reflexology; security.
   6ar.  Reflexology.
   7as.   Securityand detective services, excluding private
8security and detective services furnished by a peace officer
9with the knowledge and consent of the chief executive officer
10of the peace officer’s law enforcement agency; sewage.
   11at.   Sewageservices for nonresidential commercial
12operations; sewing.
   13au.   Sewingand stitching; shoe.
   14av.   Shoerepair and shoeshine; sign.
   15aw.   Signconstruction and installation; storage.
   16ax.   Storageof household goods, mini-storage, and
17warehousing of raw agricultural products; swimming.
   18ay.   Swimmingpool cleaning and maintenance; tanning.
   19az.   Tanningbeds or salons; taxidermy.
   20ba.   Taxidermyservices; telephone.
   21bb.   Telephoneanswering service; test.
   22bc.   Testlaboratories, including mobile testing laboratories
23and field testing by testing laboratories, and excluding tests
24on humans or animals and excluding environmental testing
25services; termite.
   26bd.  Termite, bug, roach, and pest eradicators; tin.
   27be.   Tinand sheet metal repair; transportation.
   28bf.   Transportationservice consisting of the rental of
29recreational vehicles or recreational boats, or the rental of
30vehicles subject to registration which are registered for a
31gross weight of thirteen tons or less for a period of sixty
32days or less, or the rental of aircraft for a period of sixty
33days or less;.
   34bg.  Turkish baths, massage, and reducing salons, excluding
35services provided by massage therapists licensed under chapter
-43-1152C; water.
   2bh.   Waterconditioning and softening; weighing; welding;
3well
.
   4bi.  Weighing.
   5bj.  Welding.
   6bk.   Welldrilling; wrapping.
   7bl.  Wrapping, packing, and packaging of merchandise other
8than processed meat, fish, fowl, and vegetables; wrecking.
   9bm.   Wreckingservice; wrecker.
   10bn.   Wreckerand towing.
   11b.  For the purposes of this subsection, “financial
12institutions”
means all national banks, federally chartered
13savings and loan associations, federally chartered savings
14banks, federally chartered credit unions, banks organized under
15chapter 524, credit unions organized under chapter 533, and
16all banks, savings banks, credit unions, and savings and loan
17associations chartered or otherwise created under the laws of
18any state and doing business in Iowa.
   19bo.  Photography.
   20bp.  Retouching.
   21bq.  Storage of tangible or electronic files, documents, or
22other records.
   23br.  Information services.
   24bs.  Services arising from or related to installing,
25maintaining, servicing, repairing, operating, upgrading, or
26enhancing specified digital products.
   27bt.  Video game services and tournaments.
   28bu.  Software as a service.
29   Sec. 69.  Section 423.2, subsection 8, Code 2018, is amended
30by adding the following new paragraph:
31   NEW PARAGRAPH.  d.  A transaction that otherwise meets
32the definition of “bundled transaction” as defined in this
33subsection is not a bundled transaction if it is any of the
34following:
   35(1)  The retail sale of tangible personal property and a
-44-1service where the tangible personal property is essential
2to the use of the service, and is provided exclusively in
3connection with the service, and the true object of the
4transaction is the service.
   5(2)  The retail sale of services where one service is
6provided that is essential to the use or receipt of a second
7service and the first service is provided exclusively in
8connection with the second service and the true object of the
9transaction is the second service.
   10(3)  (a)  A transaction that includes taxable products and
11nontaxable products and the purchase price or sales price of
12the taxable products is de minimis.
   13(b)  For purposes of this subparagraph, “de minimis” means
14the seller’s purchase or sales price of the taxable products
15is ten percent or less of the total purchase price or sales
16price of the bundled products. Sellers shall use either the
17purchase price or the sale price of the products to determine
18if the taxable products are de minimis. Sellers may not use
19a combination of the purchase price and sales price of the
20products to determine if the taxable products are de minimis.
   21(4)  The retail sale of exempt tangible personal property and
22taxable tangible personal property where all of the following
23apply:
   24(a)  The transaction includes food and food ingredients,
25drugs, durable medical equipment, mobility enhancing equipment,
26prosthetic devices, or medical supplies.
   27(b)  The seller’s purchase price or sales price of the
28taxable tangible personal property is fifty percent or less
29of the total purchase price or sales price of the bundled
30tangible personal property. Sellers may not use a combination
31of the purchase price and sales price of the tangible personal
32property when making the fifty percent determination for a
33transaction.
34   Sec. 70.  Section 423.2, Code 2018, is amended by adding the
35following new subsection:
-45-1   NEW SUBSECTION.  9A.  a.  A tax of six percent is imposed on
2the sales price of specified digital products sold at retail
3in the state. The tax applies whether the purchaser obtains
4permanent use or less than permanent use of the specified
5digital product, whether the sale is conditioned or not
6conditioned upon continued payment from the purchaser, and
7whether the sale is on a subscription basis or is not on a
8subscription basis.
   9b.  The sale of a digital code that may be used to obtain
10or access a specified digital product shall be taxed in the
11same manner as the specified digital product. For purposes
12of this paragraph, “digital code” means a method that permits
13a purchaser to obtain or access at a later date a specified
14digital product.
15   Sec. 71.  Section 423.2, subsections 10, 11, and 12, Code
162018, are amended by striking the subsections.
17   Sec. 72.  NEW SECTION.  423.2A  Deposit and transfer of
18revenues.
   191.  a.  All revenues arising under the operation of the
20provisions of this subchapter II shall be deposited into the
21general fund of the state.
   22b.  Subsequent to the deposit into the general fund of
23the state, the director shall credit an amount equal to the
24product of the sales tax rate imposed in section 423.2 times
25the sales price of the tangible personal property or services
26furnished to purchasers at a baseball and softball complex that
27has received an award under section 15F.207 and that meets
28the qualifications of section 423.4, subsection 10, into the
29baseball and softball complex sales tax rebate fund created
30under section 423.4, subsection 10, paragraph “e”. The director
31shall credit the moneys beginning the first day of the quarter
32following July 1, 2016. This paragraph is repealed thirty
33days following the date on which five million dollars in total
34rebates have been provided under section 423.4, subsection 10.
   352.  Subsequent to the deposit into the general fund of the
-46-1state pursuant to subsection 1, the department shall do the
2following in the order prescribed:
   3a.  Transfer the revenues collected under chapter 423B.
   4b.  Transfer from the remaining revenues the amounts required
5under Article VII, section 10, of the Constitution of the State
6of Iowa to the natural resources and outdoor recreation trust
7fund created in section 461.31, if applicable.
   8c.  Transfer one-sixth of the remaining revenues to the
9secure an advanced vision for education fund created in section
10423F.2. This paragraph “c” is repealed December 31, 2029.
   11d.  Transfer to the baseball and softball complex sales tax
12rebate fund that portion of the sales tax receipts described
13in subsection 1, paragraph “b”, remaining after the transfers
14required under paragraphs “a”, “b”, and “c” of this subsection
152. This paragraph is repealed thirty days following the date
16on which five million dollars in total rebates have been
17provided under section 423.4, subsection 10.
   18e.  Beginning the first day of the calendar quarter
19beginning on the reinvestment district’s commencement date,
20subject to remittance limitations established by the economic
21development authority board pursuant to section 15J.4,
22subsection 3, transfer to a district account created in the
23state reinvestment district fund for each reinvestment district
24established under chapter 15J, the amount of new state sales
25tax revenue, determined in section 15J.5, subsection 1,
26paragraph “b”, in the district, that remains after the prior
27transfers required under this subsection 2. Such transfers
28shall cease pursuant to section 15J.8.
   29f.  Subject to the limitation on the calculation and
30deposit of sales tax increment revenues in section 418.12,
31beginning the first day of the quarter following adoption
32of the resolution pursuant to section 418.4, subsection 3,
33paragraph “d”, transfer to the account created in the sales tax
34increment fund for each governmental entity approved to use
35sales tax increment revenues under chapter 418, that portion
-47-1of the increase in sales tax revenue, determined in section
2418.11, subsection 2, paragraph “d”, in the applicable area of
3the governmental entity, that remains after the other transfers
4required under this subsection 2.
   5g.  Beginning the first day of the quarter following July
61, 2014, transfer to the raceway facility tax rebate fund
7created in section 423.4, subsection 11, paragraph “e”, that
8portion of the sales tax receipts collected and remitted upon
9sales of tangible personal property or services furnished by
10retailers at a raceway facility meeting the qualifications of
11section 423.4, subsection 11, that remains after the transfers
12required in paragraphs “a” through “f” of this subsection
132. This subparagraph is repealed June 30, 2025, or thirty
14days following the date on which an amount of total rebates
15specified in section 423.4, subsection 11, paragraph “c”,
16subparagraph (4), subparagraph division (a) or (b), whichever
17is applicable, has been provided or thirty days following the
18date on which rebates cease as provided in section 423.4,
19subsection 11, paragraph “c”, subparagraph (5), whichever is
20earliest.
   213.  Of the amount of sales tax revenue actually transferred
22per quarter pursuant to subsection 2, paragraphs “e” and “f”,
23the department shall retain an amount equal to the actual cost
24of administering the transfers under subsection 2, paragraphs
25“e” and “f”, or twenty-five thousand dollars, whichever is
26less. The amount retained by the department pursuant to this
27subsection shall be divided pro rata each quarter between
28the amounts that would have been transferred pursuant to
29subsection 2, paragraphs “e” and “f”, without the deduction
30made by operation of this subsection. Revenues retained by
31the department pursuant to this subsection shall be considered
32repayment receipts as defined in section 8.2.
33   Sec. 73.  Section 423.3, subsections 1 and 17, Code 2018, are
34amended to read as follows:
   351.  The sales price from sales of tangible personal property,
-48-1specified digital products,
and services furnished which this
2state is prohibited from taxing under the Constitution or laws
3of the United States or under the Constitution of this state.
   417.  The sales price of all goods, wares, or merchandise,
5
 tangible personal property, specified digital products, or
6services, used for educational purposes sold to any private
7nonprofit educational institution in this state. For the
8purpose of this subsection, “educational institution” means an
9institution which primarily functions as a school, college,
10or university with students, faculty, and an established
11curriculum. The faculty of an educational institution must be
12associated with the institution and the curriculum must include
13basic courses which are offered every year. “Educational
14institution”
includes an institution primarily functioning as
15a library.
16   Sec. 74.  Section 423.3, subsection 18, unnumbered paragraph
171, Code 2018, is amended to read as follows:
   18The sales price of tangible personal property or specified
19digital products
sold, or of services furnished, to the
20following nonprofit corporations:
21   Sec. 75.  Section 423.3, subsections 20, 21, 22, 23, 26, 27,
2228, and 31, Code 2018, are amended to read as follows:
   2320.  The sales price of tangible personal property or
24specified digital products
sold, or of services furnished, to
25nonprofit legal aid organizations.
   2621.  The sales price of goods, wares, or merchandise,
27
 tangible personal property, of specified digital products,
28 or of services, used for educational, scientific, historic
29preservation, or aesthetic purpose sold to a nonprofit private
30museum.
   3122.  The sales price from sales of goods, wares, or
32merchandise,
 tangible personal property, of specified digital
33products,
or from services furnished, to a nonprofit private
34art center to be used in the operation of the art center.
   3523.  The sales price of tangible personal property or
-49-1specified digital products
sold, or of services furnished, by a
2fair organized under chapter 174.
   326.  The sales price of tangible personal property or
4specified digital products
sold, or of services furnished, to a
5statewide nonprofit organ procurement organization, as defined
6in section 142C.2.
   727.  The sales price of tangible personal property or
8specified digital products
sold, or of services furnished, to a
9nonprofit hospital licensed pursuant to chapter 135B to be used
10in the operation of the hospital.
   1128.  The sales price of tangible personal property or
12specified digital products
sold, or of services furnished, to
13a freestanding nonprofit hospice facility which operates a
14hospice program as defined in 42 C.F.R. ch.IV, §418.3, which
15property or services are to be used in the hospice program.
   1631.  a.  The sales price of goods, wares, or merchandise
17
 tangible personal property or specified digital products sold
18to and of services furnished, and used for public purposes
19sold to a tax-certifying or tax-levying body of the state or
20a governmental subdivision of the state, including regional
21transit systems, as defined in section 324A.1, the state board
22of regents, department of human services, state department of
23transportation, any municipally owned solid waste facility
24which sells all or part of its processed waste as fuel to a
25municipally owned public utility, and all divisions, boards,
26commissions, agencies, or instrumentalities of state, federal,
27county, or municipal government which have no earnings going to
28the benefit of an equity investor or stockholder, except any
29of the following:
   30(1)  a.  The sales price of goods, wares, or merchandise
31
 tangible personal property or specified digital products sold
32to, or of services furnished, and used by or in connection with
33the operation of any municipally owned public utility engaged
34in selling gas, electricity, heat, pay television service, or
35communication service to the general public.
-50-
   1(2)    b.  The sales price of furnishing of sewage services to
2a county or municipality on behalf of nonresidential commercial
3operations.
   4(3)    c.  The furnishing of solid waste collection and
5disposal service to a county or municipality on behalf of
6nonresidential commercial operations located within the county
7or municipality.
   8b.  The exemption provided by this subsection shall also
9apply to all such sales of goods, wares, or merchandise or of
10services furnished and subject to use tax.
11   Sec. 76.  Section 423.3, subsection 32, unnumbered paragraph
121, Code 2018, is amended to read as follows:
   13The sales price of tangible personal property or specified
14digital products
sold, or of services furnished, by a county or
15city. This exemption does not apply to any of the following:
16   Sec. 77.  Section 423.3, subsection 36, unnumbered paragraph
171, Code 2018, is amended to read as follows:
   18The sales price from sales of tangible personal property
 19or specified digital products or of the sale or furnishing of
20electrical energy, natural or artificial gas, or communication
21service to another state or political subdivision of another
22state if the other state provides a similar reciprocal
23exemption for this state and political subdivision of this
24state.
25   Sec. 78.  Section 423.3, subsection 39, paragraph a,
26subparagraphs (1) and (2), Code 2018, are amended to read as
27follows:
   28(1)  Sales of tangible personal property or specified
29digital products
, or the furnishing of services, of a
30nonrecurring nature, by the owner, if the seller, at the time
31of the sale, is not engaged for profit in the business of
32selling tangible personal property, specified digital products,
33 or services taxed under section 423.2.
   34(2)  The sale of all or substantially all of the tangible
35personal property, or specified digital products, or services
-51-1held or used by a seller in the course of the seller’s trade or
2business for which the seller is required to hold a sales tax
3permit when the seller sells or otherwise transfers the trade
4or business to another person who shall engage in a similar
5trade or business.
6   Sec. 79.  Section 423.3, subsection 63, Code 2018, is amended
7to read as follows:
   863.  The sales price from the sale of tangible personal
9property, specified digital products, or services which will be
10given as prizes to players in games of skill, games of chance,
11raffles, and bingo games as defined in chapter 99B.
12   Sec. 80.  Section 423.3, subsections 65, 66, and 67, Code
132018, are amended by striking the subsections.
14   Sec. 81.  Section 423.3, subsection 78, paragraph a,
15unnumbered paragraph 1, Code 2018, is amended to read as
16follows:
   17The sales price from sales or rental the sale of tangible
18personal property, specified digital products, or services
19rendered by any entity where the profits from the sales or
20rental
 sale of the tangible personal property, specified
21digital products,
or services rendered, are used by or donated
22to a nonprofit entity that is exempt from federal income
23taxation pursuant to section 501(c)(3) of the Internal Revenue
24Code, a government entity, or a nonprofit private educational
25institution, and where the entire proceeds from the sales,
26rental,
 sale or services are expended for any of the following
27purposes:
28   Sec. 82.  Section 423.3, subsection 79, Code 2018, is amended
29to read as follows:
   3079.  The sales price from the sale or rental of tangible
31personal property or specified digital products, or from
32services furnished, to a recognized community action agency as
33provided in section 216A.93 to be used for the purposes of the
34agency.
35   Sec. 83.  Section 423.3, Code 2018, is amended by adding the
-52-1following new subsections:
2   NEW SUBSECTION.  103.  a.  The sales price of specified
3digital products sold, and of enumerated services described in
4section 423.2, subsection 6, paragraphs “bq”, “br”, “bs”, and
5“bu” furnished, to a commercial enterprise for use exclusively
6by the commercial enterprise. The use of a specified digital
7product or service fails to qualify as a use exclusively by the
8commercial enterprise if its use for noncommercial purposes is
9more than de minimis.
   10b.  For purposes of this subsection:
   11(1)  “Commercial enterprise” means the same as defined in
12section 423.3, subsection 47, paragraph “d”, subparagraph (1).
   13(2)  “De minimis” and “noncommercial purposes” shall be
14defined by the director by rule.
15   NEW SUBSECTION.  104.  The sales price of specified digital
16products sold to a non-end user. For purposes of this
17subsection, “non-end user” means a person who receives by
18contract a specified digital product for further commercial
19broadcast, rebroadcast, transmission, retransmission,
20licensing, relicensing, distribution, redistribution, or
21exhibition of the product, in whole or in part, to another
22person.
23   Sec. 84.  Section 423.4, subsection 3, unnumbered paragraph
241, Code 2018, is amended to read as follows:
   25A relief agency may apply to the director for refund of the
26amount of sales or use tax imposed and paid upon sales to it
27of any goods, wares, merchandise, tangible personal property
28or specified digital products,
or services furnished, used for
29free distribution to the poor and needy.
30   Sec. 85.  Section 423.4, subsection 3, paragraph a,
31subparagraph (1), Code 2018, is amended to read as follows:
   32(1)  On forms furnished by the department, and filed within
33the time as the director shall provide by rule, the relief
34agency shall report to the department the total amount or
35amounts, valued in money, expended directly or indirectly
-53-1for goods, wares, merchandise, tangible personal property or
2specified digital products,
or services furnished, used for
3free distribution to the poor and needy.
4   Sec. 86.  Section 423.4, subsection 10, paragraph e, Code
52018, is amended to read as follows:
   6e.  There is established within the state treasury under the
7control of the department a baseball and softball complex sales
8tax rebate fund consisting of the amount of state sales tax
9revenues transferred pursuant to section 423.2, subsection 11,
10paragraph “b”, subparagraph (4)
 423.2A, subsection 2, paragraph
11“d”
. An account is created within the fund for each baseball
12and softball complex receiving an award under section 15F.207
13and meeting the qualifications of this subsection. Moneys
14in the fund shall only be used to provide rebates of state
15sales tax pursuant to this subsection, and only the state sales
16tax revenues in the baseball and softball complex rebate fund
17are subject to rebate under this subsection. The amount of
18rebates paid from each baseball and softball complex’s account
19within the fund shall not exceed the amount of the award under
20section 15F.207, and not more than five million dollars in
21total rebates shall be paid from the fund. Any moneys in the
22fund which represent state sales tax revenue for which the time
23period in paragraph “c” for receiving a rebate has expired,
24or which otherwise represent state sales tax revenue that has
25become ineligible for rebate pursuant to this subsection, shall
26immediately revert to the general fund of this state.
27   Sec. 87.  Section 423.4, subsection 11, paragraph b,
28subparagraph (1), Code 2018, is amended to read as follows:
   29(1)  Sales tax imposed and collected by retailers upon
30sales of tangible personal property or services furnished to
31purchasers at the raceway facility. Notwithstanding the state
32sales tax imposed in section 423.2, a sales tax rebate issued
33pursuant to this subparagraph shall not exceed the amounts
34transferred to the raceway facility tax rebate fund pursuant to
35section 423.2, subsection 11, paragraph “b”, subparagraph (7)
-54-1
 423.2A, subsection 2, paragraph “g”.
2   Sec. 88.  Section 423.4, subsection 11, paragraph b,
3subparagraph (2), subparagraph division (c), Code 2018, is
4amended to read as follows:
   5(c)  Notwithstanding the state sales tax imposed in section
6423.2, a sales tax rebate issued pursuant to this subparagraph
7shall not exceed the amounts remaining after the transfers
8required under section 423.2, subsection 11, paragraph “b”,
9subparagraphs (1) through (6)
 423.2A, subsection 2, paragraphs
10“a” through “f”
, have been made from the total amount of sales
11tax for which the rebate is requested.
12   Sec. 89.  Section 423.4, subsection 11, paragraph e, Code
132018, is amended to read as follows:
   14e.  There is established within the state treasury under
15the control of the department a raceway facility tax rebate
16fund consisting of the amount of state sales tax revenues
17transferred pursuant to section 423.2, subsection 11, paragraph
18“b”, subparagraph (7)
 423.2A, subsection 2, paragraph “g”. An
19account is created within the fund for each raceway facility
20meeting the qualifications of this subsection. Moneys in the
21fund shall only be used to provide rebates of state sales tax
22pursuant to paragraph “b”, subparagraph (1). The total amount
23of rebates paid from the fund shall not exceed the amount
24specified in paragraph “c”, subparagraph (4), subparagraph
25division (a) or (b), whichever is applicable. Any moneys in
26the fund which represent state sales tax revenue for which the
27time period in paragraph “c” for receiving a rebate has expired,
28or which otherwise represent state sales tax revenue that has
29become ineligible for rebate pursuant to this subsection shall
30immediately revert to the general fund of the state.
31   Sec. 90.  Section 423.5, subsection 1, paragraph a, Code
322018, is amended to read as follows:
   33a.  The use in this state of tangible personal property
34as defined in section 423.1, including aircraft subject to
35registration under section 328.20, purchased for use in this
-55-1state. For the purposes of this subchapter, the furnishing
2or use of the following services is also treated as the use
3of tangible personal property: optional service or warranty
4contracts, except residential service contracts regulated under
5chapter 523C, vulcanizing, recapping, or retreading services,
6engraving, photography, retouching, printing, or binding
7services, and communication service when furnished or delivered
8to consumers or users within this state.
9   Sec. 91.  Section 423.5, subsection 1, paragraph d, Code
102018, is amended to read as follows:
   11d.  Purchases of tangible personal property or specified
12digital products
made from the government of the United States
13or any of its agencies by ultimate consumers shall be subject
14to the tax imposed by this section. Services purchased from
15the same source or sources shall be subject to the service
16tax imposed by this subchapter and apply to the user of the
17services.
18   Sec. 92.  Section 423.5, subsection 1, Code 2018, is amended
19by adding the following new paragraph:
20   NEW PARAGRAPH.  f.  (1)  The use in this state of specified
21digital products. The tax applies whether the purchaser
22obtains permanent use or less than permanent use of the
23specified digital product, whether the use is conditioned or
24not conditioned upon continued payment from the purchaser,
25and whether the use is on a subscription basis or is not on a
26subscription basis.
   27(2)  The use of a digital code that may be used to obtain
28or access a specified digital product shall be taxed in the
29same manner as the specified digital product. For purposes of
30this subparagraph, “digital code” means the same as defined in
31section 423.2, subsection 9A.
32   Sec. 93.  Section 423.5, subsection 3, Code 2018, is amended
33to read as follows:
   343.  For the purpose of the proper administration of the use
35tax and to prevent its evasion, evidence that tangible personal
-56-1property was or specified digital products were sold by any
2person for delivery in this state shall be prima facie evidence
3that such tangible personal property was or specified digital
4products were
sold for use in this state.
5   Sec. 94.  Section 423.5, subsection 4, Code 2018, is amended
6by striking the subsection.
7   Sec. 95.  Section 423.6, unnumbered paragraph 1, Code 2018,
8is amended to read as follows:
   9The use in this state of the following tangible personal
10property, specified digital products, and services is exempted
11from the tax imposed by this subchapter:
12   Sec. 96.  Section 423.6, subsections 1, 2, 4, and 6, Code
132018, are amended to read as follows:
   141.  Tangible personal property, specified digital products,
15 and enumerated services, the sales price from the sale of which
16are required to be included in the measure of the sales tax, if
17that tax has been paid to the department or the retailer. This
18exemption does not include vehicles subject to registration or
19subject only to the issuance of a certificate of title.
   202.  The sale of tangible personal property, specified
21digital products,
or the furnishing of services in the regular
22course of business.
   234.  All articles of tangible personal property and all
24specified digital products
brought into the state of Iowa by a
25nonresident individual for the individual’s use or enjoyment
26while within the state.
   276.  Tangible personal property, specified digital products,
28 or services the sales price of which is exempt from the sales
29tax under section 423.3, except section 423.3, subsections 39
30and 73, as it relates to the sale, but not the lease or rental,
31of vehicles subject only to the issuance of a certificate of
32title and as it relates to aircraft subject to registration
33under section 328.20.
34   Sec. 97.  Section 423.14, subsection 2, paragraphs b and c,
35Code 2018, are amended to read as follows:
-57-   1b.  The tax upon the use of all tangible personal property
 2and specified digital products other than that enumerated in
3paragraph “a”, which is sold by a seller who is a retailer
4maintaining a place of business in this state, or by such other
5retailer or agent as the director shall authorize pursuant to
6section 423.30
 or its agent that is not otherwise required
7to collect sales tax under the provisions of this chapter
,
8shall be collected by the retailer or agent and remitted to the
9department, pursuant to the provisions of paragraph “e”, and
10sections 423.24, 423.29, 423.30, 423.32, and 423.33.
   11c.  The tax upon the use of all tangible personal property
 12and specified digital products not paid pursuant to paragraphs
13“a” and “b” shall be paid to the department directly by any
14person using the property within this state, pursuant to the
15provisions of section 423.34.
16   Sec. 98.  NEW SECTION.  423.14A  Persons required to collect
17sales and use tax — supplemental conditions, requirements, and
18responsibilities.
   191.  For purposes of this section, “Iowa sales” means sales
20of tangible personal property, services, or specified digital
21products sourced to this state pursuant to section 423.15,
22423.16, 423.17, 423.19, or 423.20, or that are otherwise sold
23in this state or for delivery into this state.
   242.  In addition to and not in lieu of any application of
25this chapter to sellers who are retailers and sellers who are
26retailers maintaining a place of business in this state, any
27person described in subsection 3, or the person’s agents,
28shall be considered a retailer in this state and a retailer
29maintaining a place of business in this state for purposes of
30this chapter on or after January 1, 2019, and shall be subject
31to all requirements of this chapter imposed on retailers and
32retailers maintaining a place of business in this state,
33including but not limited to the requirement to collect and
34remit sales and use taxes pursuant to sections 423.14 and
35423.29, and local option taxes under chapter 423B.
-58-
   13.  a.  A retailer that has gross revenue from Iowa sales
2equal to or exceeding one hundred thousand dollars for the
3immediately preceding calendar year or the current calendar
4year.
   5b.  A retailer that makes Iowa sales in two hundred or more
6separate transactions for the immediately preceding calendar
7year or the current calendar year.
   8c.  (1)  A retailer that owns, licenses, or uses software
9or data files that are installed or stored on property used
10in this state. For purposes of this subparagraph, “software
11or data files”
include but are not limited to software that is
12affirmatively downloaded by a user, software that is downloaded
13as a result of the use of a website, preloaded software, and
14cookies.
   15(2)  A retailer that uses in-state software to make Iowa
16sales. For purposes of this subparagraph, “in-state software”
17means computer software that is stored on property located in
18this state or that is distributed within this state for the
19purpose of facilitating a sale by the retailer.
   20(3)  A retailer that provides, or enters into an agreement
21with another person to provide, a content distribution network
22in this state to facilitate, accelerate, or enhance the
23delivery of the retailer’s internet site to purchasers. For
24purposes of this subparagraph, “content distribution network”
25means a system of distributed servers that deliver internet
26sites and other internet content to a user based on the
27geographic location of the user, the origin of the internet
28site or internet content, and a content delivery server.
   29(4)  This paragraph “c” shall not apply to a retailer that
30has gross revenue from Iowa sales of less than one hundred
31thousand dollars for the immediately preceding calendar year
32or the current calendar year.
   33d.  (1)  A retailer that makes Iowa sales through a
34marketplace provider. This subparagraph shall not apply to a
35retailer that has gross revenue from Iowa sales of less than
-59-1ten thousand dollars for the immediately preceding calendar
2year or the current calendar year.
   3(2)  A marketplace provider that makes or facilitates Iowa
4sales for one or more retailers equal to or exceeding one
5hundred thousand dollars, or in two hundred or more separate
6transactions, for the immediately preceding calendar year or
7the current calendar year.
   8(3)  Retailers and marketplace providers subject to this
9paragraph may enter into agreements regarding the fulfillment
10of the requirements of this chapter.
   11(4)  A marketplace provider shall collect sales and use tax
12on the entire sales price or purchase price paid by a purchaser
13on each Iowa sale made or facilitated by the marketplace
14provider that is subject to sales and use tax, regardless of
15the amount of the sales price or purchase price that will
16ultimately accrue to or benefit the marketplace provider,
17another retailer, or any other person. This sales and use tax
18collection responsibility of a marketplace provider applies but
19shall not be limited to sales facilitated through a computer
20software application, commonly referred to as in-app purchases,
21or through a specified digital product.
   22(5)  If a retail sale subject to the sales and use tax
23involves both a marketplace provider and another retailer
24that is required to collect and remit sales and use tax,
25the marketplace provider and any other retailer involved in
26the transaction shall be jointly and severally liable for
27collecting and remitting sales and use tax under this chapter.
   28(6)  (a)  For purposes of this paragraph, “marketplace
29provider”
means a person who facilitates a retail sale by
30satisfying subparagraph divisions (i) and (ii) as follows:
   31(i)  The person directly or indirectly does any of the
32following:
   33(A)  Lists, makes available, or advertises tangible personal
34property, services, or specified digital products for sale by a
35retailer in any forum.
-60-
   1(B)  Transmits or otherwise communicates an offer or
2acceptance of a retail sale of tangible personal property,
3services, or specified digital products between a retailer and
4a purchaser.
   5(C)  Owns, rents, licenses, makes available, or operates
6any electronic or physical infrastructure or any property,
7process, method, copyright, trademark, or patent that connects
8retailers to purchasers for the purpose of making retail sales
9of tangible personal property, services, or specified digital
10products.
   11(D)  Provides a platform or other marketplace for making
12retail sales of tangible personal property, services, or
13specified digital products, or otherwise facilitates retail
14sales of tangible personal property, services, or specified
15digital products, regardless of ownership or control of the
16tangible personal property, services, or specified digital
17products that are the subject of the retail sale.
   18(E)  Provides software development or research and
19development activities related to any activity described in
20this subparagraph subdivision (i), if such software development
21or research and development activities are directly related
22to the physical or electronic marketplace provided by a
23marketplace provider.
   24(F)  Provides or offers fulfillment or storage services for
25a retailer.
   26(G)  Sets prices for a retailer’s sale of tangible personal
27property, services, or specified digital products.
   28(H)  Provides or offers customer service to a retailer or
29a retailer’s customers, or accepts or assists with returns or
30exchanges of tangible personal property, services, or specified
31digital products sold by a retailer.
   32(ii)  The person directly or indirectly does any of the
33following:
   34(A)  Collects the sales price or purchase price of a retail
35sale of tangible personal property, services, or specified
-61-1digital products.
   2(B)  Provides payment processing services for a retail sale
3of tangible personal property, services, or specified digital
4products.
   5(C)  Charges, collects, or otherwise receives selling
6fees, listing fees, referral fees, closing fees, fees for
7inserting or making available tangible personal property,
8services, or specified digital products on a marketplace, or
9other consideration from the facilitation of a retail sale of
10tangible personal property, services, or specified digital
11products, regardless of ownership or control of the tangible
12personal property, services, or specified digital products that
13are the subject of the retail sale.
   14(D)  Through terms and conditions, agreements, or
15arrangements with a third party, collects payment in connection
16with a retail sale of tangible personal property, services,
17or specified digital products from a purchaser and transmits
18that payment to the retailer, regardless of whether the person
19collecting and transmitting such payment receives compensation
20or other consideration in exchange for the service.
   21(E)  Provides a virtual currency that purchasers are allowed
22or required to use to purchase tangible personal property,
23services, or specified digital products.
   24(b)  For purposes of this paragraph, “marketplace provider”
25includes but is not limited to a digital distribution service,
26digital distribution platform, online portal, or an application
27store.
   28e.  (1)  A retailer that makes Iowa sales through the use of
29a solicitor. For purposes of this paragraph, “solicitor” means
30a person that directly or indirectly solicits business for a
31retailer.
   32(2)  (a)  A retailer is deemed to have a solicitor in
33this state if the retailer enters into an agreement with a
34resident under which the resident, for a commission, fee, or
35other similar consideration, directly or indirectly refers
-62-1potential customers, whether by link on an internet site,
2or otherwise, to the retailer. This determination may be
3rebutted by a showing of proof that the resident with whom the
4retailer has an agreement did not engage in any solicitation
5in this state on behalf of the retailer that would satisfy the
6nexus requirement of the United States Constitution during the
7calendar year in question.
   8(b)  This subparagraph (2) shall not apply to a retailer that
9has Iowa gross revenue from Iowa sales of ten thousand dollars
10or less for the immediately preceding calendar year or the
11current calendar year.
   12(c)  For purposes of this subparagraph (2):
   13(i)  “Iowa gross revenue” means gross revenue from Iowa
14sales to purchasers who were referred to the retailer by all
15solicitors who are residents.
   16(ii)  “Resident” includes an individual who is a resident
17of this state, as defined in section 422.4, and any business
18that owns any tangible or intangible property with a situs in
19this state, or that has one or more employees performing or
20providing services for the business in this state.
   21(d)  This paragraph “e” does not apply to chapter 422 and
22does not expand or contract the state’s jurisdiction to tax a
23trade or business under chapter 422.
   24f.  A retailer that owns, controls, rents, licenses, makes
25available, or uses any tangible or intangible property in this
26state or with a situs in this state, to make or otherwise
27facilitate a retail sale.
   28g.  (1)  Any person that enters into a contract or agreement
29with a governmental entity, including but not limited to
30contracts for the provision of financial assistance or
31incentives such as a tax credit, forgivable loan, grant, tax
32rebate, or any other thing of value. For purposes of this
33subparagraph, “governmental entity” means any unit of government
34in the executive, legislative, or judicial branch, or any
35political subdivision of the state, including but not limited
-63-1to a city, county, township, or school district.
   2(2)  Every bid submitted and each contract or agreement
3executed by a state agency shall contain a certification by
4the bidder or contractor stating that the bidder or contractor
5is registered with the department pursuant to this chapter
6and will collect and remit Iowa sales and use tax due under
7this chapter. In the certification, the bidder or contractor
8shall also acknowledge that the state agency may declare the
9contractor or bid void if the certification is false or becomes
10false. Fraudulent certification, by act or omission, may
11result in the state agency or its representative filing for
12damages for breach of contract.
   13h.  Any affiliate of any retailer that is required to collect
14and remit sales and use tax under this chapter, provided the
15affiliate makes retail sales.
16   Sec. 99.  Section 423.15, unnumbered paragraph 1, Code 2018,
17is amended to read as follows:
   18All sales of products tangible personal property, services,
19or specified digital products
, except those sales enumerated
20in section 423.16, shall be sourced according to this section
21by sellers obligated to collect Iowa sales and use tax. The
22sourcing rules described in this section apply to sales of
23tangible personal property, specified digital goods products,
24and all services other than telecommunications services. This
25section only applies to determine a seller’s obligation to pay
26or collect and remit a Iowa sales or use tax with respect to
27the seller’s sale of a product. This section does not affect
28the obligation of a purchaser or lessee to remit tax on the use
29of the product to the taxing jurisdictions in which the use
30occurs. A seller’s obligation to collect Iowa sales tax or
31Iowa use tax only occurs if the sale is sourced to this state.
32Whether Iowa sales tax applies to a sale sourced to Iowa shall
33be determined based on the location at which the sale is
34consummated by delivery or, in the case of a service, where the
35first use of the service occurs
 made by a seller subject to
-64-1section 423.1, subsection 48, or section 423.14A
.
2   Sec. 100.  Section 423.15, subsection 1, paragraph e, Code
32018, is amended to read as follows:
   4e.  When paragraphs “a”, “b”, “c”, and “d” do not apply,
5including the circumstance where the seller is without
6sufficient information to apply the previous rules, then the
7location will be determined by the address from which tangible
8personal property was shipped, from which the specified digital
9good product or the computer software delivered electronically
10was first available for transmission by the seller, or from
11which the service was provided disregarding for these purposes
12any location that merely provided the digital transfer of the
13product sold.
14   Sec. 101.  Section 423.22, Code 2018, is amended to read as
15follows:
   16423.22  Taxation in another state.
   17If any person who causes tangible personal property or
18specified digital products
to be brought into this state or
19who uses in this state services enumerated in section 423.2
20has already paid a tax in another state in respect to the sale
21or use of the property or the performance of the service, or
22an occupation tax in respect to the property or service, in
23an amount less than the tax imposed by subchapter II or III,
24the provisions of those subchapters shall apply, but at a rate
25measured by the difference only between the rate fixed by
26subchapter II or III and the rate by which the previous tax on
27the sale or use, or the occupation tax, was computed. If the
28tax imposed and paid in the other state is equal to or more than
29the tax imposed by those subchapters, then a tax is not due in
30this state on the personal property or service.
31   Sec. 102.  Section 423.29, subsection 1, Code 2018, is
32amended to read as follows:
   331.  Every seller who is a retailer and who is making taxable
34sales of tangible personal property or specified digital
35products
in Iowa shall, at the time of selling the property
-65-1
 making the sale, collect the sales tax. Every seller who
2is a retailer maintaining a place of business in this state
3
 that is not otherwise required to collect sales tax under the
4provisions of this chapter
and who is selling tangible personal
5property or specified digital products for use in Iowa shall,
6at the time of making the sale, whether within or without the
7state, collect the use tax. Sellers required to collect sales
8or use tax shall give to any purchaser a receipt for the tax
9collected in the manner and form prescribed by the director.
10   Sec. 103.  Section 423.30, subsection 1, Code 2018, is
11amended to read as follows:
   121.  The director may, upon application, authorize the
13collection of the use tax by any seller who is a retailer not
14maintaining a place of business within this state and not
15registered under the agreement, who, to the satisfaction of
16the director, furnishes adequate security to ensure collection
17and payment of the tax. Such sellers shall be issued, without
18charge, permits to collect tax subject to any regulations
19which the director shall prescribe. When so authorized, it
20shall be the duty of foreign sellers to collect the tax upon
21all tangible personal property and specified digital products
22 sold, to the retailer’s knowledge, for use within this state,
23in the same manner and subject to the same requirements as a
24retailer maintaining a place of business within this state.
25The authority and permit may be canceled when, at any time, the
26director considers the security inadequate, or that tax can
27more effectively be collected from the person using property
28in this state.
29   Sec. 104.  Section 423.31, subsection 1, Code 2018, is
30amended to read as follows:
   311.  Each person subject to this section and section 423.36
32and in accordance with the provisions of this section and
33section 423.36 shall, on or before the last day of the month
34following the close of each calendar quarter during which
35such person is or has become or ceased being subject to the
-66-1provisions of this section and section 423.36, make, sign, and
2file a return for the calendar quarter in the form as may be
3required. Returns shall show information relating to sales
4prices including goods, wares, tangible personal property,
5specified digital products,
and services converted to the
6use of such person, the amounts of sales prices excluded and
7exempt from the tax, the amounts of sales prices subject to
8tax, a calculation of tax due, and any other information for
9the period covered by the return as may be required. Returns
10shall be signed by the retailer or the retailer’s authorized
11agent and must be certified by the retailer to be correct in
12accordance with forms and rules prescribed by the director.
13   Sec. 105.  Section 423.31, subsection 5, paragraph a, Code
142018, is amended to read as follows:
   15a.  Upon making application and receiving approval from
16the director, a parent corporation person and its affiliated
17corporations
 affiliates that make retail sales of tangible
18personal property, specified digital products, or taxable
19enumerated services may make deposits and file a consolidated
20sales tax return for the affiliated group, pursuant to rules
21adopted by the director. A parent corporation person and each
22affiliate corporation that files a consolidated return are
23jointly and severally liable for all tax, penalty, and interest
24found due for the tax period for which a consolidated return is
25filed or required to be filed.
26   Sec. 106.  Section 423.32, subsection 1, paragraph b, Code
272018, is amended to read as follows:
   28b.  The deposit form is due on or before the twentieth day of
29the month following the month of collection, except a deposit
30is not required for the third month of the calendar quarter,
31and the total quarterly amount, less the amounts deposited for
32the first two months of the quarter, is due with the quarterly
33report on the last day of the month following the month of
34collection. At that time, the retailer shall file with the
35department a return for the preceding quarterly period in the
-67-1form prescribed by the director showing the purchase price of
2the tangible personal property, specified digital products, and
3services
sold by the retailer during the preceding quarterly
4period, the use of which is subject to the use tax imposed
5by this chapter, and other information the director deems
6necessary for the proper administration of the use tax.
7   Sec. 107.  Section 423.33, subsection 3, Code 2018, is
8amended to read as follows:
   93.  Event sponsor’s liability for sales tax.  A person
10sponsoring a flea market or a craft, antique, coin, or stamp
11show or similar event shall obtain from every retailer selling
12tangible personal property, specified digital products,
13 or taxable services at the event proof that the retailer
14possesses a valid sales tax permit or secure from the retailer
15a statement, taken in good faith, that tangible personal
16 property, specified digital products, or services offered for
17sale are not subject to sales tax. Failure to do so renders
18a sponsor of the event liable for payment of any sales tax,
19interest, and penalty due and owing from any retailer selling
20property or services at the event. Sections 423.31, 423.32,
21423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 apply to the
22sponsors. For purposes of this subsection, a “person sponsoring
23a flea market or a craft, antique, coin, or stamp show or similar
24event”
does not include an organization which sponsors an
25event determined to qualify as an event involving casual sales
26pursuant to section 423.3, subsection 39, or the state fair or
27a fair as defined in section 174.1.
28   Sec. 108.  Section 423.33, Code 2018, is amended by adding
29the following new subsection:
30   NEW SUBSECTION.  4.  Liability of affiliates.
   31a.  Notwithstanding any other provision of law to the
32contrary, if any retailer required to collect and remit sales
33and use tax pursuant to sections 423.14, 423.14A, and 423.29,
34or any other provision of this chapter, fails to do so, all
35affiliates that directly, indirectly, or constructively control
-68-1the retailer shall be jointly and severally liable for any tax,
2penalty, and interest under this chapter, regardless of whether
3the affiliate is a retailer.
   4b.  Pursuant to paragraph “a”, the department may elect
5to assess the full amount of any tax, penalty, and interest
6against the retailer, an affiliate of the retailer described
7in paragraph “a”, or any combination of the retailer and the
8retailer’s affiliates described in paragraph “a”.
   9c.  Notwithstanding any other provision of law to the
10contrary, the department has the discretion to deem an
11affiliate of a retailer an agent or alter ego of that retailer.
   12d.  Notwithstanding any other provision of law to the
13contrary, the department has the discretion to disregard or
14look through any organizational structure of an enterprise in
15order to assess and collect any tax, penalty, and interest
16against an affiliate that is acting to benefit an affiliate or
17an enterprise of which the affiliate is a part.
18   Sec. 109.  Section 423.34, Code 2018, is amended to read as
19follows:
   20423.34  Liability of user.
   21Any person who uses any tangible personal property,
22specified digital products,
or services enumerated in section
23423.2 upon which the use tax has not been paid, either to the
24county treasurer or to a retailer or direct to the department
25as required by this subchapter, shall be liable for the payment
26of tax, and shall on or before the last day of the month next
27succeeding each quarterly period pay the use tax upon all
28property or services used by the person during the preceding
29quarterly period in the manner and accompanied by such returns
30as the director shall prescribe. All of the provisions of
31sections 423.32 and 423.33 with reference to the returns and
32payments shall be applicable to the returns and payments
33required by this section.
34   Sec. 110.  Section 423.36, subsection 1, Code 2018, is
35amended to read as follows:
-69-   11.  A person shall not engage in or transact business as a
2retailer making taxable sales of tangible personal property,
3specified digital products,
or furnishing services within
4this state or as a retailer making taxable sales of tangible
5personal property, specified digital products, or furnishing
6services for use within this state, unless a permit has been
7issued to the retailer under this section, except as provided
8in subsection 7. Every person desiring to engage in or
9transact business as a retailer shall file with the department
10an application for a permit to collect sales or use tax. Every
11application for a sales or use tax permit shall be made upon
12a form prescribed by the director and shall set forth any
13information the director may require. The application shall
14be signed by an owner of the business if a natural person; in
15the case of a retailer which is an association or partnership,
16by a member or partner; and in the case of a retailer which
17is a corporation, by an executive officer or some person
18specifically authorized by the corporation to sign the
19application, to which shall be attached the written evidence of
20the person’s authority.
21   Sec. 111.  Section 423.36, subsection 2, paragraph a, Code
222018, is amended to read as follows:
   23a.  Notwithstanding subsection 1, if any person will make
24taxable sales of tangible personal property, specified digital
25products,
or furnish services to any state agency, that person
26shall, prior to the sale, apply for and receive a permit to
27collect sales or use tax pursuant to this section. A state
28agency shall not purchase tangible personal property, specified
29digital products,
or services from any person unless that
30person has a valid, unexpired permit issued pursuant to this
31section and is in compliance with all other requirements in
32this chapter imposed upon retailers, including but not limited
33to the requirement to collect and remit sales and use tax and
34file sales and use tax returns.
35   Sec. 112.  Section 423.36, subsection 7, paragraph b, Code
-70-12018, is amended to read as follows:
   2b.  Persons engaged in selling tangible personal property,
3specified digital products,
or furnishing services shall not be
4required to obtain or retain a sales tax permit for a place of
5business at which taxable sales of tangible personal property,
6specified digital products,
or taxable performance of services
7will not occur.
8   Sec. 113.  Section 423.36, subsection 9, paragraph a, Code
92018, is amended to read as follows:
   10a.  Except as provided in paragraph “b”, purchasers, users,
11and consumers of tangible personal property, specified digital
12products,
or enumerated services taxed pursuant to subchapter
13II or III of this chapter or chapter 423B may be authorized,
14pursuant to rules adopted by the director, to remit tax owed
15directly to the department instead of the tax being collected
16and paid by the seller. To qualify for a direct pay tax permit,
17the purchaser, user, or consumer must accrue a tax liability
18of more than four thousand dollars in tax under subchapters
19II and III in a semimonthly period and make deposits and file
20returns pursuant to section 423.31. This authority shall not
21be granted or exercised except upon application to the director
22and then only after issuance by the director of a direct pay
23tax permit.
24   Sec. 114.  Section 423.40, subsection 2, Code 2018, is
25amended to read as follows:
   262.  a.  Any person who knowingly sells tangible personal
27property, specified digital products, tickets or admissions
28to places of amusement and athletic events, or gas, water,
29electricity, or communication service at retail, or engages in
30the furnishing of services enumerated in section 423.2, in this
31state without procuring a permit to collect tax, as provided
32in section 423.36, or who violates section 423.24 and the
33officers of any corporation who so act are guilty of a serious
34misdemeanor.
   35b.  A person who knowingly sells tangible personal property,
-71- 1specified digital products, tickets or admissions to places of
2amusement and athletic events, or gas, water, electricity, or
3communication service at retail, or engages in the furnishing
4of services enumerated in section 423.2, in this state after
5the person’s sales tax permit has been revoked and before it
6has been restored as provided in section 423.36, subsection 6,
7and the officers of any corporation who so act are guilty of an
8aggravated misdemeanor.
9   Sec. 115.  Section 423.41, Code 2018, is amended to read as
10follows:
   11423.41  Books — examination.
   12Every retailer required or authorized to collect taxes
13imposed by this chapter and every person using in this state
14tangible personal property, specified digital products,
15 services, or the product of services shall keep records,
16receipts, invoices, and other pertinent papers as the director
17shall require, in the form that the director shall require,
18for as long as the director has the authority to examine and
19determine tax due. The director or any duly authorized agent
20of the department may examine the books, papers, records,
21and equipment of any person either selling tangible personal
22property, specified digital products, or services or liable
23for the tax imposed by this chapter, and investigate the
24character of the business of any person in order to verify
25the accuracy of any return made, or if a return was not made
26by the person, ascertain and determine the amount due under
27this chapter. These books, papers, and records shall be made
28available within this state for examination upon reasonable
29notice when the director deems it advisable and so orders. If
30the taxpayer maintains any records in an electronic format,
31the taxpayer shall comply with reasonable requests by the
32director or the director’s authorized agents to provide those
33electronic records in a standard record format. The preceding
34requirements shall likewise apply to users and persons
35furnishing services enumerated in section 423.2.
-72-
1   Sec. 116.  Section 423.45, subsection 4, paragraphs a, b, and
2e, Code 2018, are amended to read as follows:
   3a.  The department shall issue or the seller may separately
4provide exemption certificates in the form prescribed by the
5director, including certificates not made of paper, which
6conform to the requirements of paragraph “c”, to assist
7retailers in properly accounting for nontaxable sales of
8tangible personal property, specified digital products,
9 or services to purchasers for a nontaxable purpose. The
10department shall also allow the use of exemption certificates
11for those circumstances in which a sale is taxable but the
12seller is not obligated to collect tax from the buyer.
   13b.  The sales tax liability for all sales of tangible
14personal property and specified digital products and all sales
15of services is upon the seller and the purchaser unless the
16seller takes from the purchaser a valid exemption certificate
17stating under penalty of perjury that the purchase is for a
18nontaxable purpose and is not a retail sale as defined in
19section 423.1, or the seller is not obligated to collect tax
20due, or unless the seller takes a fuel exemption certificate
21pursuant to subsection 5. If the tangible personal property,
22specified digital products,
or services are purchased tax free
23pursuant to a valid exemption certificate and the tangible
24personal property, specified digital products, or services are
25used or disposed of by the purchaser in a nonexempt manner, the
26purchaser is solely liable for the taxes and shall remit the
27taxes directly to the department and sections 423.31, 423.32,
28423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 shall apply
29to the purchaser.
   30e.  If the circumstances change and as a result the tangible
31personal property, specified digital products, or services are
32used or disposed of by the purchaser in a nonexempt manner or
33the purchaser becomes obligated to pay the tax, the purchaser
34is liable solely for the taxes and shall remit the taxes
35directly to the department in accordance with this subsection.
-73-
1   Sec. 117.  Section 423.57, Code 2018, is amended to read as
2follows:
   3423.57  Statutes applicable.
   4The director shall administer this subchapter as it relates
5to the taxes imposed in this chapter in the same manner and
6subject to all the provisions of, and all of the powers,
7duties, authority, and restrictions contained in sections
8423.14, 423.14A, 423.15, 423.16, 423.17, 423.19, 423.20,
9423.21, 423.22, 423.23, 423.24, 423.25, 423.29, 423.31, 423.32,
10423.33, 423.34, 423.34A, 423.35, 423.37, 423.38, 423.39,
11423.40, 423.41, and 423.42, section 423.43, subsection 1, and
12sections 423.45, 423.46, and 423.47.
13   Sec. 118.  Section 423.58, Code 2018, is amended to read as
14follows:
   15423.58  Collection, permit, and tax return exemption for
16certain out-of-state businesses.
   17Notwithstanding sections 423.14, 423.14A, 423.29, 423.31,
18423.32, and 423.36, a person meeting the requirements of
19section 29C.24 is not required to obtain a sales or use tax
20permit, collect and remit sales and use tax, or make and file
21applicable sales or use tax returns, as provided in section
2229C.24, subsection 3, paragraph “a”, subparagraph (2).
23   Sec. 119.  Section 423B.5, subsection 1, Code 2018, is
24amended to read as follows:
   251.  A local sales and services tax at the rate of not more
26than one percent may be imposed by a county on the sales price
27taxed by the state under chapter 423, subchapter II. A local
28sales and services tax shall be imposed on the same basis as
29the state sales and services tax or in the case of the use of
30natural gas, natural gas service, electricity, or electric
31service on the same basis as the state use tax and shall not
32be imposed on the sale of any property or on any service not
33taxed by the state, except the tax shall not be imposed on
34the sales price from the sale of motor fuel or special fuel
35as defined in chapter 452A which is consumed for highway use
-74-1or in watercraft or aircraft if the fuel tax is paid on the
2transaction and a refund has not or will not be allowed,
3on the sales price from the sale of equipment by the state
4department of transportation, or on the sales price from the
5sale or use of natural gas, natural gas service, electricity,
6or electric service in a city or county where the sales price
7from the sale of natural gas or electric energy is subject to
8a franchise fee or user fee during the period the franchise
9or user fee is imposed. A local sales and services tax is
10applicable to transactions within those incorporated and
11unincorporated areas of the county where it is imposed and,
12which transactions include but are not limited to sales sourced
13pursuant to sections 423.15, 423.17, 423.19, or 423.20, to a
14location within that incorporated or unincorporated area of the
15county. The tax
shall be collected by all persons required
16to collect state sales taxes. All cities contiguous to each
17other shall be treated as part of one incorporated area and the
18tax would be imposed in each of those contiguous cities only
19if the majority of those voting in the total area covered by
20the contiguous cities favors its imposition. In the case of a
21local sales and services tax submitted to the registered voters
22of two or more contiguous counties as provided in section
23423B.1, subsection 4, paragraph “c”, all cities contiguous to
24each other shall be treated as part of one incorporated area,
25even if the corporate boundaries of one or more of the cities
26include areas of more than one county, and the tax shall be
27imposed in each of those contiguous cities only if a majority
28of those voting on the tax in the total area covered by the
29contiguous cities favored its imposition.
30   Sec. 120.  Section 423B.6, subsection 2, paragraph b, Code
312018, is amended to read as follows:
   32b.  The ordinance of a county board of supervisors imposing
33a local sales and services tax shall adopt by reference the
34applicable provisions of the appropriate sections of chapter
35423. All powers and requirements of the director to administer
-75-1the state sales tax law and use tax law are applicable to the
2administration of a local sales and services tax law and the
3local excise tax, including but not limited to the provisions
4of section 422.25, subsection 4, sections 422.30, 422.67,
5and 422.68, section 422.69, subsection 1, sections 422.70
6through 422.75, section 423.14, subsection 1 and subsection
72, paragraphs “b” through “e”, and sections 423.14A, 423.15,
8423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 through
9423.42, 423.46, and 423.47. Local officials shall confer
10with the director of revenue for assistance in drafting the
11ordinance imposing a local sales and services tax. A certified
12copy of the ordinance shall be filed with the director as soon
13as possible after passage.
14   Sec. 121.  LEGISLATIVE INTENT.  It is the intent of the
15general assembly that the provisions of this division of this
16Act amending the definition of “place of business” in section
17423.1, subsection 37, and “sales” in section 423.1, subsection
1850, enacting definitions of “sold at retail in the state” in
19section 423.1, subsection 55A, and “subscription” in section
20423.1, subsection 57A, and amending the enumerated service of
21pay television in 423.2, subsection 6, paragraph “al”, are
22conforming amendments consistent with current state law, and
23that the amendments do not change the application of current
24law but instead reflect current law both before and after the
25enactment of this division of this Act.
26   Sec. 122.  RELATIONSHIP TO EXISTING LAW FOR TAXATION OF
27SPECIFIED DIGITAL PRODUCTS.
  The provisions of this division of
28this Act relating to the imposition of tax on the sale or use of
29“specified digital products”, as defined in this division of
30this Act, shall not be construed as affecting the taxability
31or nontaxability under other provisions of existing law of
32sales or uses occurring prior to the enactment of this division
33of this Act of products meeting the definition of “specified
34digital products”, as defined in this division of this Act.
35   Sec. 123.  EFFECTIVE DATE.
-76-
   11.  Except as provided in subsection 2, this division of this
2Act takes effect January 1, 2019.
   32.  The following take effect July 1, 2018:
   4a.  The sections of this division of this Act amending
5section 423.1, subsections 37 and 50.
   6b.  The sections of this division of this Act enacting
7section 423.1, subsections 55A and 57A.
   8c.  The section of this division of this Act amending section
9423.2, subsection 1, paragraph “a”, subparagraph (1).
   10d.  The provision amending the enumerated service of pay
11television to include but not be limited to streaming video,
12video on-demand, and pay-per-view, in the section of this
13division of this Act amending section 423.2, subsection 6.
   14e.  The provisions adding photography and retouching to the
15list of enumerated services subject to the sales tax in the
16section of this division of this Act amending section 423.2,
17subsection 6.
   18f.  The section of this division of this Act enacting section
19423.2, subsection 8, paragraph “d”.
   20g.  The section of this division of this Act amending section
21423.5, subsection 1, paragraph “a”.
   22h.  The section of this division of this Act entitled
23“legislative intent” which describes the intent of the general
24assembly with respect to certain amendments in this division of
25this Act to the definition of “place of business” in section
26423.1, subsection 37, “sales” in section 423.1, subsection 50,
27the enactment of a definition for “subscription” in section
28423.1, subsection 57A, and “sold at retail” in section 423.1,
29subsection 55A, and amendments to the enumerated service of pay
30television in section 423.2, subsection 6, paragraph “al”.
31DIVISION V
32HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE RENTAL EXCISE TAX
33CHANGES
34   Sec. 124.  Section 423A.2, subsection 1, Code 2018, is
35amended to read as follows:
-77-   11.  For the purposes of this chapter, unless the context
2otherwise requires:
   3a.  “Department” means the department of revenue.
   4b.  “Lessor” means any of the following:
   5(1)   Aperson engaged in the business of renting lodging to
6users.
   7(2)  A person who acquires a right to or interest in any
8lodging with an intent to rent the lodging to another person.
   9(3)  A person who actually or constructively rents lodging,
10regardless of who owns or controls the lodging.
   11(4)  A lodging facilitator.
   12(5)  A retailer or retailer maintaining a place of business
13in this state as defined in section 423.1, including those
14persons who meet the requirements of section 423.14A, which
15retailer or retailer maintaining a place of business in this
16state would be responsible for collection and payment of the
17hotel and motel tax if it were a sales or use tax under chapter
18423.
   19c.  “Lodging” means rooms, apartments, or sleeping quarters
20in a hotel, motel, inn, public lodging house, rooming house,
 21cabin, apartment, residential property, or manufactured or
22mobile home which is tangible personal property, or in a
23tourist court, or in any place where sleeping accommodations
24are furnished to transient guests for rent, whether with or
25without meals. Lodging does not include rooms that are not
26used for sleeping accommodations.
   27d.  “Lodging facilitator” means any person who facilitates
28the renting of lodging to users by satisfying subparagraphs (1)
29and (2) as follows:
   30(1)  The person directly or indirectly does any of the
31following:
   32(a)  Lists, makes available, or advertises lodging for rent
33by a lessor in any forum.
   34(b)  Transmits or otherwise communicates an offer or
35acceptance between a lessor or user.
-78-
   1(c)  Owns, rents, licenses, makes available, or operates any
2electronic or physical infrastructure or any property, process,
3method, copyright, trademark, or patent that connects lessors
4and users to each other.
   5(d)  Provides a platform or other marketplace for renting
6lodging or otherwise facilitates the renting of lodging,
7regardless of ownership or control of the lodging.
   8(e)  Provides software development or research and
9development activities related to any activity described in
10this subparagraph (1), if such software development or research
11and development activities are directly related to the physical
12or electronic marketplace provided by a lodging facilitator.
   13(f)  Provides or offers fulfillment or storage services for a
14lessor.
   15(g)  Sets prices for a lessor’s rental of lodging.
   16(h)  Provides or offers customer service to a lessor or
17a lessor’s customers, or accepts or assists with returns,
18exchanges, cancellations, or rescheduling of the rental of
19lodging by a lessor.
   20(2)  The person directly or indirectly does any of the
21following:
   22(a)  Collects the sales price for the renting of the lodging.
   23(b)  Provides payment processing services for the renting of
24lodging.
   25(c)  Charges, collects, or otherwise receives booking fees,
26advertising revenues, or other consideration from the renting
27of lodging or the facilitation of the renting of lodging,
28regardless of ownership or control of the lodging.
   29(d)  Through terms and conditions, agreements, or
30arrangements with a third party, collects payment in connection
31with a rental of lodging from a user and transmits that payment
32to the lessor, regardless of whether the person collecting
33and transmitting such payment receives compensation or other
34consideration in exchange for the service.
   35(e)  Provides a virtual currency that users are allowed or
-79-1required to use to rent lodging.
   2d.    e.  “Person” means the same as the term is defined in
3section 423.1.
   4e.    f.  “Renting”, “rental”, or “rent” means a transfer of
5possession or control of lodging for a fixed or indeterminate
6term for consideration and includes any kind of direct or
7indirect charge for such lodging or its use.
   8f.    g.  “Sales price” means the consideration for renting of
9lodging and means the same as the term is defined in section
10423.1
 all direct or indirect consideration, including but
11not limited to cash, credit, property, and services, paid in
12connection with any charge of any description associated with
13the renting of lodging or with communicating, negotiating,
14reserving, booking, facilitating, or otherwise arranging to
15rent lodging, including but not limited to booking fees,
16reservation fees, service fees, cleaning fees, linen fees,
17towel fees, and nonrefundable deposits
When determining “sales
18price”
, no deduction shall be taken for any of the following:

   19(1)  The lessor’s cost of the property rented.
   20(2)  The cost of materials used, labor or service cost,
21interest, losses, all costs of transportation to the lessor,
22all taxes imposed on the lessor, or any other expenses of the
23lessor.
   24(3)  Charges by the lessor for any services necessary to
25complete the rental transaction.
   26g.    h.  “User” means a person to whom lodging is rented.
27   Sec. 125.  NEW SECTION.  423A.3A  Collection and remittance by
28lodging facilitators — joint and several liability.
   29If a transaction for the rental of lodging involves both a
30lodging facilitator and another lessor, all of the following
31shall apply:
   321.  The lodging facilitator shall collect the state-imposed
33tax under section 423A.3 and the locally imposed tax under
34section 423A.4 on the entire sales price paid by the user,
35regardless of the amount of the sales price that will
-80-1ultimately accrue to or benefit the lodging facilitator,
2another lessor, or any other person.
   32.  The lodging facilitator and any other lessor involved
4in the transaction shall be jointly and severally liable for
5collecting and remitting the tax under sections 423A.3 and
6423A.4.
7   Sec. 126.  Section 423A.5, Code 2018, is amended to read as
8follows:
   9423A.5  Exemptions.
   101.  There are exempted from the provisions of this chapter
11and from the computation of any amount of tax imposed by
12section 423A.3 this chapter all of the following:
   13a.    1.  The sales price from the renting of lodging which is
14rented by the same person for a period of more than thirty-one
15consecutive days.
   16b.    2.  The sales price from the renting of sleeping rooms
17in dormitories and in memorial unions at all universities and
18colleges located in the state of Iowa.
   192.  There is exempted from the provisions of this chapter and
20from the computation of any amount of tax imposed by section
21423A.4 all of the following:
   22a.  The sales price from the renting of lodging or rooms
23exempt under subsection 1.
   24b.    3.  The sales price of lodging furnished to the guests of
25a religious institution if the property is exempt under section
26427.1, subsection 8, and the purpose of renting is to provide a
27place for a religious retreat or function and not a place for
28transient guests generally.
29   Sec. 127.  Section 423A.6, subsection 4, Code 2018, is
30amended to read as follows:
   314.  Section 422.25, subsection 4, sections 422.30, 422.67,
32and 422.68, section 422.69, subsection 1, sections 422.70,
33422.71, 422.72, 422.74, and 422.75, section 423.14, subsection
341, and sections 423.23, 423.24, 423.25, 423.31, 423.33,
35423.35, 423.37 through 423.42, and 423.47, consistent with the
-81-1provisions of this chapter, apply with respect to the taxes
2authorized under this chapter, in the same manner and with the
3same effect as if the state and local hotel and motel taxes
4were retail sales taxes within the meaning of those statutes.
5Notwithstanding this subsection, the director shall provide for
6quarterly filing of returns and for other than quarterly filing
7of returns both as prescribed in section 423.31. The director
8may require all persons who are engaged in the business of
9deriving any sales price subject to tax under this chapter to
10register with the department. All taxes collected under this
11chapter by a retailer, lessor, or any individual other person
12 are deemed to be held in trust for the state of Iowa and the
13local jurisdictions imposing the taxes.
14   Sec. 128.  Section 423C.2, subsection 3, Code 2018, is
15amended to read as follows:
   163.  “Lessor” means a any of the following:
   17a.   Aperson engaged in the business of renting automobiles
18to users. “Lessor” includes a
   19b.   Amotor vehicle dealer licensed pursuant to chapter
20322 who rents automobiles to users. For this purpose, the
21objective of making a profit is not necessary to make the
22renting activity a business.

   23c.  A person who acquires a right to or interest in any
24automobile with an intent to rent the automobile to another
25person.
   26d.  A person who actually or constructively rents
27automobiles, regardless of who owns or controls the
28automobiles.
   29e.  A rental facilitator.
   30f.  A retailer or retailer maintaining a place of business in
31this state as defined in section 423.1, including those persons
32who meet the requirements of section 423.14A, which retailer or
33retailer maintaining a place of business in this state would be
34responsible for collection and payment of the automobile rental
35excise tax if it were a sales or use tax under chapter 423.
-82-
1   Sec. 129.  Section 423C.2, Code 2018, is amended by adding
2the following new subsection:
3   NEW SUBSECTION.  06.  “Rental facilitator” means any person
4who facilitates the renting of an automobile to users by
5satisfying paragraphs “a” and “b” as follows:
   6a.  The person directly or indirectly does any of the
7following:
   8(1)  Lists, makes available, or advertises automobiles for
9rent by a lessor in any forum.
   10(2)  Transmits or otherwise communicates an offer or
11acceptance between a lessor or user.
   12(3)  Owns, rents, licenses, makes available, or operates any
13electronic or physical infrastructure or any property, process,
14method, copyright, trademark, or patent that connects lessors
15and users to each other.
   16(4)  Provides a platform or other marketplace for
17renting automobiles or otherwise facilitates the renting
18of automobiles, regardless of ownership or control of the
19automobile.
   20(5)  Provides software development or research and
21development activities related to any activity described in
22this paragraph “a”, if such software development or research and
23development activities are directly related to the physical or
24electronic marketplace provided by a rental facilitator.
   25(6)  Provides or offers fulfillment or storage services for a
26lessor.
   27(7)  Sets prices for a lessor’s rental of automobiles.
   28(8)  Provides or offers customer service to a lessor or
29a lessor’s customers, or accepts or assists with returns,
30exchanges, cancellations, or rescheduling of the rental of
31automobiles by a lessor.
   32b.  The person directly or indirectly does any of the
33following:
   34(1)  Collects the rental price for the renting of an
35automobile.
-83-
   1(2)  Provides payment processing services for the renting of
2an automobile.
   3(3)  Charges, collects, or otherwise receives booking
4fees, advertising revenues, or other consideration from the
5renting of an automobile or the facilitation of the renting
6of an automobile, regardless of ownership or control of the
7automobile.
   8(4)  Through terms and conditions, agreements, or
9arrangements with a third party, collects payment in connection
10with a rental of automobiles from a user and transmits that
11payment to the lessor, regardless of whether the person
12collecting and transmitting such payment receives compensation
13or other consideration in exchange for the service.
   14(5)  Provides a virtual currency that users are allowed or
15required to use to rent automobiles.
16   Sec. 130.  Section 423C.2, subsection 6, Code 2018, is
17amended by striking the subsection and inserting in lieu
18thereof the following:
   196.  “Rental price” means all direct or indirect
20consideration, including but not limited to cash, credit,
21property, and services, paid in connection with any charge of
22any description associated with the renting of an automobile
23or with communicating, negotiating, reserving, booking,
24facilitating, or otherwise arranging to rent an automobile,
25including but not limited to booking fees, reservation fees,
26service fees, and nonrefundable deposits. When determining
27“rental price”, no deduction shall be taken for any of the
28following:
   29a.  The lessor’s cost of the property rented.
   30b.  The cost of materials used, labor or service cost,
31interest, losses, all costs of transportation to the lessor,
32all taxes imposed on the lessor, or any other expenses of the
33lessor.
   34c.  Charges by the lessor for any services necessary to
35complete the rental transaction.
-84-
1   Sec. 131.  NEW SECTION.  423C.3A  Collection and remittance by
2rental facilitators — joint and several liability.
   3If a transaction for the rental of an automobile involves
4both a rental facilitator and another lessor, all of the
5following shall apply:
   61.  The rental facilitator shall collect the tax under
7section 423C.3 on the entire rental price paid by the user,
8regardless of the amount of the rental price that will
9ultimately accrue to or benefit the rental facilitator, another
10lessor, or any other person.
   112.  The rental facilitator and any other lessor involved
12in the transaction shall be jointly and severally liable for
13collecting and remitting the tax under section 423C.3.
14   Sec. 132.  LEGISLATIVE INTENT.  It is the intent of the
15general assembly that the provision of this division of this
16Act amending the definition of “lodging” in section 423A.2,
17subsection 1, paragraph “c”, is a conforming amendment
18consistent with current state law, and that the amendment
19does not change the application of current law but instead
20reflects current law both before and after the enactment of
21this division of this Act.
22   Sec. 133.  EFFECTIVE DATE.
   231.  Except as provided in subsection 2, this division of this
24Act takes effect January 1, 2019.
   252.  The following take effect July 1, 2018:
   26a.  The provision amending the definition of “lodging” in the
27section of this division of this Act amending section 423A.2,
28subsection 1, paragraph “c”.
   29b.  The section of this division of this Act entitled
30“legislative intent” which describes the intent of the general
31assembly with respect to the amendment in this division of
32this Act to the definition of “lodging” in section 423A.2,
33subsection 1, paragraph “c”.
34EXPLANATION
35The inclusion of this explanation does not constitute agreement with
-85-1the explanation’s substance by the members of the general assembly.
   2This bill makes numerous changes to income taxes, the
3sales and use taxes and local option sales tax, the hotel and
4motel excise tax, the automobile rental excise tax, the Iowa
5educational savings plan trust, and the Iowa ABLE savings plan
6trust.
   7DIVISION I — INCOME TAX CHANGES FOR TAX YEAR 2018. The
8federal Protecting Americans From Tax Hikes Act (PATH Act)
9enacted by Congress in 2015 made permanent certain increased
10phase-out amounts and increased credit percentages of the
11federal earned income tax credit (EITC) that were scheduled to
12expire in 2018, and made permanent the deduction for certain
13expenses incurred by elementary and secondary school teachers
14that was scheduled to expire in 2015. To date, Iowa has
15not coupled with these federal changes for purposes of the
16teacher expense deduction or for calculating the Iowa EITC.
17 Division I couples with these federal EITC and teacher expense
18deduction changes for purposes of the Iowa EITC and Iowa net
19income calculation for tax year 2018. Division I also couples
20for tax year 2018 with certain accounting method and other
21miscellaneous changes made in the federal Tax Cuts and Jobs Act
22of 2017 for purposes of the individual and corporate income
23taxes, and the franchise tax, to the extent those amendments
24affect the calculation of federal adjusted gross income or
25federal taxable income for federal tax purposes for tax year
262018. These include amendments contained in the following
27sections of the federal Tax Cuts and Jobs Act: §13102 (small
28business accounting method changes), §13221 (accounting method
29rules for the taxable year of inclusion), §13504 (repeal of
30technical termination of partnerships), §13541 (electing small
31business trust), §13543 (treatment of S corporation conversion
32to C corporation), §13611 (repeal of special rule permitting
33recharacterization of Roth IRA conversions), and §13613
34(extended rollover period for qualified plan loans).
   35The division takes effect upon enactment and applies
-86-1retroactively to January 1, 2018, for tax years beginning on or
2after that date, but prior to January 1, 2019.
   3DIVISION II — INDIVIDUAL INCOME TAX CHANGES BEGINNING IN
4TAX YEAR 2019. Division II makes numerous changes to the Iowa
5individual income tax beginning in tax year 2019.
   6TAX RATE AND TAX BRACKET CHANGES. Current law provides nine
7regular tax brackets containing progressively higher amounts
8of taxable income that are taxed at progressively higher tax
9rates, from a low of 0.36 percent, to a high of 8.98 percent.
10The taxable income amounts in each tax bracket are indexed to
11inflation and increased each year. For tax years beginning on
12or after January 1, 2019, the bill reduces the tax rate in each
13bracket, reduces the number of brackets to eight, and increases
14the taxable income amount in the top bracket to $150,000, as
15follows:
16Income over:But not over:Tax rate category I:
17 1) $0$1,6280.32%
182) $1,628$3,2560.64%
193) $3,256$6,5122.10%
204) $6,512$14,6524.05%
215) $14,652$24,4205.40%
22 6) $24,420$48,8405.70%
237) $48,840$150,0006.70%
24 8) $150,000 or more7.60%
   25The bill provides that the income amounts in each of the
26eight brackets listed above will be indexed to inflation and
27increased each year beginning in tax year 2020.
   28The tax rates in tax category I listed above apply for all
29tax years beginning on or after January 1, 2019, until such
30time as a different tax rate category takes effect as described
31below.
   32Beginning with the fiscal year ending June 30, 2019, the
33bill sets forth six additional tax rate categories labeled
34as tax rate category II, III, IV, and V, and provides that
35each progressively higher tax rate category may take effect in
-87-1future tax years if certain net tax receipt revenue targets are
2met or exceeded as provided in the bill. The possible tax rate
3categories for each of the income brackets listed above are as
4follows:
   5IIIIIIVV
61)0.32%0.30%0.30%0.30%
72)0.64%0.60%0.60%0.60%
83)2.10%2.00%2.00%2.00%
94)4.05%4.00%4.00%4.00%
105)5.40%5.30%5.30%5.20%
116)5.70%5.60%5.60%5.40%
127)6.70%6.30%6.30%6.30%
138)7.40%7.00%7.00%6.90%
   14Whether a particular tax rate category takes effect in
15future tax years depends on the net tax receipts for the
16previous fiscal year and the tax rate category in effect for
17the previous tax year, as described in the bill. A net tax
18receipt calculation for a fiscal year will not cause the tax
19rate category in effect for a future tax year to drop to a lower
20tax rate category than is currently in effect.
   21By operation of law, the tax rate category applicable to tax
22year 2025 will also apply to all future tax years.
   23The bill requires the department of revenue (department), in
24consultation with the department of management, to calculate
25net tax receipts each applicable fiscal year and submit an
26annual report to the governor and general assembly identifying
27net tax receipts for the fiscal year, which tax rate category
28will be in effect for future tax years, and describing in
29detail the net tax receipts calculation made by the department.
30The bill defines “net tax receipts” and requires the director
31of the department to adopt rules for calculating net tax
32receipts and defining various related terms.
   33INTERNAL REVENUE CODE (IRC) COUPLING. Under current law
34with the exception of the solar energy credit and the state
35research activities credit, Code references to the IRC include
-88-1the IRC in effect on January 1, 2015, meaning federal income
2tax revisions made by Congress in 2015 through 2017 are not
3applicable for Iowa tax purposes, including revisions made in
4the PATH Act of 2015 and the federal Tax Cuts and Jobs Act of
52017. The bill adopts, or couples with, these revisions for
6purposes of the individual income tax beginning in tax year
72019, except for certain revisions as described below. The
8coupling is accomplished generally by updating the definition
9of IRC as it applies to the individual income tax to mean
10the IRC as amended and in effect on January 1, 2018. The
11updated definition does not apply to the state solar energy
12system credit in Code section 422.11L, or the state individual
13research activities credit in Code section 422.10, because both
14of those credits contain their own definition of IRC.
   15Code section 422.9 provided individuals a deduction from
16net income for state sales and use taxes if the individual
17chose to deduct sales and use tax in lieu of state income taxes
18or the standard deduction for federal income tax purposes.
19The deduction was set to expire under both federal and Iowa
20law beginning in tax year 2016. The federal deduction was
21made permanent by the PATH Act of 2015, and the bill couples
22with these federal changes to the deduction, thus making it
23permanent for tax year 2019 and beyond.
   24The federal deduction for other taxes paid was limited to
25$10,000 per year under most circumstances by the federal Tax
26Cuts and Jobs Act of 2017, but the bill decouples from this
27limitation. Taxpayers will be allowed to deduct other taxes
28paid in computing state itemized deductions to the same extent
29as is allowed under current state law, without regard to the
30$10,000 limitation described above.
   31BONUS DEPRECIATION DECOUPLING. The bill decouples, for Iowa
32individual income tax purposes, from the federal additional
33first-year depreciation allowance in section 168(k) of the IRC
34(bonus depreciation) which was extended and modified by the
35federal PATH Act of 2015 and the federal Tax Cuts and Jobs Act
-89-1of 2017. By decoupling, taxpayers who claim bonus depreciation
2for federal tax purposes are required to add such depreciation
3amounts back to Iowa net income, but are then allowed under
4existing state law to deduct the amount of depreciation that
5would otherwise be allowable under federal law, without regard
6to the bonus depreciation allowance.
   7IRC §179 DEDUCTION. The IRC §179 deduction provides a tax
8deduction in lieu of depreciation for certain property placed
9in service during a tax year. Under current law, for Iowa
10tax purposes, the maximum IRC §179 deduction per tax year is
11$25,000. This maximum deduction is incrementally reduced when
12a taxpayer’s eligible property placed in service during the tax
13year exceeds $200,000 (investment limitation).
   14The federal Tax Cuts and Jobs Act of 2017 made several
15changes to the IRC §179 deduction, including increasing the
16statutory maximum deduction to $1 million, and increasing
17the statutory investment limitation to $2.5 million. The
18bill couples for Iowa individual income tax purposes with the
19changes made to the IRC §179 deduction in the federal Tax Cuts
20and Jobs Act beginning in tax year 2019, but limits the maximum
21deduction to $100,000, and sets the investment limitation at
22$400,000.
   23If the total IRC §179 deduction allocated to a taxpayer from
24one or more partnerships, S corporations, or limited liability
25companies exceeds $100,000 in a tax year, the bill allows the
26taxpayer to deduct the amount in excess of $100,000 evenly over
27a five-year tax period beginning in the subsequent tax year.
28Taxpayers who elect to take advantage of this provision are
29not allowed to take the IRC §179 deduction for the tax year
30of the election on any eligible property placed in service by
31the taxpayer, but are allowed to deduct depreciation on such
32amounts that would otherwise be allowable under federal law,
33without regard to the bonus depreciation allowance.
   34Under current Iowa law, for previous tax years, individual
35taxpayers were required to recompute their Iowa itemized
-90-1deductions under Code section 422.9(2) to account for
2differences between the federal and Iowa treatment of the
3IRC §179 deduction. The bill provides that taxpayers must
4make those same adjustments to federal adjusted gross income
5beginning in tax year 2019.
   6ALTERNATIVE MINIMUM TAX (AMT) REPEAL. Current law imposes
7an AMT to the extent it exceeds an individual’s regular
8tax liability. The AMT is generally calculated by adding
9certain “preference” items (deductions, exemptions, and other
10adjustments) back to taxable income, applying an exemption
11amount, and then multiplying the resulting income amount by an
12AMT rate. The bill repeals the AMT for the individual income
13tax beginning in tax year 2019. The bill makes corresponding
14amendments to other individual income tax provisions in the
15Code to strike references to the AMT in the calculation of the
16resident tax credit for income tax paid to another jurisdiction
17and in the requirement for nonresidents subject to the AMT to
18file an Iowa income tax return.
   19Current law also provides an alternative minimum tax credit,
20which allows AMT paid by an individual in prior tax years to be
21claimed against regular tax liability in future tax years if
22the individual is not subject to the AMT in that year. With
23the repeal of the individual AMT in 2019, the bill allows a
24taxpayer to claim any remaining alternative minimum tax credit
25against the individual’s regular tax liability for the 2019 tax
26year, and the bill then repeals the alternative minimum tax
27credit beginning in tax year 2020.
   28FEDERAL DEDUCTIBILITY LIMITATION AND POSSIBLE REPEAL. When
29calculating taxable income under current law for purposes of
30the individual income tax, individuals are allowed to deduct
31federal income taxes paid, net of any federal income tax
32refunds received. The bill limits the deduction beginning in
33the 2019 tax year, depending on the tax rate category in effect
34for the tax year. Individuals are permitted to deduct 100
35percent of federal income taxes paid for tax year 2018 (whether
-91-1paid in calendar year 2018 or 2019), and either 25 percent
2or 15 percent of federal income taxes paid for a tax year in
3which the rates in tax rate category I or II, respectively,
4were applicable (whether paid during the tax year or during the
5following calendar year), net of any federal income tax refunds
6received during those years to the extent the federal income
7tax was deducted for a prior tax year. Federal income tax paid
8during a tax year is not deductible to the extent the payment
9is for a tax year during which the tax rates in category III,
10IV, or V, were applicable.
   11STANDARD DEDUCTION INCREASES. When calculating taxable
12income for purposes of the individual income tax, individuals
13are allowed to choose between a standard deduction or itemized
14deductions. The standard deduction under current law for tax
15year 2018 is $2,030 for a single person or a married person who
16files separately, and is $5,000 for a married couple filing
17jointly, a surviving spouse, or a head of household. These
18amounts are indexed to inflation and increased each year.
   19The bill increases the standard deduction amounts beginning
20in tax year 2019 to $4,000 for a single person or a married
21person who files separately, and to $8,000 for a married couple
22filing jointly, a surviving spouse, or a head of household.
23The bill also provides for an additional standard deduction
24amount for each individual who at the close of the tax year
25is 65 or older or is blind. The determination of whether an
26individual is blind is the same as for the personal exemption
27credit under Code section 422.12. The additional standard
28deduction amount is $1,500 per person, and is doubled if the
29person is both 65 or older and blind at the end of the tax year.
30The bill increases each of these additional standard deduction
31amounts to $2,070 per person in the event the tax rates in
32category III, IV, or V, become effective in future tax years.
33The bill indexes these standard deduction amounts, including
34the additional standard deduction amounts, to inflation so they
35will be increased in future tax years.
-92-
   1QUALIFIED BUSINESS INCOME DEDUCTION. The federal Tax Cuts
2and Jobs Act of 2017 created a deduction in calculating federal
3taxable income for noncorporate taxpayers of up to 20 percent
4of certain domestic qualified business income earned by a
5taxpayer from a partnership, S corporation, limited liability
6company, other pass-through entity, or a sole proprietorship.
7The deduction is calculated under section 199A of the IRC
8and includes numerous limitations based on the type of trade
9or business involved, the income of the trade or business,
10and the income of the taxpayer claiming the deduction. The
11federal deduction applies to tax years 2018 through 2025, and
12is available to a taxpayer regardless of whether the taxpayer
13claims the standard deduction or itemized deductions for
14federal tax purposes.
   15The bill provides a deduction in computing Iowa taxable
16income for purposes of the individual income tax equal to 25
17percent of the taxpayer’s qualified business income deduction
18allowed for federal income tax purposes beginning in tax
19year 2019. With regard to individuals, the Iowa deduction
20is available regardless of whether the individual claims
21the standard deduction or itemized deductions for Iowa tax
22purposes. With regard to an estate or trust, the starting
23point for calculating Iowa income tax will include the full
24amount of the federal qualified business income deduction, so
25the bill requires the estate or trust to add back 75 percent of
26such amount when calculating Iowa taxable income.
   27The bill provides special rules for calculating the
28qualified business income deduction in the case of an entity
29filing an Iowa composite income tax return on behalf of all of
30the entity’s nonresident partners, members, beneficiaries, or
31shareholders. In such cases, the deduction on the composite
32return shall be an amount equal to 25 percent of the federal
33qualified business income deduction that would be allowable to
34an individual reporting the same items of income and loss that
35are included on the composite return.
-93-
   1EFFECTIVE DATE AND APPLICABILITY. The division takes effect
2January 1, 2019, and applies to tax years beginning on or after
3that date.
   4DIVISION III — CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN
5TRUST AND IOWA ABLE SAVINGS PLAN TRUST. Division III makes
6several changes to the Iowa educational savings plan trust in
7Code chapter 12D (Iowa 529 plan), the disabilities expenses
8savings plan trust in Code chapter 12I (Iowa ABLE plan), and
9the income tax treatment of contributions to and withdrawals
10from such plans.
   11IRC §529, which governs state tuition programs, previously
12required that in order for a state tuition program to be
13considered qualified and therefore eligible for certain
14federal tax benefits, the program must be established to
15allow contributions for the purposes of funding certain
16qualifying expenses of attendance at institutions of higher
17education. Accordingly, the Iowa 529 plan allows participants
18to contribute and withdraw funds to and from the Iowa 529 plan
19for the payment of higher education costs related to attendance
20at institutions of higher education.
   21The federal Tax Cuts and Jobs Act of 2017 amended IRC
22§529 to provide that during each tax year, up to $10,000 of
23cash distributions from all qualified tuition programs for a
24beneficiary for tuition expenses in connection with enrollment
25or attendance at an elementary or secondary public, private,
26or religious school, may be considered a distribution for
27qualified higher education expenses and thus excludable from
28income for federal income tax purposes. The federal Tax
29Cuts and Jobs Act of 2017 also provided that under certain
30conditions, amounts in qualified tuition programs may be
31transferred to a qualified ABLE account without incurring
32federal income tax consequences.
   33This bill amends the Iowa 529 plan to provide for qualified
34withdrawals from the plan for elementary or secondary school
35tuition as is now allowed under federal law pursuant to the
-94-1federal Tax Cuts and Jobs Act of 2017. The bill modifies the
2findings and purpose provision of the Iowa 529 plan in Code
3section 12D.1(1) by striking or amending specific references
4to higher education and institutions of higher education so
5that such provisions more generally reference education and
6educational institutions, and by providing that the Iowa 529
7plan’s purpose is to make available an opportunity to invest in
8a public trust to fund future formal education needs.
   9The bill strikes the definition of “higher education costs”,
10as well as numerous references to that term throughout the Iowa
11529 plan, and replaces them with the term “qualified education
12expenses”, which is defined in the bill to mean the same as
13qualified higher education expenses as defined in IRC §529,
14including elementary and secondary school tuition to the extent
15such tuition amounts are described and allowed under IRC §529.
   16The bill also replaces numerous references to “institution
17of higher education” throughout the Iowa 529 plan with
18references to a “qualified educational institution”, which
19is defined in the bill to include an institution of higher
20education and any elementary or secondary, public, private, or
21religious school described in IRC §529.
   22The federal Tax Cuts and Jobs Act of 2017 also amended
23IRC §529 to allow certain transfers from a qualified tuition
24program to an ABLE account without incurring federal income tax
25consequences. The bill amends the Iowa 529 plan to provide
26that a participant may transfer amounts in an Iowa 529 plan to
27an ABLE account, including the Iowa ABLE plan, if the transfer
28is permitted under IRC §529. The Iowa 529 plan is further
29amended to allow the transfer of funds to another account in
30the Iowa 529 plan, if the transfer is permitted under IRC §529.
   31Several other modifications are made to the Iowa 529 plan
32to remove references to the imposition of penalties for
33cancellation and late payments under the trust, to remove
34certain references to the ability to amend participation
35agreements, to describe rules and procedures for determining
-95-1account successors in the case of death of a participant, and
2to modify the permissible investment direction that may be
3provided by participants and beneficiaries under the trust.
4Finally, the bill adds Iowa 529 plan accounts to the list of
5exemptions from execution under Code section 627.6.
   6Under current law in Code section 422.7(32)(c), previously
7tax-deducted contributions to an Iowa 529 plan that are
8withdrawn for purposes other than the payment of qualified
9education expenses are required to be added back to income
10in computing Iowa individual income tax. The bill amends
11this provision to provide that Iowa 529 plan withdrawals of
12previously tax-deducted contributions must be added back to
13Iowa income unless the amount is a withdrawal or transfer
14for one of three eligible purposes. First, for the payment
15of qualified higher education expenses. Second, for the
16payment of tuition to an elementary or secondary school if the
17tuition amounts are qualified education expenses. Third, for a
18change in beneficiaries under, or transfer to another account
19within, the Iowa 529 plan, or a transfer to the Iowa ABLE plan,
20provided such beneficiary change or transfer is permitted under
21the Iowa 529 plan. The bill defines “institution of higher
22education” and “tuition” to mean the same as defined under
23the Iowa 529 plan. The bill defines “elementary or secondary
24school” to mean an elementary or secondary school in this state
25which is accredited under Code section 256.11 (educational
26standards), and adheres to the provisions of the federal
27Civil Rights Act of 1964 and Code chapter 216 (civil rights
28commission). The bill defines “qualified higher education
29expenses” to mean the same as defined under IRC §529.
   30The bill amends the income tax treatment of contributions
31to and withdrawals from the Iowa ABLE plan to provide that a
32contribution shall not be deducted from Iowa income tax to the
33extent it represents a transfer from the Iowa 529 plan that was
34previously deducted as a contribution to the Iowa 529 plan,
35and that amounts resulting from a cancellation or withdrawal
-96-1from the Iowa ABLE plan for purposes other than the payment of
2qualified disability expenses shall be added back to income in
3computing Iowa individual income tax to the extent the amount
4was previously transferred from the Iowa 529 plan and deducted
5as a contribution to the Iowa 529 plan.
   6The division takes effect upon enactment and applies
7retroactively to January 1, 2018, for withdrawals and transfers
8from the Iowa educational savings plan trust made on or after
9that date, and for tax years beginning on or after that date.
   10DIVISION IV — SALES AND USE TAXES. Division IV makes
11numerous changes to the sales and use taxes, including the
12local option sales tax.
   13SPECIFIED DIGITAL PRODUCTS. The bill imposes the sales and
14use tax at a rate of six percent on the sale or use of specified
15digital products in Iowa. The bill defines “specified digital
16products” as electronically transferred digital audio-visual
17works, digital audio works, digital books, or other digital
18products. These and other related terms are defined in
19the bill in new Code section 423.1(55A). The sales or use
20tax applies whether the purchaser obtains permanent use or
21less than permanent use of the specified digital product,
22whether the sale or use is conditioned or not conditioned upon
23continued payment from the purchaser, and whether the sale or
24use is on a subscription basis or is not on a subscription
25basis. The bill also provides that the sale or use of digital
26code that may be used to obtain or access a specified digital
27product at a later date is taxed in the same manner as a
28specified digital product.
   29The bill creates an exemption for the sale or use of
30specified digital products to a non-end user, as defined in the
31bill.
   32The bill amends numerous existing sales and use tax
33exemptions to include specified digital products, including
34the following: sales the state is prohibited from taxing
35under the United States Constitution or the Iowa Constitution;
-97-1sales to certain nonprofit corporations, organizations,
2educational institutions, legal aid organizations, museums,
3art centers, organ procurement organizations, hospitals, or
4hospice facilities; sales by a state fair; sales to political
5subdivisions; sales by counties or cities; casual sales; sales
6of property which will be distributed as prizes to players
7of certain amusement games; sales to recognized community
8action agencies; uses of property for which the sales tax has
9already been paid; sales in the regular course of business;
10and property brought into Iowa by a nonresident and used here
11temporarily. The bill amends a sales tax refund provision
12relating to relief agencies that purchase property for free
13distribution to the poor to include purchases of specified
14digital products.
   15The bill makes certain other conforming amendments related
16to the treatment of specified digital products for purposes
17of the administration of the sales and use taxes. The bill
18provides that the imposition of tax on the sale or use of
19specified digital products shall not be construed as affecting
20the taxability or nontaxability under other provisions of
21existing law of sales or uses occurring prior to the enactment
22of this division of this Act of products meeting the definition
23of “specified digital products”.
   24SUBSCRIPTIONS AND PAY TELEVISION SERVICE. The bill amends
25the definition of “sale” in Code section 423.1(50) for purposes
26of the sales tax to provide that a sale includes but is not
27limited to any transfer, exchange, or barter on a subscription
28basis. The bill defines “subscription” in new Code section
29423.1(57A).
   30The bill amends the taxable service of pay television to
31provide that pay television includes but is not limited to
32streaming video, video on-demand, and pay-per-view.
   33The bill provides that it is the intent of the general
34assembly that these changes to the definition of “sale” and
35“subscription”, and changes to the service of pay television,
-98-1are conforming amendments consistent with current state law,
2and that the amendments do not change the application of
3current law but instead reflect current law both before and
4after the enactment of these changes.
   5These changes take effect July 1, 2018.
   6OTHER CHANGES TO TAXABLE SERVICES. Under current law, the
7services of photography and retouching are subject to the
8sales and use tax, but such services are taxed as if they were
9sales of tangible personal property. The bill strikes these
10provisions treating photography and retouching as tangible
11personal property, and adds photography and retouching to the
12list of enumerated services subject to the sales and use tax.
13These changes to photography and retouching take effect July
141, 2018.
   15Current law provides that a limousine service is subject
16to the sales and use tax. The bill modifies this service to
17provide that a personal transportation service shall be subject
18to the sales and use tax, and includes taxis, driver services,
19ride sharing services, rides for hire, and limousine services
20as examples of the types of services which qualify as a taxable
21personal transportation service.
   22Under current law, the furnishing of information services,
23as defined in Code section 423.3(66), is exempt from the
24sales and use tax. The bill strikes this exemption and makes
25information services a taxable service for purposes of the
26sales and use tax. The bill defines “information services”.
   27The bill additionally adds the following services to the
28list of enumerated services subject to the sales and use
29tax: storage of tangible or electronic files, documents, or
30other records; services arising from or related to installing,
31maintaining, servicing, repairing, operating, upgrading, or
32enhancing specified digital products; video game services and
33tournaments; and software as a service.
   34OTHER SALES AND USE TAX EXEMPTIONS. Current law provides
35a sales and use tax exemption for access charges related to
-99-1online computer services in Code section 423.3(65), and for any
2retail sale delivered electronically in Code section 423.3(67).
3The bill strikes both of these exemptions.
   4The bill creates a sales and use tax exemption in new
5Code section 423.3(103) for certain sales to a commercial
6enterprise for use exclusively by the commercial enterprise.
7The exemption specifies that such a use fails to qualify as
8a use exclusively by the commercial enterprise if its use
9for noncommercial purposes is more than de minimis. The
10bill provides that the terms “de minimis” and “noncommercial
11purposes” shall be defined by the director of revenue by
12rule. The bill defines “commercial enterprise” to mean the
13same as defined under the machinery and equipment sales and
14use tax exemption in Code section 423.3(47), which includes
15businesses and manufacturers conducted for profit and centers
16for data processing services to insurance companies, financial
17institutions, businesses, and manufacturers, but excludes
18professions and occupations and nonprofit organizations.
   19The exemption applies to sales of specified digital
20products, and to the furnishing of the following enumerated
21taxable services: storage of tangible or electronic files,
22documents, or other records; information services; services
23arising from or related to installing, maintaining, servicing,
24repairing, operating, upgrading, or enhancing specified digital
25products; and software as a service.
   26The bill adds the sale of services to the items that may
27qualify for the sales and use tax exemption in Code section
28423.3(63) relating to items purchased for the purposes of
29providing them as prizes to players of certain amusement games.
   30SALES AND USE TAX NEXUS AND COLLECTION REQUIREMENTS. The
31bill modifies the requirement of persons to collect and remit
32the state sales and use taxes and the local option sales tax.
33Current law requires retailers to collect sales tax for taxable
34items sold at retail in the state. The bill defines “sold
35at retail in the state” and other similar terms to include
-100-1but not be limited to sales sourced to this state under Code
2chapter 423 (sales and use tax), and provides that it is
3the intent of the general assembly that the definition is a
4conforming amendment consistent with current state law, and
5that the amendment does not change the application of current
6law but instead reflects current law both before and after the
7enactment of the definition. The enactment of the definition
8of “sold at retail in the state” takes effect July 1, 2018.
   9Under current law, Code section 423.15 provides general
10rules for the sourcing of sales to Iowa. The bill amends a
11provision in this Code section relating to when sales tax
12applies to a sale sourced to Iowa, to provide that Iowa sales
13tax applies to a sale sourced to Iowa made by a seller who is a
14retailer maintaining a place of business in this state, or who
15is subject to the new Code section 423.14A (described below).
16The bill also amends provisions relating to the requirement
17of retailers maintaining a place of business in this state to
18collect use tax in Code sections 423.14 and 423.29, to provide
19that use tax shall be collected by retailers not otherwise
20required to collect sales tax under Code chapter 423 (sales and
21use tax).
   22Under current law in Code section 423B.5, the local sales and
23services tax is applicable to transactions within the areas of
24the county imposing the tax. The bill amends this provision
25to provide that a transaction occurring within the taxing area
26includes a sale sourced to a location in that area pursuant
27to the sourcing rules governing the sales and use tax (Code
28sections 423.15 through 423.20).
   29The bill creates new Code section 423.14A that deems certain
30persons, or agents of those persons, to be a retailer and
31a retailer maintaining a place of business in this state
32on or after January 1, 2019, and subjects those persons to
33all requirements of Code chapter 423 (sales and use taxes),
34including but not limited to the requirement to collect and
35remit Iowa sales and use tax, and the requirement to collect
-101-1and remit the local option sales tax. The bill provides that
2the requirements in Code section 423.14A are in addition to,
3and not in lieu of, any other application of Code chapter 423
4to a retailer or a retailer maintaining a place of business in
5this state. Qualifying persons required to collect and remit
6Iowa sales and use tax include any person described below. For
7purposes of any threshold requirement described below that
8involves the sales of taxable items, the bill defines “Iowa
9sales” to include any sale sourced to this state under Code
10chapter 423, or otherwise sold in this state or for delivery
11into this state, of tangible personal property, specified
12digital products, or services.
   13A qualifying person includes any retailer that has gross
14revenue from Iowa sales equal to or exceeding $100,000 for the
15current or previous calendar year.
   16A qualifying person includes any retailer that makes Iowa
17sales in 200 or more separate transactions for the current or
18previous calendar year.
   19A qualifying person includes any retailer that owns,
20licenses, or uses software or data files (as defined in the
21bill) that are installed or stored on property used in this
22state.
   23A qualifying person includes any retailer that uses in-state
24software (as defined in the bill) to make Iowa sales.
   25A qualifying person includes any retailer that provides, or
26enters into an agreement to provide, a content distribution
27network (as defined in the bill) in this state to facilitate,
28accelerate, or enhance the delivery of the retailer’s internet
29site to purchasers. However, this provision does not apply to
30any retailer that has gross revenue from Iowa sales of less
31than $100,000 for the current or previous calendar year.
   32A qualifying person includes any retailer that makes Iowa
33sales through a marketplace provider (as defined in the bill).
34However, this provision does not apply to any retailer that
35has gross revenue from Iowa sales of less than $10,000 for the
-102-1current or previous calendar year.
   2A qualifying person includes any marketplace provider that
3makes or facilitates Iowa sales for a retailer equal to or
4exceeding $100,000, or in 200 or more separate transactions for
5the current or previous year. The bill requires marketplace
6providers to collect Iowa sales and use tax on the entire
7sales price or purchase price paid the purchaser, regardless
8of the amount that will ultimately accrue to or benefit the
9marketplace provider or any other person, includes other
10provisions related to marketplace providers, and subjects
11certain marketplace providers and retailers described in the
12bill to joint and several liability for the collection and
13payment of Iowa sales and use tax.
   14A qualifying person includes a retailer that makes Iowa
15sales through the use of a solicitor (as defined in the bill).
16The bill creates a presumption that a retailer has a solicitor
17in this state under certain circumstances. This provision does
18not apply to retailers that have gross revenue from Iowa sales
19referred by solicitors of $10,000 or less for the current or
20previous calendar year.
   21A qualifying person includes any person that owns, controls,
22rents, licenses, makes available, or uses any tangible or
23intangible property in this state or with a situs in this state
24to make or facilitate a retail sale.
   25A qualifying person includes any person that enters into a
26contract or agreement with a governmental entity, as defined in
27the bill, including but not limited to contracts or agreements
28for the provision of financial assistance or incentives such as
29a tax credit, forgivable loan, grant, tax rebate, or any other
30thing of value. This provision includes certain requirements
31for contractors who submit bids and agreements to state
32agencies similar to language in current Code section 423.2(10).
33The bill strikes the similar language under existing law in
34Code section 423.2(10).
   35A qualifying person includes any affiliate or any retailer
-103-1that is required to collect Iowa sales and use tax, provided
2the affiliate makes retail sales.
   3OTHER MISCELLANEOUS SALES AND USE TAX CHANGES. The bill
4moves provisions relating to the deposit and transfer of sales
5tax revenues in Code section 423.11 to a new Code section
6423.2A, and makes corresponding changes to other provisions of
7the Code that reference those deposit and transfer provisions.
   8The bill amends the definition of “lease or rental”, “use”,
9“use tax”, and “user” in Code section 423.1. The bill also
10amends the definition of “bundled transaction” in Code section
11423.2(8) to incorporate certain language also included in
12the definition of “bundled transaction” for purposes of the
13streamlined sales tax agreement, of which Iowa is a member
14state. The changes to the definition of bundled transaction
15take effect July 1, 2018.
   16The bill defines “personal property” for purposes of the
17sales and use tax to include but not be limited to tangible
18personal property and specified digital products.
   19The bill amends the definition of “place of business” in
20Code section 423.1 to include places where specified digital
21products or services are offered for sale, and provides that
22it is the intent of the general assembly that the change to
23the definition is a conforming amendment consistent with
24current state law, and that the amendment does not change the
25application of current law but instead reflects current law
26both before and after the enactment of the change. These
27changes to the definition of “place of business” take effect
28July 1, 2018.
   29The bill provides that when any retailer required under
30Iowa law to collect and remit sales and use tax fails to do
31so, the retailer and any affiliate that directly, indirectly,
32or constructively controls the retailer shall be held jointly
33and severally liable for the tax and any resulting penalty and
34interest, regardless of whether the affiliate is a retailer.
35The bill provides the department the authority to assess
-104-1the full amount of any tax, penalty, or interest against
2the retailer and these affiliates, and gives the department
3discretion to disregard or look through any organizational
4structure of an enterprise to assess tax, penalty, and interest
5against an affiliate of a retailer. The term “affiliate” for
6purposes of these provisions is defined under existing law in
7Code section 423.1(2).
   8Finally, the bill adds several Code sections relating to
9the requirement to collect sales and use tax to the provisions
10for which failure to comply may subject a retailer to personal
11liability under Code section 421.26.
   12EFFECTIVE DATE PROVISIONS. Except as otherwise provided
13above, the division takes effect January 1, 2019.
   14DIVISION V — HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE
15RENTAL EXCISE TAX. The bill amends the hotel and motel excise
16tax in Code chapter 423A and the automobile rental excise tax
17in Code chapter 423C to expand the types of persons who must
18collect and remit the excise taxes, and to make other changes
19to the administration of the taxes.
   20Current law requires lessors, as defined with respect to
21each excise tax, to collect the excise tax. The bill amends
22the definition of “lessor” under each tax to more broadly
23include any person who acquires a right or interest in lodging
24or an automobile, any person who actually or constructively
25rents lodging or an automobile, lodging facilitators and rental
26facilitators, and retailers who would be required to collect
27the excise taxes if the excise taxes were a sales and use tax
28under Code chapter 423. The bill defines a lodging facilitator
29with respect to the hotel and motel excise tax, and defines a
30rental facilitator with respect to the automobile rental excise
31tax, to include certain persons who facilitate the renting of
32the taxable items by directly or indirectly performing certain
33acts with regard to the rental transaction. The bill modifies
34the definition of “sales price” for purposes of the hotel
35and motel excise tax and “rental price” with respect to the
-105-1automobile rental excise tax.
   2The bill repeals an exemption from the hotel and motel excise
3tax provided for the renting of rooms in a memorial union of an
4Iowa college or university, and expands an exemption for the
5renting of rooms in certain religious institutions so that it
6also applies to the state and local hotel and motel excise tax.
7Under current law, that exemption only applies to the local
8hotel and motel excise tax.
   9The bill modifies the definition of “lodging” for purposes
10of the hotel and motel excise tax to include a cabin,
11apartment, or residential property. The bill provides that it
12is the intent of the general assembly that the change to the
13definition of “lodging” is a conforming amendment consistent
14with current state law, and that the amendments do not change
15the application of current law but instead reflect current law
16both before and after the enactment of these changes. The
17changes to the definition of “lodging” take effect July 1,
182018.
   19Finally, the bill provides that if a transaction under
20either excise tax involves both a lessor and a lodging
21facilitator or rental facilitator, as applicable, then both
22parties will be jointly and severally liable for the applicable
23tax, and further provides that the lodging facilitator or
24rental facilitator shall collect the entire amount of tax
25due on the transaction, regardless of the amount that will
26ultimately accrue to the benefit of the lodging facilitator or
27rental facilitator, or any other person.
   28EFFECTIVE DATE PROVISIONS. Except as otherwise provided
29above, the division takes effect January 1, 2019.
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