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Senate Study Bill 3197 - IntroducedA Bill ForAn Act 1relating to state and local revenue and finance by
2modifying the individual and corporate income taxes, the
3franchise tax, tax credits, the moneys and credits tax, the
4sales and use taxes and local option sales tax, the hotel
5and motel excise tax, the automobile rental excise tax, the
6Iowa educational savings plan trust, and the disabilities
7expenses savings plan trust, making penalties applicable,
8and including immediate effective date and retroactive and
9other applicability provisions.
10BE 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
6INCOME TAX AND FRANCHISE TAX CHANGES BEGINNING IN 2019
7 Sec. 6. Section 217.39, Code 2018, is amended to read as
8follows:
9217.39 Persecuted victims of World War II — reparations —
10heirs.
11Notwithstanding any other law of this state, payments paid
12to and income from lost property of a victim of persecution
13for racial, ethnic, or religious reasons by Nazi Germany or
14any other Axis regime or as an heir of such victim which is
15exempt from state income tax as provided described in section
16422.7, subsection 35, Code 2018, shall not be considered as
17income or an asset for determining the eligibility for state or
18local government benefit or entitlement programs. The proceeds
19are not subject to recoupment for the receipt of governmental
20benefits or entitlements, and liens, except liens for child
21support, are not enforceable against these sums for any reason.
22 Sec. 7. Section 422.3, subsection 5, Code 2018, is amended
23to read as follows:
245. “Internal Revenue Code” means the Internal Revenue Code
25of 1954, prior to the date of its redesignation as the Internal
26Revenue Code of 1986 by the Tax Reform Act of 1986, or means
27the Internal Revenue Code of 1986, as amended and in effect
28on January 1, 2015. This definition shall not be construed
29to include any amendment to the Internal Revenue Code enacted
30after the date specified in the preceding sentence, including
31any amendment with retroactive applicability or effectiveness.
32 Sec. 8. Section 422.4, subsection 1, paragraphs b and c,
33Code 2018, are amended to read as follows:
34b. “Cumulative inflation factor” means the product of the
35annual inflation factor for the 1988 2022 calendar year and
-2-1all annual inflation factors for subsequent calendar years
2as determined pursuant to this subsection. The cumulative
3inflation factor applies to all tax years beginning on or after
4January 1 of the calendar year for which the latest annual
5inflation factor has been determined.
6c. The annual inflation factor for the 1988 2022 calendar
7year is one hundred percent.
8 Sec. 9. Section 422.4, subsection 2, Code 2018, is amended
9by striking the subsection.
10 Sec. 10. Section 422.4, subsection 16, Code 2018, is amended
11to read as follows:
1216. The words “taxable income” mean the net income as
13defined in section 422.7 minus the deductions deduction allowed
14by section 422.9, if available, in the case of individuals;
15in the case of estates or trusts, the words “taxable income”
16mean the taxable income (without a deduction for personal
17exemption) as computed for federal income tax purposes under
18the Internal Revenue Code, but with the adjustments specified
19in section 422.7 plus the Iowa income tax deducted in computing
20the federal taxable income and minus federal income taxes as
21provided in section 422.9.
22 Sec. 11. Section 422.5, subsection 1, paragraphs a, b, c, d,
23and e, Code 2018, are amended by striking the paragraphs and
24inserting in lieu thereof the following:
25a. On all taxable income from zero through twelve thousand
26dollars in the case of a married couple filing jointly, or from
27zero to six thousand dollars in the case of all other persons,
28five percent.
29b. On all taxable income exceeding twelve thousand dollars
30but not exceeding thirty thousand dollars in the case of a
31married couple filing jointly, or exceeding six thousand
32dollars but not exceeding fifteen thousand dollars in the case
33of all other persons, five and one-quarter percent.
34c. On all taxable income exceeding thirty thousand dollars
35but not exceeding sixty thousand dollars in the case of a
-3-1married couple filing jointly, or exceeding fifteen thousand
2dollars but not exceeding thirty thousand dollars in the case
3of all other persons, five and one-half percent.
4d. On all taxable income exceeding sixty thousand dollars
5but not exceeding one hundred fifty thousand dollars in the
6case of a married couple filing jointly, or exceeding thirty
7thousand dollars but not exceeding seventy-five thousand
8dollars in the case of all other persons, six percent.
9e. On all taxable income exceeding one hundred fifty
10thousand dollars in the case of a married couple filing
11jointly, or exceeding seventy-five thousand dollars in the case
12of all other persons, the following:
13(1) Six and six-tenths percent for tax years beginning
14during the 2019 calendar year.
15(2) Six and one-half percent for tax years beginning during
16the 2020 calendar year.
17(3) Six and four-tenths percent for tax years beginning
18during the 2021 calendar year.
19(4) Six and three-tenths percent for tax years beginning on
20or after January 1, 2022.
21 Sec. 12. Section 422.5, subsection 1, paragraphs f, g, h,
22and i, Code 2018, are amended by striking the paragraphs.
23 Sec. 13. Section 422.5, subsection 1, paragraph j, Code
242018, is amended to read as follows:
25j. (1) The tax imposed upon the taxable income of a
26nonresident shall be computed by reducing the amount determined
27pursuant to paragraphs “a” through “i” “e” by the amounts of
28nonrefundable credits under this division and by multiplying
29this resulting amount by a fraction of which the nonresident’s
30net income allocated to Iowa, as determined in section
31422.8, subsection 2, paragraph “a”, is the numerator and the
32nonresident’s total net income computed under section 422.7 is
33the denominator. This provision also applies to individuals
34who are residents of Iowa for less than the entire tax year.
35(2) (a) The tax imposed upon the taxable income of a
-4-1resident shareholder in an S corporation or of an estate
2or trust with a situs in Iowa that is a shareholder in an S
3corporation, which S corporation has in effect for the tax
4year an election under subchapter S of the Internal Revenue
5Code and carries on business within and without the state,
6may be computed by reducing the amount determined pursuant to
7paragraphs “a” through “i” “e” by the amounts of nonrefundable
8credits under this division and by multiplying this resulting
9amount by a fraction of which the resident’s or estate’s
10or trust’s net income allocated to Iowa, as determined in
11section 422.8, subsection 2, paragraph “b”, is the numerator
12and the resident’s or estate’s or trust’s total net income
13computed under section 422.7 is the denominator. If a resident
14shareholder, or an estate or trust with a situs in Iowa
15that is a shareholder, has elected to take advantage of this
16subparagraph (2), and for the next tax year elects not to take
17advantage of this subparagraph, the resident or estate or
18trust shareholder shall not reelect to take advantage of this
19subparagraph for the three tax years immediately following the
20first tax year for which the shareholder elected not to take
21advantage of this subparagraph, unless the director consents to
22the reelection. This subparagraph also applies to individuals
23who are residents of Iowa for less than the entire tax year.
24(b) This subparagraph (2) shall not affect the amount of
25the taxpayer’s checkoffs under this division, the credits from
26tax provided under this division, and the allocation of these
27credits between spouses if the taxpayers filed separate returns
28or separately on combined returns.
29 Sec. 14. Section 422.5, subsection 2, Code 2018, is amended
30by striking the subsection.
31 Sec. 15. Section 422.5, subsections 3 and 3B, Code 2018, are
32amended to read as follows:
333. a. The tax shall not be imposed on a resident or
34nonresident whose net income, as defined in section 422.7, is
35thirteen thousand five hundred dollars or less in the case
-5-1of married persons filing jointly or filing separately on a
2combined return, heads of household, and surviving spouses or
3nine thousand dollars or less in the case of all other persons;
4but in the event that the payment of tax under this division
5would reduce the net income to less than thirteen thousand five
6hundred dollars or nine thousand dollars as applicable, then
7the tax shall be reduced to that amount which would result
8in allowing the taxpayer to retain a net income of thirteen
9thousand five hundred dollars or nine thousand dollars as
10applicable. The preceding sentence does not apply to estates
11or trusts. For the purpose of this subsection, the entire net
12income, including any part of the net income not allocated
13to Iowa, shall be taken into account. For purposes of this
14subsection, net income includes all amounts of pensions or
15other retirement income, except for military retirement pay
16excluded under section 422.7, subsection 31A, paragraph “a”,
17or section 422.7, subsection 31B, paragraph “a”, received from
18any source which is not taxable under this division as a result
19of the government pension exclusions in section 422.7, or any
20other state law. If the combined net income of a husband and
21wife exceeds thirteen thousand five hundred dollars, neither
22of them shall receive the benefit of this subsection, and it
23is immaterial whether they file a joint return or separate
24returns. However, if a husband and wife file separate returns
25and have a combined net income of thirteen thousand five
26hundred dollars or less, neither spouse shall receive the
27benefit of this paragraph, if one spouse has a net operating
28loss and elects to carry back or carry forward the loss as
29provided under the Internal Revenue Code or in section 422.9,
30subsection 3. A person who is claimed as a dependent by
31another person as defined in section 422.12 shall not receive
32the benefit of this subsection if the person claiming the
33dependent has net income exceeding thirteen thousand five
34hundred dollars or nine thousand dollars as applicable or the
35person claiming the dependent and the person’s spouse have
-6-1combined net income exceeding thirteen thousand five hundred
2dollars or nine thousand dollars as applicable.
3b. In lieu of the computation in subsection 1 or 2, or in
4paragraph “a” of this subsection, if the married persons’,
5 filing jointly or filing separately on a combined return,
6head of household’s, or surviving spouse’s net income exceeds
7thirteen thousand five hundred dollars, the regular tax imposed
8under this division shall be the lesser of the maximum state
9individual income tax rate for the tax year times the portion
10of the net income in excess of thirteen thousand five hundred
11dollars or the regular tax liability computed without regard
12to this sentence. Taxpayers electing to file separately shall
13compute the alternate tax described in this paragraph using the
14total net income of the husband and wife. The alternate tax
15described in this paragraph does not apply if one spouse elects
16to carry back or carry forward the loss as provided under the
17Internal Revenue Code or in section 422.9, subsection 3.
183B. a. The tax shall not be imposed on a resident or
19nonresident who is at least sixty-five years old on December
2031 of the tax year and whose net income, as defined in section
21422.7, is thirty-two thousand dollars or less in the case
22of married persons filing jointly or filing separately on a
23combined return, heads of household, and surviving spouses or
24twenty-four thousand dollars or less in the case of all other
25persons; but in the event that the payment of tax under this
26division would reduce the net income to less than thirty-two
27thousand dollars or twenty-four thousand dollars as applicable,
28then the tax shall be reduced to that amount which would result
29in allowing the taxpayer to retain a net income of thirty-two
30thousand dollars or twenty-four thousand dollars as applicable.
31The preceding sentence does not apply to estates or trusts.
32For the purpose of this subsection, the entire net income,
33including any part of the net income not allocated to Iowa,
34shall be taken into account. For purposes of this subsection,
35net income includes all amounts of pensions or other retirement
-7-1income, except for military retirement pay excluded under
2section 422.7, subsection 31A, paragraph “a”, or section 422.7,
3subsection 31B, paragraph “a”, received from any source which is
4not taxable under this division as a result of the government
5pension exclusions in section 422.7, or any other state law.
6If the combined net income of a husband and wife exceeds
7thirty-two thousand dollars, neither of them shall receive the
8benefit of this subsection, and it is immaterial whether they
9file a joint return or separate returns. However, if a husband
10and wife file separate returns and have a combined net income
11of thirty-two thousand dollars or less, neither spouse shall
12receive the benefit of this paragraph, if one spouse has a net
13operating loss and elects to carry back or carry forward the
14loss as provided under the Internal Revenue Code or in section
15422.9, subsection 3. A person who is claimed as a dependent by
16another person as defined in section 422.12 shall not receive
17the benefit of this subsection if the person claiming the
18dependent has net income exceeding thirty-two thousand dollars
19or twenty-four thousand dollars as applicable or the person
20claiming the dependent and the person’s spouse have combined
21net income exceeding thirty-two thousand dollars or twenty-four
22thousand dollars as applicable.
23b. In lieu of the computation in subsection 1, 2, or 3, if
24the married persons’, filing jointly or filing separately on
25a combined return, head of household’s, or surviving spouse’s
26net income exceeds thirty-two thousand dollars, the regular tax
27imposed under this division shall be the lesser of the maximum
28state individual income tax rate for the tax year times the
29portion of the net income in excess of thirty-two thousand
30dollars or the regular tax liability computed without regard
31to this sentence. Taxpayers electing to file separately shall
32compute the alternate tax described in this paragraph using the
33total net income of the husband and wife. The alternate tax
34described in this paragraph does not apply if one spouse elects
35to carry back or carry forward the loss as provided under the
-8-1Internal Revenue Code or in section 422.9, subsection 3.
2c. This subsection applies even though one spouse has not
3attained the age of sixty-five, if the other spouse is at least
4sixty-five at the end of the tax year.
5 Sec. 16. Section 422.5, subsection 6, Code 2018, is amended
6by striking the subsection and inserting in lieu thereof the
7following:
86. Upon determination of the latest cumulative inflation
9factor, the director shall reduce each tax rate in subsection
101, paragraphs “a” through “d”, and paragraph “e”, subparagraph
11(4), by the same percentage that the latest cumulative
12inflation factor exceeds one hundred percent, shall round off
13the resulting rate to the nearest one-hundredth of one percent,
14and shall incorporate the result into the income tax forms and
15instructions for each tax year.
16 Sec. 17. Section 422.7, unnumbered paragraph 1, Code 2018,
17is amended to read as follows:
18The term “net income” means the adjusted gross income before
19the net operating loss deduction taxable income as properly
20computed for federal income tax purposes under section 63 the
21Internal Revenue Code, with the following adjustments:
22 Sec. 18. Section 422.7, Code 2018, is amended by adding the
23following new subsections:
24 NEW SUBSECTION. 4. Add any federal net operating loss
25deduction carried over from a taxable year beginning prior to
26January 1, 2019.
27 NEW SUBSECTION. 6. a. For tax years beginning in the 2019
28calendar year, subtract the amount of federal income taxes
29paid during the tax year to the extent payment is for a tax
30year beginning prior to January 1, 2019, and add any federal
31income tax refunds received during the tax year to the extent
32the federal income tax was deducted for a tax year beginning
33prior to January 1, 2019. Where married persons who have filed
34a joint federal income tax return file separately for state tax
35purposes, such total shall be divided between them according
-9-1to the portion of the total paid by each. Federal income taxes
2paid for a tax year in which an Iowa return was not required to
3be filed shall not be subtracted.
4b. Notwithstanding any other provision of law to the
5contrary, amounts subtracted or added pursuant to this
6subsection shall not be included in the calculation of net
7income for purposes of section 422.5, subsection 3 or 3B, or
8section 422.13.
9 Sec. 19. Section 422.7, subsection 12, paragraph a,
10unnumbered paragraph 1, Code 2018, is amended to read as
11follows:
12If For tax years beginning prior to January 1, 2022, if the
13adjusted gross federal taxable income includes income or loss
14from a small business operated by the taxpayer, an additional
15deduction shall be allowed in computing the income or loss from
16the small business if the small business hired for employment
17in the state during its annual accounting period ending with or
18during the taxpayer’s tax year any of the following:
19 Sec. 20. Section 422.7, subsection 12A, paragraph a,
20unnumbered paragraph 1, Code 2018, is amended to read as
21follows:
22If For tax years beginning prior to January 1, 2022, if the
23adjusted gross federal taxable income includes income or loss
24from a business operated by the taxpayer, and if the business
25does not qualify for the adjustment under subsection 12, an
26additional deduction shall be allowed in computing the income
27or loss from the business if the business hired for employment
28in the state during its annual accounting period ending with or
29during the taxpayer’s tax year either of the following:
30 Sec. 21. Section 422.7, subsection 13, Code 2018, is amended
31by striking the subsection and inserting in lieu thereof the
32following:
3313. Subtract, to the extent included, the amount of social
34security benefits taxable under section 86 of the Internal
35Revenue Code.
-10-1 Sec. 22. Section 422.7, Code 2018, is amended by adding the
2following new subsections:
3 NEW SUBSECTION. 18. Add, to the extent deducted for federal
4tax purposes, charitable contributions under section 170 of
5the Internal Revenue Code to the extent such contribution was
6made to an organization for the purpose of deposit in the Iowa
7education savings plan trust established in chapter 12D, and
8the taxpayer designated that any part of the contribution be
9used for the direct benefit of any dependent of the taxpayer or
10any other single beneficiary designated by the taxpayer.
11 NEW SUBSECTION. 19. a. Subtract, to the extent included,
12income resulting from the payment by an employer of the
13taxpayer, whether paid to the taxpayer or to a lender, of
14principal or interest on any qualified education loan incurred
15by the taxpayer.
16b. If the taxpayer has a deduction in computing federal
17taxable income under section 221 of the Internal Revenue Code
18for interest on a qualified education loan, the taxpayer shall
19recompute for purposes of this subsection the amount of the
20deduction under paragraph “a” by not subtracting any amount of
21income resulting from the employer’s payment of interest on a
22qualified education loan that was also deducted by the taxpayer
23under section 221 of the Internal Revenue Code.
24c. For purposes of this subsection, “qualified education
25loan” means the same as defined in section 221 of the Internal
26Revenue Code.
27 Sec. 23. Section 422.7, subsection 31, Code 2018, is amended
28to read as follows:
2931. For a person who is disabled, or is fifty-five years of
30age or older, or is the surviving spouse of an individual or
31a survivor having an insurable interest in an individual who
32would have qualified for the exemption under this subsection
33for the tax year, subtract, to the extent included, the
34total amount of a governmental or other pension or retirement
35pay, including, but not limited to, defined benefit or
-11-1defined contribution plans, annuities, individual retirement
2accounts, plans maintained or contributed to by an employer,
3or maintained or contributed to by a self-employed person as
4an employer, and deferred compensation plans or any earnings
5attributable to the deferred compensation plans, up to a
6maximum of six ten thousand dollars for a person, other than a
7husband or wife, who files a separate state income tax return
8and up to a maximum of twelve twenty thousand dollars for a
9husband and wife who file a joint state income tax return.
10However, a surviving spouse who is not disabled or fifty-five
11years of age or older can only exclude the amount of pension or
12retirement pay received as a result of the death of the other
13spouse. A husband and wife filing separate state income tax
14returns or separately on a combined state return are allowed
15a combined maximum exclusion under this subsection of up to
16twelve twenty thousand dollars. The twelve twenty thousand
17dollar exclusion shall be allocated to the husband or wife
18in the proportion that each spouse’s respective pension and
19retirement pay received bears to total combined pension and
20retirement pay received.
21 Sec. 24. Section 422.7, subsection 41, Code 2018, is amended
22by adding the following new paragraph:
23 NEW PARAGRAPH. 0e. Add, to the extent deducted for
24federal tax purposes, interest, taxes, and other miscellaneous
25expenses to the extent such amounts are eligible home costs
26in connection with a qualified home purchase that were paid
27or reimbursed from funds in a first-time homebuyer savings
28account.
29 Sec. 25. Section 422.7, subsection 44, paragraph a,
30unnumbered paragraph 1, Code 2018, is amended to read as
31follows:
32If For tax years beginning before January 1, 2022, if the
33taxpayer, while living, donates one or more of the taxpayer’s
34human organs to another human being for immediate human organ
35transplantation during the tax year, subtract, to the extent
-12-1not otherwise excluded, the following unreimbursed expenses
2incurred by the taxpayer and related to the taxpayer’s organ
3donation:
4 Sec. 26. Section 422.7, subsection 47, Code 2018, is amended
5to read as follows:
647. Subtract, to the extent not otherwise deducted in
7computing adjusted gross federal taxable income, the amounts
8paid by the taxpayer to the department of veterans affairs for
9the purpose of providing grants under the injured veterans
10grant program established in section 35A.14. Amounts
11subtracted under this subsection shall not be used by the
12taxpayer in computing the amount of charitable contributions as
13defined by section 170 of the Internal Revenue Code.
14 Sec. 27. Section 422.7, Code 2018, is amended by adding the
15following new subsection:
16 NEW SUBSECTION. 51. The additional first-year depreciation
17allowance authorized in section 168(k) of the Internal Revenue
18Code does not apply in computing net income for state tax
19purposes. If the taxpayer has taken the additional first-year
20depreciation allowance for purposes of computing federal
21taxable income, then the taxpayer shall make the following
22adjustments to federal taxable income when computing net income
23for state tax purposes:
24a. Add the total amount of depreciation taken under section
25168(k) of the Internal Revenue Code for the tax year.
26b. Subtract the amount of depreciation allowable under the
27modified accelerated cost recovery system described in section
28168 of the Internal Revenue Code and calculated without regard
29to section 168(k).
30c. Any other adjustments to gains or losses necessary to
31reflect the adjustments made in paragraphs “a” and “b”. The
32director shall adopt rules for the administration of this
33paragraph.
34 Sec. 28. Section 422.7, subsections 3, 7, 8, 9, 10, 11, 14,
3515, 16, 20, 21, 22, 23, 24, 25, 26, 29, 30, 35, 36, 37, 39, 39A,
-13-139B, 40, 43, 45, 49, 53, 55, 56, 57, and 58, Code 2018, are
2amended by striking the subsections.
3 Sec. 29. Section 422.8, subsection 4, Code 2018, is amended
4by striking the subsection.
5 Sec. 30. Section 422.9, Code 2018, is amended by striking
6the section and inserting in lieu thereof the following:
7422.9 Iowa net operating loss incurred prior to January 1,
82019.
9Any Iowa net operating loss carried over from a taxable year
10beginning prior to January 1, 2019, may be deducted as provided
11in section 422.9, subsection 3, Code 2018.
12 Sec. 31. Section 422.11S, subsection 4, Code 2018, is
13amended to read as follows:
144. Married taxpayers who file separate returns or file
15separately on a combined return form must determine the tax
16credit under subsection 1 based upon their combined net income
17and allocate the total credit amount to each spouse in the
18proportion that each spouse’s respective net income bears to
19the total combined net income. Nonresidents or part-year
20residents of Iowa must determine their tax credit in the ratio
21of their Iowa source net income to their all source net income.
22Nonresidents or part-year residents who are married and elect
23to file separate returns or to file separately on a combined
24return form must allocate the tax credit between the spouses
25in the ratio of each spouse’s Iowa source net income to the
26combined Iowa source net income of the taxpayers.
27 Sec. 32. Section 422.12B, subsection 2, Code 2018, is
28amended to read as follows:
292. Married taxpayers electing to file separate returns or
30filing separately on a combined return may avail themselves
31of the earned income credit by allocating the earned income
32credit to each spouse in the proportion that each spouse’s
33respective earned income bears to the total combined earned
34income. Taxpayers affected by the allocation provisions of
35section 422.8 shall be permitted a deduction for the credit
-14-1only in the amount fairly and equitably allocable to Iowa under
2rules prescribed by the director.
3 Sec. 33. Section 422.12C, subsection 4, Code 2018, is
4amended to read as follows:
54. Married taxpayers who have filed joint federal returns
6electing to file separate returns or to file separately on a
7combined return form must determine the child and dependent
8care credit under subsection 1 or the early childhood
9development tax credit under subsection 2 based upon their
10combined net income and allocate the total credit amount to
11each spouse in the proportion that each spouse’s respective net
12income bears to the total combined net income. Nonresidents
13or part-year residents of Iowa must determine their Iowa child
14and dependent care credit in the ratio of their Iowa source
15net income to their all source net income. Nonresidents or
16part-year residents who are married and elect to file separate
17returns or to file separately on a combined return form must
18allocate the Iowa child and dependent care credit between the
19spouses in the ratio of each spouse’s Iowa source net income to
20the combined Iowa source net income of the taxpayers.
21 Sec. 34. Section 422.13, subsection 1, paragraph c, Code
222018, is amended by striking the paragraph.
23 Sec. 35. Section 422.16, subsection 1, paragraph f, Code
242018, is amended by striking the paragraph.
25 Sec. 36. Section 422.21, subsections 2, 5, and 7, Code 2018,
26are amended to read as follows:
272. An individual in the armed forces of the United States
28serving in an area designated by the president of the United
29States or the United States Congress as a combat zone or as a
30qualified hazardous duty area, or deployed outside the United
31States away from the individual’s permanent duty station while
32participating in an operation designated by the United States
33secretary of defense as a contingency operation as defined
34in 10 U.S.C. §101(a)(13), or which became such a contingency
35operation by the operation of law, or an individual serving in
-15-1support of those forces, is allowed the same additional time
2period after leaving the combat zone or the qualified hazardous
3duty area, or ceasing to participate in such contingency
4operation, or after a period of continuous hospitalization, to
5file a state income tax return or perform other acts related
6to the department, as would constitute timely filing of the
7return or timely performance of other acts described in section
87508(a) of the Internal Revenue Code. An individual on active
9duty federal military service in the armed forces, armed forces
10military reserve, or national guard who is deployed outside
11the United States in other than a combat zone, qualified
12hazardous duty area, or contingency operation is allowed the
13same additional period of time described in section 7508(a)
14of the Internal Revenue Code to file a state income tax
15return or perform other acts related to the department. For
16the purposes of this subsection, “other acts related to the
17department” includes filing claims for refund for any tax
18administered by the department, making tax payments other than
19withholding payments, filing appeals on the tax matters, filing
20other tax returns, and performing other acts described in the
21department’s rules. The additional time period allowed applies
22to the spouse of the individual described in this subsection
23to the extent the spouse files jointly or separately on the
24combined return form with the individual or when the spouse
25is a party with the individual to any matter for which the
26additional time period is allowed.
275. The director shall determine for the 1989 2022 and each
28subsequent calendar year the annual and cumulative inflation
29factors for each calendar year to be applied to tax years
30beginning on or after January 1 of that calendar year. The
31director shall compute the new dollar amounts tax rates
32 as specified to be adjusted in section 422.5 by the latest
33cumulative inflation factor and round off the result to the
34nearest one dollar one-hundredth of one percent. The annual
35and cumulative inflation factors determined by the director
-16-1are not rules as defined in section 17A.2, subsection 11. The
2director shall determine for the 1990 calendar year and each
3subsequent calendar year the annual and cumulative standard
4deduction factors to be applied to tax years beginning on or
5after January 1 of that calendar year. The director shall
6compute the new dollar amounts of the standard deductions
7specified in section 422.9, subsection 1, by the latest
8cumulative standard deduction factor and round off the result
9to the nearest ten dollars. The annual and cumulative standard
10deduction factors determined by the director are not rules as
11defined in section 17A.2, subsection 11.
127. If married taxpayers file a joint return or file
13separately on a combined return in accordance with rules
14prescribed by the director, both spouses are jointly and
15severally liable for the total tax due on the return, except
16when one spouse is considered to be an innocent spouse under
17criteria established pursuant to section 6015 of the Internal
18Revenue Code.
19 Sec. 37. Section 422.32, subsection 1, paragraph h, Code
202018, is amended to read as follows:
21h. “Internal Revenue Code” means the Internal Revenue Code
22of 1954, prior to the date of its redesignation as the Internal
23Revenue Code of 1986 by the Tax Reform Act of 1986, or means
24the Internal Revenue Code of 1986, as amended and in effect
25on January 1, 2015. This definition shall not be construed
26to include any amendment to the Internal Revenue Code enacted
27after the date specified in the preceding sentence, including
28any amendment with retroactive applicability or effectiveness.
29 Sec. 38. Section 422.33, subsection 1, paragraphs a, b, c,
30and d, Code 2018, are amended to read as follows:
31a. On the first twenty-five thousand dollars of taxable
32income, or any part thereof, the rate of six percent for tax
33years beginning prior to January 1, 2021, and the rate of
34five and one-half percent for tax years beginning on or after
35January 1, 2021.
-17- 1b. On taxable income between twenty-five thousand dollars
2and one hundred thousand dollars or any part thereof, the rate
3of eight percent for tax years beginning prior to January 1,
42021, and the rate of five and one-half percent for tax years
5beginning on or after January 1, 2021.
6c. On taxable income between one hundred thousand dollars
7and two hundred fifty thousand dollars or any part thereof, the
8rate of ten percent for tax years beginning prior to January 1,
92020, the rate of eight percent for tax years beginning during
10the 2020 calendar year, and the rate of five and one-half
11percent for tax years beginning on or after January 1, 2021.
12d. On taxable income of two hundred fifty thousand dollars
13or more, the rate of twelve ten percent for tax years beginning
14on or after January 1, 2019, but prior to January 1, 2021, the
15rate of eight percent for tax years beginning during the 2021
16calendar year, and the rate of seven percent for tax years
17beginning on or after January 1, 2022.
18 Sec. 39. Section 422.33, subsection 4, Code 2018, is amended
19by striking the subsection.
20 Sec. 40. Section 422.35, unnumbered paragraph 1, Code 2018,
21is amended to read as follows:
22The term “net income” means the taxable income before the
23net operating loss deduction, as properly computed for federal
24income tax purposes under the Internal Revenue Code, with the
25following adjustments:
26 Sec. 41. Section 422.35, subsection 4, Code 2018, is amended
27to read as follows:
284. Subtract fifty percent of the federal income taxes paid
29or accrued, as the case may be, during the tax year to the
30extent payment is for a tax year beginning prior to January 1,
312019, adjusted by any federal income tax refunds; and add the
32Iowa income tax deducted in computing said taxable income to
33the extent the tax was deducted for a tax year beginning prior
34to January 1, 2019.
35 Sec. 42. Section 422.35, subsection 6, paragraph a,
-18-1unnumbered paragraph 1, Code 2018, is amended to read as
2follows:
3If For tax years beginning before January 1, 2022, if the
4taxpayer is a small business corporation, subtract an amount
5equal to sixty-five percent of the wages paid to individuals,
6but not to exceed twenty thousand dollars per individual, named
7in subparagraphs (1), (2), and (3) who were hired for the first
8time by the taxpayer during the tax year for work done in this
9state:
10 Sec. 43. Section 422.35, subsection 6A, paragraph a,
11unnumbered paragraph 1, Code 2018, is amended to read as
12follows:
13If For tax years beginning prior to January 1, 2022, if the
14taxpayer is a business corporation and does not qualify for
15the adjustment under subsection 6, subtract an amount equal to
16sixty-five percent of the wages paid to individuals, but shall
17not exceed twenty thousand dollars per individual, named in
18subparagraphs (1) and (2) who were hired for the first time by
19the taxpayer during the tax year for work done in this state:
20 Sec. 44. Section 422.35, subsection 11, Code 2018, is
21amended by striking the subsection and inserting in lieu
22thereof the following:
2311. a. Add any federal net operating loss deduction carried
24over from a taxable year beginning prior to January 1, 2019.
25b. Any Iowa net operating loss carried over from a taxable
26year beginning prior to January 1, 2019, may be deducted as
27provided in section 422.35, subsection 11, Code 2018.
28 Sec. 45. Section 422.35, Code 2018, is amended by adding the
29following new subsection:
30 NEW SUBSECTION. 23. The additional first-year depreciation
31allowance authorized in section 168(k) of the Internal Revenue
32Code does not apply in computing net income for state tax
33purposes. If the taxpayer has taken the additional first-year
34depreciation allowance for purposes of computing federal
35taxable income, then the taxpayer shall make the following
-19-1adjustments to federal taxable income when computing net income
2for state tax purposes:
3a. Add the total amount of depreciation taken under section
4168(k) of the Internal Revenue Code for the tax year.
5b. Subtract the amount of depreciation allowable under the
6modified accelerated cost recovery system described in section
7168 of the Internal Revenue Code and calculated without regard
8to section 168(k).
9c. Any other adjustments to gains or losses necessary to
10reflect the adjustments made in paragraphs “a” and “b”. The
11director shall adopt rules for the administration of this
12paragraph.
13 Sec. 46. Section 422.35, subsections 3, 5, 7, 8, 10, 16,
1417, 18, 19, 19A, 19B, 20, 22, and 24, Code 2018, are amended by
15striking the subsections.
16 Sec. 47. Section 541B.3, subsection 1, paragraph b, Code
172018, is amended to read as follows:
18b. A married couple electing to file a joint Iowa individual
19income tax return may establish a joint first-time homebuyer
20savings account. Married taxpayers electing to file separate
21tax returns or separately on a combined tax return for Iowa tax
22purposes shall not establish or maintain a joint first-time
23homebuyer savings account.
24 Sec. 48. Section 541B.6, Code 2018, is amended to read as
25follows:
26541B.6 Tax considerations.
27The state income tax treatment of a first-time homebuyer
28savings account shall be as provided in section 422.7,
29subsection 41, and section 422.9, subsection 2, paragraph “k”.
30 Sec. 49. EFFECTIVE DATE. This division of this Act takes
31effect January 1, 2019.
32 Sec. 50. APPLICABILITY. This division of this Act applies
33to tax years beginning on or after January 1, 2019.
34DIVISION III
35tax credits
-20-1 Sec. 51. Section 8.57E, subsection 2, Code 2018, is amended
2to read as follows:
32. Moneys in the taxpayers trust fund shall only be used
4pursuant to appropriations or transfers made by the general
5assembly for tax relief. During each fiscal year beginning on
6or after July 1, 2014, but before June 30, 2020, in which the
7balance of the taxpayers trust fund equals or exceeds thirty
8million dollars, there is transferred from the taxpayers trust
9fund to the Iowa taxpayers trust fund tax credit fund created
10in section 422.11E, the entire balance of the taxpayers trust
11fund to be used for the Iowa taxpayers trust fund tax credit in
12accordance with section 422.11E, subsection 5.
13 Sec. 52. Section 15.119, subsection 2, paragraph a, Code
142018, is amended by striking the paragraph and inserting in
15lieu thereof the following:
16a. The high quality jobs program administered pursuant
17to sections 15.326 through 15.336. In allocating tax
18credits pursuant to this subsection, the authority shall not
19allocate more than eighty million dollars for purposes of this
20paragraph.
21 Sec. 53. Section 15.119, subsection 2, paragraphs d, e, and
22g, Code 2018, are amended to read as follows:
23d. The tax credits for investments in qualifying businesses
24issued pursuant to section 15E.43. In allocating tax credits
25pursuant to this subsection, the authority shall not allocate
26two more than four million dollars for purposes of this
27paragraph, unless the authority determines that the tax credits
28awarded will be less than that amount.
29e. The tax credits for investments in an innovation fund
30pursuant to section 15E.52. In allocating tax credits pursuant
31to this subsection in a fiscal year in which the allocation for
32purposes of paragraph “d” does not exceed two million dollars,
33the authority shall not allocate more than eight million
34dollars for purposes of this paragraph, unless the authority
35determines that the tax credits awarded will be less than that
-21-1amount. In allocating tax credits pursuant to this subsection
2in a fiscal year in which the allocation for purposes of
3paragraph “d” exceeds two million dollars, the authority shall
4not allocate for purposes of this paragraph an amount that
5exceeds an amount equal to the difference of eight million
6dollars less the amount that the allocation for purposes of
7paragraph “d” exceeds two million dollars for the same fiscal
8year.
9g. The workforce housing tax incentives program administered
10pursuant to sections 15.351 through 15.356. In allocating
11tax credits pursuant to this subsection, the authority shall
12not allocate more than twenty twenty-two million dollars for
13purposes of this paragraph. Of the moneys allocated under this
14paragraph, five seven million dollars shall be reserved for
15allocation to qualified housing projects in small cities, as
16defined in section 15.352, that are registered on or after July
171, 2017.
18 Sec. 54. Section 15.329, subsection 1, paragraph f, Code
192018, is amended to read as follows:
20f. The business shall not be a retail business or a business
21where entrance is limited by a cover charge or membership
22requirement, or a web search portal business as defined in
23section 423.3, subsection 93, or a data center business as
24defined in section 423.3, subsection 95, unless such web search
25portal business or data center business had a physical presence
26in this state prior to July 1, 2018.
27 Sec. 55. Section 15.331A, subsection 1, Code 2018, is
28amended to read as follows:
291. The eligible business shall be entitled to a refund
30of the sales and use taxes paid under chapter 423 for gas,
31electricity, water, or sewer utility services, goods, wares, or
32merchandise, or on services rendered, furnished, or performed
33to or for a contractor or subcontractor and used in the
34fulfillment of a written contract relating to the construction
35or equipping of a facility that is part of a project of the
-22-1eligible business. Taxes attributable to intangible property
2and furniture and furnishings shall not be refunded. However,
3an eligible business shall be entitled to a refund for taxes
4attributable to racks, shelving, and conveyor equipment to be
5used in a warehouse or distribution center subject to section
615.331C.
7 Sec. 56. Section 15.331C, Code 2018, is amended to read as
8follows:
915.331C Corporate tax credit for certain sales taxes paid by
10third-party developer.
111. An eligible business may claim a corporate tax credit
12in an amount equal to the sales and use taxes paid by a
13third-party developer under chapter 423 for gas, electricity,
14water, or sewer utility services, goods, wares, or merchandise,
15or on services rendered, furnished, or performed to or for a
16contractor or subcontractor and used in the fulfillment of a
17written contract relating to the construction or equipping of
18a facility of the eligible business. Taxes attributable to
19intangible property and furniture and furnishings shall not
20be included, but taxes attributable to racks, shelving, and
21conveyor equipment to be used in a warehouse or distribution
22center shall be included. Any credit in excess of the tax
23liability for the tax year may be credited to the tax liability
24for the following seven years or until depleted, whichever
25occurs earlier. An eligible business may elect to receive a
26refund of all or a portion of an unused tax credit.
272. A third-party developer shall state under oath, on
28forms provided by the department of revenue, the amount of
29taxes paid as described in subsection 1 and shall submit such
30forms to the department of revenue. The taxes paid shall be
31itemized to allow identification of the taxes attributable
32to racks, shelving, and conveyor equipment to be used in a
33warehouse or distribution center. After receiving the form
34from the third-party developer, the department of revenue shall
35issue a tax credit certificate to the eligible business equal
-23-1to the sales and use taxes paid by a third-party developer
2under chapter 423 for gas, electricity, water, or sewer
3utility services, goods, wares, or merchandise, or on services
4rendered, furnished, or performed to or for a contractor or
5subcontractor and used in the fulfillment of a written contract
6relating to the construction or equipping of a facility.
7The department of revenue shall also issue a tax credit
8certificate to the eligible business equal to the taxes paid
9and attributable to racks, shelving, and conveyor equipment to
10be used in a warehouse or distribution center. The aggregate
11combined total amount of tax refunds under section 15.331A for
12taxes attributable to racks, shelving, and conveyor equipment
13to be used in a warehouse or distribution center and of tax
14credit certificates issued by the department of revenue for the
15taxes paid and attributable to racks, shelving, and conveyor
16equipment to be used in a warehouse or distribution center
17shall not exceed five hundred thousand dollars in a fiscal
18year. If an applicant for a tax credit certificate does not
19receive a certificate for the taxes paid and attributable
20to racks, shelving, and conveyor equipment to be used in a
21warehouse or distribution center, the application shall be
22considered in succeeding fiscal years. The eligible business
23shall not claim a tax credit under this section unless a tax
24credit certificate issued by the department of revenue is
25included with the taxpayer’s tax return for the tax year for
26which the tax credit is claimed. A tax credit certificate
27shall contain the eligible business’s name, address, tax
28identification number, the amount of the tax credit, and other
29information deemed necessary by the department of revenue.
30 Sec. 57. Section 15.335, subsection 7, paragraph b, Code
312018, is amended by striking the paragraph and inserting in
32lieu thereof the following:
33b. For purposes of this section, “Internal Revenue Code”
34means the same as defined in section 422.3.
35 Sec. 58. Section 15.335, subsection 8, Code 2018, is amended
-24-1by striking the subsection and inserting in lieu thereof the
2following:
38. Any tax credit in excess of the taxpayer’s liability for
4the tax year is not refundable and may not be credited to the
5tax liability for any other year.
6 Sec. 59. Section 16.80, subsection 5, paragraphs a and b,
7Code 2018, are amended to read as follows:
8a. Except as provided in paragraph “b”, the tax credit shall
9equal five seven percent of the amount paid to the taxpayer
10under the agreement.
11b. The tax credit shall equal fifteen seventeen percent
12of the amount paid to the taxpayer from crops or animals sold
13under an agreement in which the payment is exclusively made
14from the sale of crops or animals.
15 Sec. 60. Section 16.80, subsection 10, Code 2018, is amended
16to read as follows:
1710. The amount of tax credit certificates that may be issued
18pursuant to this section shall not exceed six eight million
19dollars in any fiscal year. The authority shall issue the tax
20credit certificates on a first-come, first-served basis.
21 Sec. 61. NEW SECTION. 260G.8 Future repeal.
22This chapter is repealed effective July 1, 2025.
23 Sec. 62. Section 403.19A, subsection 3, paragraph c,
24subparagraph (2), Code 2018, is amended to read as follows:
25(2) The pilot project city and the economic development
26authority shall not enter into a withholding agreement after
27June 30, 2018 2019.
28 Sec. 63. Section 404A.4, subsection 1, paragraph a, Code
292018, is amended to read as follows:
30a. Except as provided in subsections 2 and 3, the authority
31shall not award in any one fiscal year an amount of tax credits
32provided in section 404A.2 in excess of forty-five thirty-five
33 million dollars.
34 Sec. 64. Section 404A.4, subsections 2 and 3, Code 2018, are
35amended by striking the subsections.
-25-1 Sec. 65. NEW SECTION. 404A.7 Future repeal.
2This chapter is repealed effective July 1, 2025.
3 Sec. 66. Section 422.10, subsection 1, Code 2018, is amended
4by adding the following new paragraph:
5 NEW PARAGRAPH. 0a. An individual shall only be eligible for
6the credit provided in this section if the business conducting
7the research meets all of the following requirements:
8(1) (a) The business is engaged in the manufacturing,
9life sciences, software engineering, or aviation and aerospace
10industry.
11(b) A person who is engaged in agricultural production
12as defined in section 423.1, or who is a contractor,
13subcontractor, builder, or a contractor-retailer that engages
14in commercial and residential repair and installation,
15including but not limited to heating or cooling installation
16and repair, plumbing and pipe fitting, security system
17installation, or electrical installation and repair, does not
18qualify under subparagraph division (a) and is not eligible
19for the credit. For purposes of this subparagraph division,
20“contractor-retailer” means a business that makes frequent
21retail sales to the public or to other contractors and that
22also engages in the performance of construction contracts.
23(2) The business claims and is allowed a research credit
24for such qualified research expenses under section 41 of the
25Internal Revenue Code for the same taxable year as it is
26claiming the credit provided in this section.
27 Sec. 67. Section 422.10, subsection 3, Code 2018, is amended
28by adding the following new paragraph:
29 NEW PARAGRAPH. 0a. For purposes of this section, “base
30amount” means the product of the fixed-based percentage times
31the average annual gross receipts of the taxpayer for the four
32taxable years preceding the taxable year for which the credit
33is being determined, but in no event shall the base amount be
34less than fifty percent of the qualified research expenses for
35the credit year.
-26-1 Sec. 68. Section 422.10, subsection 3, paragraph a, Code
22018, is amended to read as follows:
3a. For purposes of this section, “base amount”, “basic
4research payment”, and “qualified research expense” mean the
5same as defined for the federal credit for increasing research
6activities under section 41 of the Internal Revenue Code,
7except that for the alternative simplified credit such amounts
8are for research conducted within this state.
9 Sec. 69. Section 422.10, subsection 3, paragraph b, Code
102018, is amended by striking the paragraph.
11 Sec. 70. Section 422.11B, Code 2018, is amended to read as
12follows:
13422.11B Minimum tax credit.
141. a. There For tax years beginning before January 1, 2020,
15there is allowed as a credit against the tax determined in
16section 422.5, subsection 1, paragraphs “a” through “j” for a
17tax year an amount equal to the minimum tax credit for that tax
18year.
19b. The minimum tax credit for a tax year is the excess, if
20any, of the net minimum tax imposed for all prior tax years
21beginning on or after January 1, 1987, but before January 1,
222019, over the amount allowable as a credit under this section
23for those prior tax years.
242. a. The allowable credit under subsection 1 for a
25tax year beginning before January 1, 2019, shall not exceed
26the excess, if any, of the tax determined in section 422.5,
27subsection 1, paragraphs “a” through “j” over the state
28alternative minimum tax as determined in section 422.5,
29subsection 2, Code 2018. The allowable credit under subsection
301 for a tax year beginning in the 2019 calendar year shall not
31exceed the tax determined under section 422.5, subsection 1.
32b. The net minimum tax for a tax year is the excess, if
33any, of the tax determined in section 422.5, subsection 2,
34Code 2018, for the tax year over the tax determined in section
35422.5, subsection 1, paragraphs “a” through “j” for the tax
-27-1year.
23. This section is repealed January 1, 2020, for tax years
3beginning on or after January 1, 2020.
4 Sec. 71. Section 422.11E, Code 2018, is amended by adding
5the following new subsection:
6 NEW SUBSECTION. 6. This section is repealed on January 1,
72020.
8 Sec. 72. Section 422.11S, subsection 6, paragraph a, Code
92018, is amended to read as follows:
10a. “Eligible student” means a student who is a member of a
11household whose total annual income during the calendar year
12before the student receives a tuition grant for purposes of
13this section does not exceed an amount equal to three four
14 times the most recently published federal poverty guidelines in
15the federal register by the United States department of health
16and human services.
17 Sec. 73. Section 422.11S, subsection 8, paragraph a,
18subparagraph (2), Code 2018, is amended to read as follows:
19(2) “Total approved tax credits” means for the tax year
20beginning in the 2006 calendar year, two million five hundred
21thousand dollars, for the tax year beginning in the 2007
22calendar year, five million dollars, for tax years beginning
23on or after January 1, 2008, but before January 1, 2012, seven
24million five hundred thousand dollars, for tax years beginning
25on or after January 1, 2012, but before January 1, 2014, eight
26million seven hundred fifty thousand dollars, and for tax years
27beginning on or after January 1, 2014, but before January 1,
282019, twelve million dollars, and for tax years beginning on or
29after January 1, 2019, thirteen million dollars.
30 Sec. 74. Section 422.12, subsection 2, paragraph b, Code
312018, is amended to read as follows:
32b. A For tax years beginning before January 1, 2022, a
33 tuition credit equal to twenty-five percent of the first one
34thousand dollars which the taxpayer has paid to others for each
35dependent in grades kindergarten through twelve, for tuition
-28-1and textbooks of each dependent in attending an elementary or
2secondary school situated in Iowa, which school is accredited
3or approved under section 256.11, which is not operated for
4profit, and which adheres to the provisions of the federal
5Civil Rights Act of 1964 and chapter 216. Notwithstanding
6any other provision, all other credits allowed under this
7subsection shall be deducted before the tuition credit under
8this paragraph. The department, when conducting an audit of
9a taxpayer’s return, shall also audit the tuition tax credit
10portion of the tax return.
11 Sec. 75. Section 422.12, subsection 2, paragraph c,
12subparagraph (1), Code 2018, is amended to read as follows:
13(1) A For tax years beginning before January 1, 2022,
14a volunteer fire fighter and volunteer emergency medical
15services personnel member credit equal to one hundred dollars
16to compensate the taxpayer for the voluntary services if the
17volunteer served for the entire tax year. A taxpayer who
18is a paid employee of an emergency medical services program
19or a fire department and who is also a volunteer emergency
20medical services personnel member or volunteer fire fighter in
21a city, county, or area governed by an agreement pursuant to
22chapter 28E where the emergency medical services program or
23fire department performs services, shall qualify for the credit
24provided under this paragraph “c”.
25 Sec. 76. Section 422.12, subsection 2, paragraph d,
26subparagraph (1), Code 2018, is amended to read as follows:
27(1) A For tax years beginning before January 1, 2022, a
28 reserve peace officer credit equal to one hundred dollars to
29compensate the taxpayer for services as a reserve peace officer
30if the reserve peace officer served for the entire tax year.
31 Sec. 77. Section 422.33, subsection 5, Code 2018, is amended
32by adding the following new paragraph:
33 NEW PARAGRAPH. 0e. A corporation shall only be
34eligible for the credit provided in this subsection if the
35business conducting the research meets all of the following
-29-1requirements:
2(1) (a) The business is engaged in the manufacturing,
3life sciences, software engineering, or aviation and aerospace
4industry.
5(b) A person who is engaged in agricultural production
6as defined in section 423.1, or who is a contractor,
7subcontractor, builder, or a contractor-retailer that engages
8in commercial and residential repair and installation,
9including but not limited to heating or cooling installation
10and repair, plumbing and pipe fitting, security system
11installation, or electrical installation and repair, does not
12qualify under subparagraph division (a) and is not eligible
13for the credit. For purposes of this subparagraph division,
14“contractor-retailer” means a business that makes frequent
15retail sales to the public or to other contractors and that
16also engages in the performance of construction contracts.
17(2) The business claims and is allowed a research credit
18for such qualified research expenses under section 41 of the
19Internal Revenue Code for the same taxable year as it is
20claiming the credit provided in this subsection.
21 Sec. 78. Section 422.33, subsection 5, paragraph e, Code
222018, is amended by adding the following new subparagraph:
23 NEW SUBPARAGRAPH. (01) For purposes of this section, “base
24amount” means the product of the fixed-based percentage times
25the average annual gross receipts of the taxpayer for the four
26taxable years preceding the taxable year for which the credit
27is being determined, but in no event shall the base amount be
28less than fifty percent of the qualified research expenses for
29the credit year.
30 Sec. 79. Section 422.33, subsection 5, paragraph e,
31subparagraph (1), Code 2018, is amended to read as follows:
32(1) For purposes of this subsection, “base amount”, “basic
33research payment”, and “qualified research expense” mean the
34same as defined for the federal credit for increasing research
35activities under section 41 of the Internal Revenue Code,
-30-1except that for the alternative simplified credit such amounts
2are for research conducted within this state.
3 Sec. 80. Section 422.33, subsection 5, paragraph e,
4subparagraph (2), Code 2018, is amended by striking the
5subparagraph.
6 Sec. 81. Section 422.33, subsection 7, Code 2018, is amended
7to read as follows:
87. a. (1) There For tax years beginning before January 1,
92020, there is allowed as a credit against the tax determined
10in subsection 1 for a tax year an amount equal to the minimum
11tax credit for that tax year.
12(2) The minimum tax credit for a tax year is the excess,
13if any, of the net minimum tax imposed for all prior tax years
14beginning on or after January 1, 1987, but before January
151, 2019, over the amount allowable as a credit under this
16subsection for those prior tax years.
17b. (1) The allowable credit under paragraph “a” for a tax
18year beginning before January 1, 2019, shall not exceed the
19excess, if any, of the tax determined in subsection 1 over
20the state alternative minimum tax as determined in subsection
214. The allowable credit under paragraph “a” for a tax year
22beginning in the 2019 calendar year shall not exceed the tax
23determined in subsection 1.
24(2) The net minimum tax for a tax year is the excess, if
25any, of the tax determined in subsection 4 for the tax year
26over the tax determined in subsection 1 for the tax year.
27c. This subsection is repealed January 1, 2020, for tax
28years beginning on or after January 1, 2020.
29 Sec. 82. 2018 INTERIM TAX CREDIT STUDY. The legislative tax
30expenditure committee created in section 2.45 shall study all
31tax credits available under Iowa law during the 2018 interim.
32The study shall comprehensively review and evaluate each tax
33credit to assess its cost, equity, simplicity, competitiveness,
34public purpose, adequacy, effectiveness, and the extent of
35conformance with the original purpose of the tax credit. The
-31-1legislative tax expenditure committee shall also consider
2new or different tax credits or other incentive programs
3for economic development that will improve predictability,
4flexibility, and utilization, and put Iowa in the best position
5for attracting and retaining business in the future. The
6legislative tax expenditure committee shall submit its findings
7and recommendations to the general assembly for consideration
8during the 2019 legislative session.
9 Sec. 83. FUTURE REPEAL. Sections 15.326, 15.327, 15.329,
1015.330, 15.330A, 15.331A, 15.331C, 15.332, 15.333, 15.333A,
1115.335, 15.335A, 15.335B, 15.335C, and 15.336, Code 2018, are
12repealed effective July 1, 2025.
13 Sec. 84. REPEAL. Sections 422.10A, 422.11I, and 422.11N,
14Code 2018, are repealed.
15 Sec. 85. REPEAL. Section 422.11L, Code 2018, is repealed.
16 Sec. 86. REPEAL. Chapter 190B, Code 2018, is repealed.
17 Sec. 87. EFFECTIVE DATE AND APPLICABILITY.
181. Except as provided in subsections 2 through 11, this
19division of this Act takes effect January 1, 2019, and applies
20to tax years beginning on or after that date.
212. The section of this division of this Act repealing
22section 422.11L, takes effect July 1, 2018, and applies to
23solar energy system installations occurring on or after that
24date.
253. The section of this division of this Act striking and
26replacing section 15.119, subsection 2, paragraph “a”, takes
27effect July 1, 2018.
284. The section of this division of this Act amending section
2915.119, subsection 2, paragraphs “d”, “e”, and “g”, takes
30effect July 1, 2018.
315. The sections of this division of this Act amending
32section 404A.4 take effect July 1, 2018.
336. The section of this division of this Act amending section
3416.80, subsection 10, takes effect July 1, 2018.
357. The sections of this division of this Act enacting
-32-1section 422.10, subsection 1, paragraph “0a”, and enacting
2section 422.33, subsection 5, paragraph “0e”, being deemed of
3immediate importance, take effect upon enactment, and apply
4retroactively to January 1, 2018, for tax years beginning on or
5after that date and for tax returns, including amended returns,
6filed on or after that date for any tax year.
78. The sections of this division of this Act amending
8section 422.10, subsection 3, paragraph “a”, and section
9422.33, subsection 5, paragraph “e”, subparagraph (1), and
10enacting section 422.10, subsection 3, paragraph “0a”, and
11section 422.33, subsection 5, paragraph “e”, subparagraph
12(01), being deemed of immediate importance, take effect upon
13enactment, and apply retroactively to January 1, 2010, for tax
14years beginning on or after that date.
159. The section of this division of this Act amending section
1615.329, subsection 1, paragraph “f”, takes effect July 1, 2018.
1710. The section of this division of this Act amending
18section 403.19A, subsection 3, paragraph “c”, subparagraph (2),
19takes effect July 1, 2018.
2011. The section of this division of this Act establishing
21a 2018 interim tax credit study by the legislative tax
22expenditure committee takes effect July 1, 2018.
23DIVISION IV
24FRANCHISE TAX AND MONEYS AND CREDITS TAX
25 Sec. 88. Section 15.293A, subsection 1, paragraph a, Code
262018, is amended to read as follows:
27a. A redevelopment tax credit shall be allowed against
28the taxes imposed in chapter 422, divisions II, III, and V,
29and in chapter 432, and against the moneys and credits tax
30imposed in section 533.329, for a portion of a taxpayer’s
31equity investment, as provided in subsection 3, in a qualifying
32redevelopment project.
33 Sec. 89. Section 15.293A, subsection 2, paragraphs c and f,
34Code 2018, are amended to read as follows:
35c. The tax credit certificate, unless rescinded by the
-33-1authority, shall be accepted by the department of revenue as
2payment for taxes imposed pursuant to chapter 422, divisions
3II, III, and V, and in chapter 432, and for the moneys and
4credits tax imposed in section 533.329, subject to any
5conditions or restrictions placed by the authority upon
6the face of the tax credit certificate and subject to the
7limitations of this section.
8f. A tax credit shall not be claimed by a transferee
9under this section until a replacement tax credit certificate
10identifying the transferee as the proper holder has been
11issued. The transferee may use the amount of the tax credit
12transferred against the taxes imposed in chapter 422, divisions
13II, III, and V, and in chapter 432, and against the moneys and
14credits tax imposed in section 533.329, for any tax year the
15original transferor could have claimed the tax credit. Any
16consideration received for the transfer of the tax credit shall
17not be included as income under chapter 422, divisions II, III,
18and V. Any consideration paid for the transfer of the tax
19credit shall not be deducted from income under chapter 422,
20divisions II, III, and V.
21 Sec. 90. Section 15.333, subsection 1, Code 2018, is amended
22to read as follows:
231. An eligible business may claim a tax credit equal to a
24percentage of the new investment directly related to new jobs
25created or retained by the project. The tax credit shall be
26amortized equally over five calendar years. The tax credit
27shall be allowed against taxes imposed under chapter 422,
28division II, III, or V, and against the moneys and credits tax
29imposed in section 533.329. If the business is a partnership,
30S corporation, limited liability company, cooperative organized
31under chapter 501 and filing as a partnership for federal tax
32purposes, or estate or trust electing to have the income taxed
33directly to the individual, an individual may claim the tax
34credit allowed. The amount claimed by the individual shall
35be based upon the pro rata share of the individual’s earnings
-34-1of the partnership, S corporation, limited liability company,
2cooperative organized under chapter 501 and filing as a
3partnership for federal tax purposes, or estate or trust. The
4percentage shall be determined as provided in section 15.335A.
5 Any tax credit in excess of the tax liability for the tax year
6may be credited to the tax liability for the following seven
7years or until depleted, whichever occurs first.
8 Sec. 91. Section 15.355, subsection 3, paragraph b, Code
92018, is amended to read as follows:
10b. The tax credit shall be allowed against the taxes imposed
11in chapter 422, divisions II, III, and V, and in chapter 432,
12and against the moneys and credits tax imposed in section
13533.329.
14 Sec. 92. Section 15.355, subsection 3, paragraph e,
15subparagraphs (3) and (6), Code 2018, are amended to read as
16follows:
17(3) The tax credit certificate, unless rescinded by the
18authority, shall be accepted by the department of revenue as
19payment for taxes imposed pursuant to chapter 422, divisions
20II, III, and V, and in chapter 432, and for the moneys and
21credits tax imposed in section 533.329, subject to any
22conditions or restrictions placed by the authority upon
23the face of the tax credit certificate and subject to the
24limitations of this program.
25(6) A tax credit shall not be claimed by a transferee
26under this section until a replacement tax credit certificate
27identifying the transferee as the proper holder has been
28issued. The transferee may use the amount of the tax credit
29transferred against the taxes imposed in chapter 422, divisions
30II, III, and V, and in chapter 432, and against the moneys and
31credits tax imposed in section 533.329, for any tax year the
32original transferor could have claimed the tax credit. Any
33consideration received for the transfer of the tax credit shall
34not be included as income under chapter 422, divisions II,
35III, and V. Any consideration paid for the transfer of the tax
-35-1credit shall not be deducted from income under chapter 422,
2divisions II, III, and V.
3 Sec. 93. Section 15E.43, subsection 1, paragraphs a and d,
4Code 2018, are amended to read as follows:
5a. For tax years beginning on or after January 1, 2015,
6a tax credit shall be allowed against the taxes imposed in
7chapter 422, divisions II, III, and V, and in chapter 432, and
8against the moneys and credits tax imposed in section 533.329,
9 for a portion of a taxpayer’s equity investment, as provided in
10subsection 2, in a qualifying business.
11d. For a tax credit claimed against the taxes imposed in
12chapter 422, division II, any tax credit in excess of the
13tax liability is refundable. In lieu of claiming a refund,
14the taxpayer may elect to have the overpayment shown on
15the taxpayer’s final, completed return credited to the tax
16liability for the following tax year. For a tax credit claimed
17against the taxes imposed in chapter 422, divisions III and
18V, and in chapter 432, and against the moneys and credits tax
19imposed in section 533.329, any tax credit in excess of the
20taxpayer’s liability for the tax year may be credited to the
21tax liability for the following three years or until depleted,
22whichever is earlier. A tax credit shall not be carried back
23to a tax year prior to the tax year in which the taxpayer
24redeems the tax credit.
25 Sec. 94. Section 15E.44, subsection 4, Code 2018, is amended
26to read as follows:
274. After verifying the eligibility of a qualifying
28business, the authority shall issue a tax credit certificate
29to be included with the equity investor’s tax return. The tax
30credit certificate shall contain the taxpayer’s name, address,
31tax identification number, the amount of credit, the name of
32the qualifying business, and other information required by the
33department of revenue. The tax credit certificate, unless
34rescinded by the authority, shall be accepted by the department
35of revenue as payment for taxes imposed pursuant to chapter
-36-1422, divisions II, III, and V, and in chapter 432, and for the
2moneys and credits tax imposed in section 533.329, subject to
3any conditions or restrictions placed by the authority upon
4the face of the tax credit certificate and subject to the
5limitations of section 15E.43.
6 Sec. 95. Section 15E.52, subsection 2, paragraph a, Code
72018, is amended to read as follows:
8a. A tax credit shall be allowed against the taxes imposed
9in chapter 422, divisions II, III, and V, and in chapter 432,
10and against the moneys and credits tax imposed in section
11533.329, for a portion of a taxpayer’s equity investment in the
12form of cash in an innovation fund.
13 Sec. 96. Section 15E.52, subsection 13, Code 2018, is
14amended to read as follows:
1513. The transferee may use the amount of the tax credit
16transferred against the taxes imposed in chapter 422, divisions
17II, III, and V, and in chapter 432, and against the moneys and
18credits tax imposed in section 533.329, for any tax year the
19original transferor could have claimed the tax credit. Any
20consideration received for the transfer of the tax credit shall
21not be included as income under chapter 422, divisions II, III,
22and V. Any consideration paid for the transfer of the tax
23credit shall not be deducted from income under chapter 422,
24divisions II, III, and V.
25 Sec. 97. Section 15E.62, subsection 8, Code 2018, is amended
26to read as follows:
278. “Tax credit” means a contingent tax credit issued
28pursuant to section 15E.66 that is available against tax
29liabilities imposed by chapter 422, divisions II, III, and
30V, and by chapter 432 and against the moneys and credits tax
31imposed by section 533.329.
32 Sec. 98. Section 15E.305, subsection 1, Code 2018, is
33amended to read as follows:
341. For tax years beginning on or after January 1, 2003,
35a tax credit shall be allowed against the taxes imposed in
-37-1chapter 422, divisions II, III, and V, and in chapter 432, and
2against the moneys and credits tax imposed in section 533.329
3 equal to twenty-five percent of a taxpayer’s endowment gift to
4an endow Iowa qualified community foundation. An individual
5may claim a tax credit under this section of a partnership,
6limited liability company, S corporation, estate, or trust
7electing to have income taxed directly to the individual. The
8amount claimed by the individual shall be based upon the pro
9rata share of the individual’s earnings from the partnership,
10limited liability company, S corporation, estate, or trust. A
11tax credit shall be allowed only for an endowment gift made to
12an endow Iowa qualified community foundation for a permanent
13endowment fund established to benefit a charitable cause in
14this state. The amount of the endowment gift for which the
15tax credit is claimed shall not be deductible in determining
16taxable income for state income tax purposes. Any tax credit
17in excess of the taxpayer’s tax liability for the tax year may
18be credited to the tax liability for the following five years
19or until depleted, whichever occurs first. A tax credit shall
20not be carried back to a tax year prior to the tax year in which
21the taxpayer claims the tax credit.
22 Sec. 99. Section 331.427, subsection 1, unnumbered
23paragraph 1, Code 2018, is amended to read as follows:
24Except as otherwise provided by state law, county revenues
25from taxes and other sources for general county services shall
26be credited to the general fund of the county, including
27revenues received under sections 9I.11, 101A.3, 101A.7, 123.36,
28123.143, 142D.9, 176A.8, 321.105, 321.152, 321G.7, 321I.8,
29section 331.554, subsection 6, sections 341A.20, 364.3, 368.21,
30423A.7, 428A.8, 433.15, 434.19, 445.57, 453A.35, 458A.21,
31483A.12, 533.329, 556B.1, 583.6, 602.8108, 904.908, and 906.17,
32and the following:
33 Sec. 100. Section 422.60, subsection 2, paragraph a, Code
342018, is amended to read as follows:
35a. In addition to all taxes imposed under this division,
-38-1there is imposed upon each financial institution doing business
2within the state and that is not exempt from the federal income
3tax, the greater of the tax determined in section 422.63 or
4the state alternative minimum tax equal to sixty percent of
5the maximum state franchise tax rate, rounded to the nearest
6one-tenth of one percent, of the state alternative minimum
7taxable income of the taxpayer computed under this subsection.
8 Sec. 101. Section 422.60, subsection 3, paragraph a,
9subparagraph (1), Code 2018, is amended to read as follows:
10(1) There For a financial institution that is not exempt
11from the federal income tax, there is allowed as a credit
12against the tax determined in section 422.63 for a tax year an
13amount equal to the minimum tax credit for that tax year.
14 Sec. 102. Section 422.61, subsections 1, 3, and 4, Code
152018, are amended to read as follows:
161. “Financial institution” means a state bank as defined
17in section 524.103, subsection 41, a state bank chartered
18under the laws of any other state, a national banking
19association, a trust company, a federally chartered savings
20and loan association, an out-of-state state chartered savings
21bank, a credit union as defined in section 533.102 that is
22incorporated or organized under chapter 533 or under the laws
23of another state, a financial institution chartered by the
24federal home loan bank board, a non-Iowa chartered savings and
25loan association, or a production credit association, or an
26agricultural credit association that is a member of the farm
27credit system under the federal Farm Credit Act, 12 U.S.C. ch.
2823, as amended.
293. a. “Net income” means one of the following:
30(1) For a financial institution that is exempt from the
31federal income tax, the total revenue less total expenses as
32properly reported on the financial institution’s internal
33revenue service form 990 covering the same period, with the
34adjustments in paragraph “b” to the extent the taxes, income,
35and deductions described in such adjustments are applicable
-39-1to the financial institution’s calculation of revenues and
2expenses as determined by the director by rule.
3(2) For any other financial institution,the net income of
4the financial institution computed in accordance with section
5422.35, with the following adjustments: in paragraph “b”.
6b. Applicable adjustments in computing “net income”:
7a. (1) Federal income taxes paid or accrued shall not be
8subtracted.
9b. (2) Notwithstanding section 422.35, subsection 2, or
10any other provisions of law, income from obligations of the
11state and its political subdivisions and franchise taxes paid
12or accrued under this division during the taxable year shall
13be added. Income from sales of obligations of the state and
14its political subdivisions and interest and dividend income
15from these obligations are exempt from the taxes imposed by
16this division only if the law authorizing the obligations
17specifically exempts the income from the sale and interest and
18dividend income from the state franchise tax.
19c. (3) Interest and dividends from federal securities shall
20not be subtracted.
21d. (4) Interest and dividends derived from obligations of
22United States possessions, agencies, and instrumentalities,
23including bonds which were purchased after January 1, 1991, and
24issued by the governments of Puerto Rico, Guam, and the Virgin
25Islands shall be added, to the extent they were not included in
26computing federal taxable income.
27e. (5) A deduction disallowed under section 265(b) or
28section 291(e)(1)(B) of the Internal Revenue Code shall be
29subtracted.
30f. (6) A deduction shall not be allowed for that portion of
31the taxpayer’s expenses computed under this paragraph which is
32allocable to an investment in an investment subsidiary. The
33portion of the taxpayer’s expenses which is allocable to an
34investment in an investment subsidiary is an amount which bears
35the same ratio to the taxpayer’s expenses as the taxpayer’s
-40-1average adjusted basis, as computed pursuant to section 1016
2of the Internal Revenue Code, of investment in that investment
3subsidiary bears to the average adjusted basis for all assets
4of the taxpayer. The portion of the taxpayer’s expenses that
5is computed and disallowed under this paragraph shall be added.
6g. (7) Where a financial institution as defined in section
7581 of the Internal Revenue Code is not subject to income tax
8and the shareholders of the financial institution are taxed on
9the financial institution’s income under the provisions of the
10Internal Revenue Code, such tax treatment shall be disregarded
11and the financial institution shall compute its net income for
12franchise tax purposes in the same manner under this subsection
13as a financial institution that is subject to or liable for
14federal income tax under the Internal Revenue Code in effect
15for the applicable year.
164. “Taxable year” means the calendar year or the fiscal year
17ending during a calendar year, for which the tax is payable.
18“Fiscal year” includes a tax period of less than twelve months
19if, under the Internal Revenue Code, a corporation is required
20to file a tax return or internal revenue service form 990
21 covering a tax period of less than twelve months.
22 Sec. 103. Section 422.62, Code 2018, is amended to read as
23follows:
24422.62 Due and delinquent dates.
25The franchise tax is due and payable on the first day
26following the end of the taxable year of each financial
27institution, and for a financial institution that is exempt
28from the federal income tax, the franchise tax is delinquent
29after the last day of the fifth month following the due date.
30For all other financial institutions, the franchise tax is
31delinquent after the last day of the fourth month following the
32due date or forty-five days after the due date of the federal
33tax return, excluding extensions of time to file, whichever is
34the later. Every financial institution shall file a return as
35prescribed by the director on or before the delinquency date.
-41-1 Sec. 104. Section 422.63, Code 2018, is amended to read as
2follows:
3422.63 Amount of tax.
41. The franchise tax is imposed annually in an amount equal
5to five percent of computed by applying the following rates
6of taxation to the net income received or accrued during the
7taxable year:
8a. On net income from zero to seven million five hundred
9thousand dollars, two percent.
10b. On net income exceeding seven million five hundred
11thousand dollars, four percent.
122. If the net income of the financial institution is derived
13from its business carried on entirely within the state, the tax
14in subsection 1 shall be imposed on the entire net income, but
15if the business is carried on partly within and partly without
16the state, the tax in subsection 1 shall be imposed on the
17 portion of net income reasonably attributable to the business
18within the state, which net income shall be specifically
19allocated or equitably apportioned within and without the state
20under rules of the director.
21 Sec. 105. REPEAL. Section 533.329, Code 2018, is repealed.
22 Sec. 106. PRESERVATION OF EXISTING RIGHTS. This division
23of this Act is not intended and shall not limit, modify,
24or otherwise adversely affect any tax credit or tax credit
25certificate issued, awarded, or allowed before January 1, 2019,
26nor shall it limit, modify, or otherwise adversely affect
27a taxpayer’s right to claim or redeem a tax credit issued,
28awarded, or allowed before January 1, 2019, including but not
29limited to any tax credit carryforward amount. Any amount of
30tax credit that would have been eligible to be claimed by a
31taxpayer on or after January 1, 2019, against the moneys and
32credits tax imposed in section 533.329, Code 2018, shall be
33allowed in the same manner and to the same extent as a credit
34against the franchise tax imposed in chapter 422, division V.
35 Sec. 107. EFFECTIVE DATE. This division of this Act takes
-42-1effect January 1, 2019.
2 Sec. 108. APPLICABILITY. This division of this Act applies
3to tax years beginning on or after January 1, 2019.
4DIVISION V
5CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST AND IOWA ABLE
6SAVINGS PLAN TRUST
7 Sec. 109. Section 12D.1, Code 2018, is amended to read as
8follows:
912D.1 Purpose and definitions.
101. The general assembly finds that the general welfare and
11well-being of the state are directly related to educational
12levels and skills of the citizens of the state, and that a
13vital and valid public purpose is served by the creation and
14implementation of programs which encourage and make possible
15the attainment of higher formal education by the greatest
16number of citizens of the state. The state has limited
17resources to provide additional programs for higher education
18funding and the continued operation and maintenance of the
19state’s public institutions of higher education and the general
20welfare of the citizens of the state will be enhanced by
21establishing a program which allows citizens of the state to
22invest money in a public trust for future application to the
23payment of higher education costs qualified education expenses.
24The creation of the means of encouragement for citizens to
25invest in such a program represents the carrying out of a
26vital and valid public purpose. In order to make available
27to the citizens of the state an opportunity to fund future
28higher formal education needs, it is necessary that a public
29trust be established in which moneys may be invested for future
30educational use.
312. As used in this chapter, unless the context otherwise
32requires:
33a. “Account balance limit” means the maximum allowable
34aggregate balance of accounts established for the same
35beneficiary. Account earnings, if any, are included in the
-43-1account balance limit.
2b. “Administrative fund” means the administrative fund
3established under section 12D.4.
4c. “Beneficiary” means the individual designated by a
5participation agreement to benefit from advance payments of
6higher education costs qualified education expenses on behalf
7of the beneficiary.
8d. “Benefits” means the payment of higher education costs
9 qualified education expenses on behalf of a beneficiary by the
10trust during the beneficiary’s attendance at an institution of
11higher education a qualified educational institution.
12e. “Higher education costs” means the same as “qualified
13higher education expenses” as defined insection 529(e)(3) of
14the Internal Revenue Code.
15f. e. “Institution of higher education” means an institution
16described in section 481 of the federal Higher Education Act of
171965, 20 U.S.C. §1088, which is eligible to participate in the
18United States department of education’s student aid programs.
19g. f. “Internal Revenue Code” means the same as defined
20insection 12I.1.
21h. g. “Iowa educational savings plan trust” or “trust” means
22the trust created under section 12D.2.
23i. h. “Participant” means an individual, individual’s legal
24representative, trust, estate, or an organization described
25in section 501(c)(3) of the Internal Revenue Code and exempt
26from taxation under section 501(a) of the Internal Revenue
27Code, that has entered into a participation agreement under
28this chapter for the advance payment of higher education costs
29 qualified education expenses on behalf of a beneficiary.
30j. i. “Participation agreement” means an agreement between
31a participant and the trust entered into under this chapter.
32k. j. “Program fund” means the program fund established
33under section 12D.4.
34k. “Qualified education expenses” means the same as
35“qualified higher education expenses” as defined in section
-44-1529(e)(3) of the Internal Revenue Code, as amended by Pub.L.
2No.115-97, and shall include elementary and secondary school
3expenses for tuition described in section 529(c)(7) of the
4Internal Revenue Code, subject to the limitations imposed by
5section 529(e)(3)(A) of the Internal Revenue Code.
6l. “Qualified educational institution” means an institution
7of higher education, or any elementary or secondary public,
8private, or religious school described in section 529(c)(7) of
9the Internal Revenue Code.
10l. m. “Tuition and fees” “Tuition” means the quarter, or
11 semester, or annual charges imposed to attend an institution
12of higher education a qualified educational institution and
13required as a condition of enrollment or attendance.
14 Sec. 110. Section 12D.2, subsections 2, 5, 9, and 14, Code
152018, are amended to read as follows:
162. Enter into agreements with any institution of higher
17education qualified educational institution, the state, or any
18federal or other state agency, or other entity as required to
19implement this chapter.
205. Carry out studies and projections so the treasurer of
21state may advise participants regarding present and estimated
22future higher education costs qualified education expenses
23 and levels of financial participation in the trust required
24in order to enable participants to achieve their educational
25funding objectives.
269. Make payments to institutions of higher education
27 qualified educational institutions, participants, or
28beneficiaries, pursuant to participation agreements on behalf
29of beneficiaries.
3014. Establish, impose, and collect administrative fees
31and charges in connection with transactions of the trust, and
32provide for reasonable service charges, including penalties for
33cancellations and late payments with respect to participation
34agreements.
35 Sec. 111. Section 12D.3, subsections 1 and 2, Code 2018, are
-45-1amended to read as follows:
21. a. Each participation agreement may require a
3participant to agree to invest a specific amount of money in
4the trust for a specific period of time for the benefit of a
5specific beneficiary. A participant shall not be required to
6make an annual contribution on behalf of a beneficiary. The
7maximum contribution that may be deducted for Iowa income tax
8purposes shall not exceed two thousand dollars per beneficiary
9per year adjusted annually to reflect increases in the consumer
10price index. The treasurer of state shall set an account
11balance limit to maintain compliance with section 529 of the
12Internal Revenue Code. A contribution shall not be permitted
13to the extent it causes the aggregate balance of all accounts
14established for the same beneficiary under the trust to exceed
15the applicable account balance limit.
16b. Participation agreements may be amended to provide for
17adjusted levels of payments based upon changed circumstances or
18changes in educational plans.
192. The execution of a participation agreement by the trust
20shall not guarantee in any way that higher education costs
21 qualified education expenses will be equal to projections
22and estimates provided by the trust or that the beneficiary
23named in any participation agreement will attain any of the
24following:
25a. Be admitted to an institution of higher education a
26qualified educational institution.
27b. If admitted, be determined a resident for tuition
28purposes by the institution of higher education qualified
29educational institution.
30c. Be allowed to continue attendance at the institution of
31higher education qualified educational institution following
32admission.
33d. Graduate from the institution of higher education
34 qualified educational institution.
35 Sec. 112. Section 12D.3, Code 2018, is amended by adding the
-46-1following new subsection:
2 NEW SUBSECTION. 5. A participant may designate a successor
3in accordance with rules adopted by the treasurer of state.
4The designated successor shall succeed to the ownership of the
5account in the event of the death of the participant. In the
6event a participant dies and has not designated a successor to
7the account, the following criteria shall apply:
8a. The beneficiary of the account, if eighteen years of
9age or older, shall become the owner of the account as well as
10remain the beneficiary upon filing the appropriate forms in
11accordance with rules adopted by the treasurer of state.
12b. If the beneficiary of the account is under the age of
13eighteen, account ownership shall be transferred to the first
14surviving parent or other legal guardian of the beneficiary to
15file the appropriate forms in accordance with rules adopted by
16the treasurer of state.
17 Sec. 113. Section 12D.4, Code 2018, is amended to read as
18follows:
1912D.4 Program and administrative funds — investment and
20payments.
211. a. The treasurer of state shall segregate moneys
22received by the trust into two funds: the program fund and the
23administrative fund.
24b. All moneys paid by participants in connection with
25participation agreements shall be deposited as received into
26separate accounts within the program fund.
27c. Contributions to the trust made by participants may only
28be made in the form of cash.
29d. A participant or beneficiary shall not provide investment
30direction regarding program contributions or earnings held by
31the trust may, directly or indirectly, direct the investment of
32any contributions to the trust or any earnings thereon no more
33than two times in a calendar year.
34e. The amount of cash distributions from the trust and all
35other qualified state tuition programs under section 529 of
-47-1the Internal Revenue Code to a beneficiary during any taxable
2year shall, in the aggregate, include no more than ten thousand
3dollars in expenses for tuition in connection with enrollment
4at an elementary or secondary public, private, or religious
5school incurred during the taxable year.
62. Moneys accrued by participants in the program fund of
7the trust may be used for payments to any institution of higher
8education qualified educational institution. Payments can be
9made to the qualified educational institution, the participant,
10or the beneficiary.
11 Sec. 114. Section 12D.6, subsection 1, paragraph a, Code
122018, is amended to read as follows:
13a. A participant retains ownership of all payments made
14under a participation agreement up to the date of utilization
15for payment of higher education costs qualified education
16expenses for the beneficiary.
17 Sec. 115. Section 12D.6, subsections 2, 3, and 5, Code 2018,
18are amended to read as follows:
192. In the event the program is terminated prior to payment
20of higher education costs qualified education expenses for the
21beneficiary, the participant is entitled to a refund of the
22participant’s account balance.
233. The institution of higher education qualified
24educational institution shall obtain ownership of the payments
25made for the higher education costs qualified education
26expenses paid to the institution at the time each payment is
27made to the institution.
285. A participant may transfer ownership rights to another
29eligible individual, including a gift of the ownership rights
30to a minor beneficiary participant, or may transfer funds to
31another plan under the trust or to an ABLE account as permitted
32under section 529(c)(3)(C) of the Internal Revenue Code.
33The transfer shall be made and the property distributed in
34accordance with rules adopted by the treasurer of state or with
35the terms of the participation agreement.
-48-1 Sec. 116. Section 12D.7, Code 2018, is amended to read as
2follows:
312D.7 Effect of payments on determination of need and
4eligibility for student financial aid.
5A student loan program, student grant program, or other
6program administered by any agency of the state, except as
7may be otherwise provided by federal law or the provisions
8of any specific grant applicable to that law, shall not take
9into account and shall not consider amounts available for
10the payment of higher education costs qualified education
11expenses pursuant to the Iowa educational savings plan trust in
12determining need and eligibility for student aid.
13 Sec. 117. Section 12D.9, subsection 1, paragraph a, Code
142018, is amended to read as follows:
15a. Pursuant to section 12D.3, subsection 1, paragraph “a”,
16a participant may make contributions to an account which is
17established for the purpose of meeting the qualified higher
18 education expenses of the designated beneficiary of the
19account.
20 Sec. 118. Section 422.7, subsection 32, paragraph c, Code
212018, is amended by striking the paragraph and inserting in
22lieu thereof the following:
23c. (1) Add, to the extent previously deducted as a
24contribution to the trust, the amount resulting from a
25withdrawal or transfer made by the taxpayer from the Iowa
26educational savings plan trust for purposes other than any of
27the following:
28(a) The payment of qualified higher education expenses.
29(b) The payment of tuition to an elementary or secondary
30school if the tuition amounts are qualified education expenses.
31(c) A change in beneficiaries under, or transfer to another
32account within, the Iowa educational savings plan trust, or a
33transfer to the Iowa ABLE savings plan trust, provided such
34change or transfer is permitted under section 12D.6, subsection
355.
-49- 1(2) For purposes of this paragraph:
2(a) “Elementary or secondary school” means an elementary
3or secondary school in this state which is accredited under
4section 256.11, and adheres to the provisions of the federal
5Civil Rights Act of 1964 and chapter 216.
6(b) “Institution of higher education”, “qualified education
7expenses”, and “tuition” all mean the same as defined in section
812D.1, subsection 2.
9(c) (i) “Qualified higher education expenses” means the same
10as defined in section 529(e)(3) of the Internal Revenue Code.
11(ii) For purposes of this subparagraph division (c),
12“Internal Revenue Code” means the Internal Revenue Code of
131954, prior to the date of its redesignation as the Internal
14Revenue Code of 1986 by the Tax Reform Act of 1986, or means
15the Internal Revenue Code of 1986 as amended and in effect on
16January 1, 2018. This definition shall not be construed to
17include any amendment to the Internal Revenue Code enacted
18after the date specified in the preceding sentence, including
19any amendment with retroactive applicability or effectiveness.
20 Sec. 119. Section 422.7, subsection 34, Code 2018, is
21amended to read as follows:
2234. a. (1) Subtract the amount contributed during the tax
23year on behalf of a designated beneficiary that is a resident
24of this state to the Iowa ABLE savings plan trust or to the
25qualified ABLE program with which the state has contracted
26pursuant to section 12I.10, not to exceed the maximum
27contribution level established in section 12I.3, subsection 1,
28paragraph “d”, or section 12I.10, subsection 2, paragraph “a”,
29as applicable.
30(2) This paragraph “a” shall not apply to any amount
31of contribution that represents a transfer from the Iowa
32educational savings plan trust created in chapter 12D that
33meets the requirements of subsection 32, paragraph “c”,
34subparagraph (1), subparagraph division (c), and that was
35previously deducted as a contribution to the Iowa educational
-50-1savings plan trust.
2b. Add the amount resulting from the cancellation of a
3participation agreement refunded to the taxpayer as an account
4owner in the Iowa ABLE savings plan trust or the qualified
5ABLE program with which the state has contracted pursuant to
6section 12I.10 to the extent previously deducted pursuant
7to this subsection by the taxpayer or any other person as a
8contribution to the trust or qualified ABLE program, or to the
9extent the amount was previously deducted by the taxpayer or
10any other person pursuant to subsection 32, paragraph “a”, and
11qualified as a transfer under paragraph “a”, subparagraph (2),
12of this subsection.
13c. Add the amount resulting from a withdrawal made by a
14taxpayer from the Iowa ABLE savings plan trust or the qualified
15ABLE program with which the state has contracted pursuant to
16section 12I.10 for purposes other than the payment of qualified
17disability expenses to the extent previously deducted pursuant
18to this subsection by the taxpayer or any other person as a
19contribution to the trust or qualified ABLE program, or to the
20extent the amount was previously deducted by the taxpayer or
21any other person pursuant to subsection 32, paragraph “a”, and
22qualified as a transfer under paragraph “a”, subparagraph (2),
23of this subsection.
24 Sec. 120. Section 627.6, Code 2018, is amended by adding the
25following new subsection:
26 NEW SUBSECTION. 17. The debtor’s interest, whether as
27participant or beneficiary, in contributions and assets,
28including the accumulated earnings and market increases in
29value, held in an account in the Iowa educational savings plan
30trust organized under chapter 12D.
31 Sec. 121. EFFECTIVE DATE. This division of this Act, being
32deemed of immediate importance, takes effect upon enactment.
33 Sec. 122. RETROACTIVE APPLICABILITY.
341. Except as provided in subsection 2, this division of this
35Act applies retroactively to January 1, 2018, for withdrawals
-51-1from the Iowa educational savings plan trust made on or after
2that date.
32. The sections of this division of this Act amending
4section 422.7 apply retroactively to January 1, 2018, for tax
5years beginning on or after that date, and for withdrawals from
6the Iowa educational savings plan trust made on or after that
7date.
8DIVISION VI
9SALES AND USE TAXES
10 Sec. 123. Section 15J.4, subsection 3, paragraph f, Code
112018, is amended to read as follows:
12f. The total aggregate amount of state sales tax revenues
13and state hotel and motel tax revenues that may be approved by
14the board for remittance to all municipalities and that may
15be transferred to the state reinvestment district fund under
16section 423.2, subsection 11, 423.2A or section 423A.6, and
17remitted to all municipalities having a reinvestment district
18under this chapter shall not exceed one hundred million
19dollars.
20 Sec. 124. Section 15J.5, subsection 1, paragraph a, Code
212018, is amended to read as follows:
22a. The department shall calculate quarterly the amount of
23new state sales tax revenues for each district established in
24the state to be deposited in the state reinvestment district
25fund created in section 15J.6, pursuant to section 423.2,
26subsection 11, paragraph “b” 423.2A, subsection 2, subject to
27remittance limitations established by the board pursuant to
28section 15J.4, subsection 3.
29 Sec. 125. Section 15J.6, subsection 1, Code 2018, is amended
30to read as follows:
311. A state reinvestment district fund is established in the
32state treasury under the control of the department consisting
33of the new state sales tax revenues collected within each
34district and deposited in the fund pursuant to section 423.2,
35subsection 11, paragraph “b” 423.2A, subsection 2, and the
-52-1new state hotel and motel tax revenues collected within each
2district and deposited in the fund pursuant to section 423A.6.
3Moneys deposited in the fund are appropriated to the department
4for the purposes of this section. Moneys in the fund shall
5only be used for the purposes of this section.
6 Sec. 126. Section 418.11, subsection 1, Code 2018, is
7amended to read as follows:
81. The department of revenue shall calculate quarterly the
9amount of increased sales tax revenues for each governmental
10entity approved to use sales tax increment revenues and the
11amount of such revenues to be transferred to the sales tax
12increment fund pursuant to section 423.2, subsection 11,
13paragraph “b” 423.2A, subsection 2.
14 Sec. 127. Section 418.12, subsection 1, Code 2018, is
15amended to read as follows:
161. A sales tax increment fund is established as a separate
17and distinct fund in the state treasury under the control of
18the department of revenue consisting of the amount of the
19increased state sales and services tax revenues collected by
20the department of revenue within each applicable area specified
21in section 418.11, subsection 3, and deposited in the fund
22pursuant to section 423.2, subsection 11, paragraph “b” 423.2A,
23subsection 2. Moneys deposited in the fund are appropriated
24to the department of revenue for the purposes of this section.
25Moneys in the fund shall only be used for the purposes of this
26section.
27 Sec. 128. Section 421.26, Code 2018, is amended to read as
28follows:
29421.26 Personal liability for tax due.
30If a licensee or other person under section 452A.65, a
31retailer or purchaser under chapter 423A, 423B, or 423E, or
32section sections 423.14, 423.14A, 423.29, 423.31, 423.32, or
33423.33, or a retailer or purchaser under section 423.32, or
34 a user under section 423.34, or a permit holder or licensee
35under section 453A.13, 453A.16, or 453A.44 fails to pay a tax
-53-1under those sections when due, an officer of a corporation
2or association, notwithstanding section 489.304, a member or
3manager of a limited liability company, or a partner of a
4partnership, having control or supervision of or the authority
5for remitting the tax payments and having a substantial legal
6or equitable interest in the ownership of the corporation,
7association, limited liability company, or partnership, who has
8intentionally failed to pay the tax is personally liable for
9the payment of the tax, interest, and penalty due and unpaid.
10However, this section shall not apply to taxes on accounts
11receivable. The dissolution of a corporation, association,
12limited liability company, or partnership shall not discharge a
13person’s liability for failure to remit the tax due.
14 Sec. 129. Section 423.1, subsection 5, Code 2018, is amended
15to read as follows:
165. “Agricultural production” includes means the commercial
17 production of livestock, milk, honey, eggs, or plants,
18including but not limited to flowering, ornamental, or
19vegetable plants in commercial greenhouses or otherwise,
20and commercial production from aquaculture, and commercial
21 production from silvicultural activities. “Agricultural
22products” includes flowering, ornamental, or vegetable plants
23and those products of aquaculture and silviculture.
24 Sec. 130. Section 423.1, Code 2018, is amended by adding the
25following new subsection:
26 NEW SUBSECTION. 22A. “Information services” means every
27activity, process, or function by which a seller accumulates,
28prepares, organizes, conveys, analyzes, or delivers data,
29facts, knowledge, procedures, information, and other similar
30services to a purchaser through any tangible, intangible,
31or electronic medium. Information accumulated, prepared,
32or organized for a purchaser is an information service even
33though it may incorporate preexisting components of data or
34other information. “Information services” includes but is not
35limited to database files, research information, genealogical
-54-1information, and other similar services.
2 Sec. 131. Section 423.1, subsection 24, paragraph a, Code
32018, is amended to read as follows:
4a. “Lease or rental” means any transfer of possession
5or control of, or access to, tangible personal property or
6specified digital products for a fixed or indeterminate term
7for consideration. A “lease or rental” may include future
8options to purchase or extend.
9 Sec. 132. Section 423.1, subsection 37, Code 2018, is
10amended to read as follows:
1137. “Place of business” means any warehouse, store,
12place, office, building, or structure where goods, wares, or
13merchandise tangible personal property, specified digital
14products, or services are offered for sale at retail or where
15any taxable amusement is conducted, or each office where gas,
16water, heat, communication, or electric services are offered
17for sale at retail. When a retailer or amusement operator
18sells merchandise by means of vending machines or operates
19music or amusement devices by coin-operated machines at more
20than one location within the state, the office, building, or
21place where the books, papers, and records of the taxpayer are
22kept shall be deemed to be the taxpayer’s place of business.
23 Sec. 133. Section 423.1, Code 2018, is amended by adding the
24following new subsection:
25 NEW SUBSECTION. 36A. “Personal property” includes but is
26not limited to tangible personal property and specified digital
27products.
28 Sec. 134. Section 423.1, subsection 43, paragraph a,
29subparagraph (3), Code 2018, is amended to read as follows:
30(3) Taking possession or making first use of digital goods
31 specified digital products, whichever comes first.
32 Sec. 135. Section 423.1, subsection 47, Code 2018, is
33amended to read as follows:
3447. “Retailer” means and includes every person engaged
35in the business of selling tangible personal property,
-55-1specified digital products, or taxable services at retail, or
2the furnishing of gas, electricity, water, or communication
3service, and tickets or admissions to places of amusement
4and athletic events or operating amusement devices or other
5forms of commercial amusement from which revenues are derived.
6However, when in the opinion of the director it is necessary
7for the efficient administration of this chapter to regard
8any salespersons, representatives, truckers, peddlers, or
9canvassers as agents of the dealers, distributors, supervisors,
10employers, or persons under whom they operate or from whom
11they obtain tangible personal property, services, or specified
12digital products sold by them irrespective of whether or not
13they are making sales on their own behalf or on behalf of such
14dealers, distributors, supervisors, employers, or persons,
15the director may so regard them, and may regard such dealers,
16distributors, supervisors, employers, or persons as retailers
17for the purposes of this chapter. “Retailer” includes a seller
18obligated to collect sales or use tax, including any person
19obligated to collect sales and use tax pursuant to section
20423.14A.
21 Sec. 136. Section 423.1, subsection 48, paragraph a, Code
222018, is amended to read as follows:
23a. “Retailer maintaining a place of business in this state”
24or any like term includes any of the following:
25(1) Aretailer having or maintaining within this state,
26directly or by a subsidiary, an office, distribution house,
27sales house, warehouse, or other place of business, or any
28representative operating within this state under the authority
29of the retailer or its subsidiary, irrespective of whether that
30place of business or representative is located here permanently
31or temporarily, or whether the retailer or subsidiary is
32admitted to do business within this state pursuant to chapter
33490.
34(2) A person obligated to collect sales and use tax pursuant
35to section 423.14A.
-56-1 Sec. 137. Section 423.1, subsection 48, paragraph b,
2subparagraph (1), unnumbered paragraph 1, Code 2018, is amended
3to read as follows:
4A retailer shall be presumed to be maintaining a place of
5business in this state, as defined in for purposes of paragraph
6“a”, subparagraph (1), if any person that has substantial nexus
7in this state, other than a person acting in its capacity as a
8common carrier, does any of the following:
9 Sec. 138. Section 423.1, subsection 48, paragraph b,
10subparagraph (1), subparagraph division (b), Code 2018, is
11amended to read as follows:
12(b) Maintains an office, distribution facility, warehouse,
13storage place, or similar place of business in this state to
14facilitate the delivery of personal property or services sold
15by the retailer to the retailer’s customers.
16 Sec. 139. Section 423.1, subsection 50, Code 2018, is
17amended to read as follows:
1850. “Sales” or “sale” means any transfer, exchange, or
19barter, conditional or otherwise, in any manner or by any means
20whatsoever, for consideration, including but not limited to any
21such transfer, exchange, or barter on a subscription basis.
22 Sec. 140. Section 423.1, Code 2018, is amended by adding the
23following new subsection:
24 NEW SUBSECTION. 55A. “Sold at retail in the state” and
25other references to sales “in the state” or “in this state”
26includes but is not limited to sales sourced to this state
27under this chapter.
28 Sec. 141. Section 423.1, Code 2018, is amended by adding the
29following new subsection:
30 NEW SUBSECTION. 55B. a. “Specified digital products” means
31electronically transferred digital audio-visual works, digital
32audio works, digital books, or other digital products.
33b. For purposes of this subsection:
34(1) “Digital audio-visual works” means a series of related
35images which, when shown in succession, impart an impression of
-57-1motion, together with accompanying sounds, if any.
2(2) “Digital audio works” means works that result from
3the fixation of a series of musical, spoken, or other sounds,
4including but not limited to ringtones. For purposes of this
5subparagraph, “ringtones” means digitized sound files that are
6downloaded onto a device and that may be used to alert the
7customer with respect to a communication.
8(3) “Digital books” means works that are generally
9recognized in the ordinary and usual sense as books.
10(4) “Electronically transferred” means obtained or accessed
11by the purchaser by means other than tangible storage media,
12including but not limited to a specified digital product
13purchased through a computer software application, commonly
14referred to as an in-app purchase, or through another specified
15digital product, or through any other means.
16(5) “Other digital products” means greeting cards, images,
17video or electronic games or entertainment, news or information
18products, and computer software applications.
19 Sec. 142. Section 423.1, Code 2018, is amended by adding the
20following new subsection:
21 NEW SUBSECTION. 57A. “Subscription” means any arrangement
22in which a person has the right or ability to access,
23receive, use, obtain, purchase, or otherwise acquire tangible
24personal property, specified digital products, or services
25on a permanent or less than permanent basis, regardless of
26whether the person actually accesses, receives, uses, obtains,
27purchases, or otherwise acquires such tangible personal
28property, specified digital product, or service.
29 Sec. 143. Section 423.1, subsections 62, 63, and 64, Code
302018, are amended to read as follows:
3162. “Use” means and includes the exercise by any person of
32any right or power over or access to tangible personal property
33or a specified digital product incident to the ownership of
34that property, or any right or power over or access to the
35product or result of a service. A retailer’s or building
-58-1contractor’s sale of manufactured housing for use in this
2state, whether in the form of tangible personal property or
3of realty, is a use of that property for the purposes of this
4chapter.
563. “Use tax” means the tax levied under subchapter III of
6this chapter for which the retailer collects and remits tax to
7the department.
864. “User” means the immediate recipient of the personal
9property or services who is entitled to exercise a right of or
10 power over or access to the personal property, or the product
11or result of such services.
12 Sec. 144. Section 423.2, subsection 1, paragraph a,
13subparagraph (1), Code 2018, is amended to read as follows:
14(1) Sales of engraving, photography, retouching, printing,
15and binding services.
16 Sec. 145. Section 423.2, subsection 6, Code 2018, is amended
17to read as follows:
186. a. The sales price of any of the following enumerated
19services is subject to the tax imposed by subsection 5:
20a. alteration Alteration and garment repair; armored.
21b. Armoredcar; vehicle.
22c. Vehiclerepair; battery.
23d. Battery, tire, and allied; investment.
24e. Investmentcounseling; service.
25f. Servicecharges of all financial institutions; barber.
26For the purposes of this paragraph, “financial institutions”
27 means all national banks, federally chartered savings and loan
28associations, federally chartered savings banks, federally
29chartered credit unions, banks organized under chapter 524,
30credit unions organized under chapter 533, and all banks,
31savings banks, credit unions, and savings and loan associations
32chartered or otherwise created under the laws of any state and
33doing business in Iowa.
34g. Barberand beauty; boat.
35h. Boatrepair; vehicle.
-59- 1i. Vehicle wash and wax; campgrounds; carpentry; roof.
2j. Campgrounds.
3k. Carpentry.
4l. Roof, shingle, and glass repair; dance.
5m. Danceschools and dance studios; dating.
6n. Datingservices; dry.
7o. Drycleaning, pressing, dyeing, and laundering excluding
8the use of self-pay washers and dryers; electrical.
9p. Electricaland electronic repair and installation;
10excavating.
11q. Excavatingand grading; farm.
12r. Farmimplement repair of all kinds; flying.
13s. Flyingservice; furniture.
14t. Furniture, rug, carpet, and upholstery repair and
15cleaning; fur.
16u. Furstorage and repair; golf.
17v. Golfand country clubs and all commercial recreation;
18gun.
19w. Gunand camera repair; house.
20x. Houseand building moving; household.
21y. Householdappliance, television, and radio repair;
22janitorial.
23z. Janitorialand building maintenance or cleaning; jewelry.
24aa. Jewelryand watch repair; lawn.
25ab. Lawncare, landscaping, and tree trimming and removal;.
26ac. Personal transportation service, including but not
27limited to taxis, driver service, ride sharing service, rides
28for hire, andlimousine service, including driver; machine.
29ad. Machineoperator; machine.
30ae. Machinerepair of all kinds; motor.
31af. Motorrepair; motorcycle.
32ag. Motorcycle, scooter, and bicycle repair; oilers.
33ah. Oilersand lubricators; office.
34ai. Officeand business machine repair; painting.
35aj. Painting, papering, and interior decorating; parking.
-60- 1ak. Parkingfacilities; pay.
2al. Paytelevision; pet, including but not limited to
3streaming video, video on-demand, and pay-per-view.
4am. Petgrooming; pipe.
5an. Pipefitting and plumbing; wood.
6ao. Woodpreparation; executive.
7ap. Executivesearch agencies; private.
8aq. Privateemployment agencies, excluding services for
9placing a person in employment where the principal place of
10employment of that person is to be located outside of the
11state; reflexology; security.
12ar. Reflexology.
13as. Securityand detective services, excluding private
14security and detective services furnished by a peace officer
15with the knowledge and consent of the chief executive officer
16of the peace officer’s law enforcement agency; sewage.
17at. Sewageservices for nonresidential commercial
18operations; sewing.
19au. Sewingand stitching; shoe.
20av. Shoerepair and shoeshine; sign.
21aw. Signconstruction and installation; storage.
22ax. Storageof household goods, mini-storage, and
23warehousing of raw agricultural products; swimming.
24ay. Swimmingpool cleaning and maintenance; tanning.
25az. Tanningbeds or salons; taxidermy.
26ba. Taxidermyservices; telephone.
27bb. Telephoneanswering service; test.
28bc. Testlaboratories, including mobile testing laboratories
29and field testing by testing laboratories, and excluding tests
30on humans or animals and excluding environmental testing
31services; termite.
32bd. Termite, bug, roach, and pest eradicators; tin.
33be. Tinand sheet metal repair; transportation.
34bf. Transportationservice consisting of the rental of
35recreational vehicles or recreational boats, or the rental of
-61-1vehicles subject to registration which are registered for a
2gross weight of thirteen tons or less for a period of sixty
3days or less, or the rental of aircraft for a period of sixty
4days or less;.
5bg. Turkish baths, massage, and reducing salons, excluding
6services provided by massage therapists licensed under chapter
7152C; water.
8bh. Waterconditioning and softening; weighing; welding;
9well.
10bi. Weighing.
11bj. Welding.
12bk. Welldrilling; wrapping.
13bl. Wrapping, packing, and packaging of merchandise other
14than processed meat, fish, fowl, and vegetables; wrecking.
15bm. Wreckingservice; wrecker.
16bn. Wreckerand towing.
17b. For the purposes of this subsection, “financial
18institutions” means all national banks, federally chartered
19savings and loan associations, federally chartered savings
20banks, federally chartered credit unions, banks organized under
21chapter 524, credit unions organized under chapter 533, and
22all banks, savings banks, credit unions, and savings and loan
23associations chartered or otherwise created under the laws of
24any state and doing business in Iowa.
25bo. Photography.
26bp. Retouching.
27bq. Storage of tangible or electronic files, documents, or
28other records.
29br. Information services.
30bs. Services arising from or related to installing,
31maintaining, servicing, repairing, operating, upgrading, or
32enhancing specified digital products.
33bt. Video game services and tournaments.
34bu. Software as a service.
35 Sec. 146. Section 423.2, subsection 8, Code 2018, is amended
-62-1by adding the following new paragraph:
2 NEW PARAGRAPH. d. A transaction that otherwise meets
3the definition of “bundled transaction” as defined in this
4subsection is not a bundled transaction if it is any of the
5following:
6(1) The retail sale of tangible personal property and a
7service where the tangible personal property is essential
8to the use of the service, and is provided exclusively in
9connection with the service, and the true object of the
10transaction is the service.
11(2) The retail sale of services where one service is
12provided that is essential to the use or receipt of a second
13service and the first service is provided exclusively in
14connection with the second service and the true object of the
15transaction is the second service.
16(3) (a) A transaction that includes taxable products and
17nontaxable products and the purchase price or sales price of
18the taxable products is de minimis.
19(b) For purposes of this subparagraph, “de minimis” means
20the seller’s purchase or sales price of the taxable products
21is ten percent or less of the total purchase price or sales
22price of the bundled products. Sellers shall use either the
23purchase price or the sale price of the products to determine
24if the taxable products are de minimis. Sellers may not use
25a combination of the purchase price and sales price of the
26products to determine if the taxable products are de minimis.
27(4) The retail sale of exempt tangible personal property and
28taxable tangible personal property where all of the following
29apply:
30(a) The transaction includes food and food ingredients,
31drugs, durable medical equipment, mobility enhancing equipment,
32prosthetic devices, or medical supplies.
33(b) The seller’s purchase price or sales price of the
34taxable tangible personal property is fifty percent or less
35of the total purchase price or sales price of the bundled
-63-1tangible personal property. Sellers may not use a combination
2of the purchase price and sales price of the tangible personal
3property when making the fifty percent determination for a
4transaction.
5 Sec. 147. Section 423.2, Code 2018, is amended by adding the
6following new subsection:
7 NEW SUBSECTION. 9A. a. A tax of six percent is imposed on
8the sales price of specified digital products sold at retail
9in the state. The tax applies whether the purchaser obtains
10permanent use or less than permanent use of the specified
11digital product, whether the sale is conditioned or not
12conditioned upon continued payment from the purchaser, and
13whether the sale is on a subscription basis or is not on a
14subscription basis.
15b. The sale of a digital code that may be used to obtain
16or access a specified digital product shall be taxed in the
17same manner as the specified digital product. For purposes
18of this paragraph, “digital code” means a method that permits
19a purchaser to obtain or access at a later date a specified
20digital product.
21 Sec. 148. Section 423.2, subsections 10, 11, and 12, Code
222018, are amended by striking the subsections.
23 Sec. 149. NEW SECTION. 423.2A Deposit and transfer of
24revenues.
251. a. All revenues arising under the operation of the
26provisions of this subchapter II shall be deposited into the
27general fund of the state.
28b. Subsequent to the deposit into the general fund of
29the state, the director shall credit an amount equal to the
30product of the sales tax rate imposed in section 423.2 times
31the sales price of the tangible personal property or services
32furnished to purchasers at a baseball and softball complex that
33has received an award under section 15F.207 and that meets
34the qualifications of section 423.4, subsection 10, into the
35baseball and softball complex sales tax rebate fund created
-64-1under section 423.4, subsection 10, paragraph “e”. The director
2shall credit the moneys beginning the first day of the quarter
3following July 1, 2016. This paragraph is repealed thirty
4days following the date on which five million dollars in total
5rebates have been provided under section 423.4, subsection 10.
62. Subsequent to the deposit into the general fund of the
7state pursuant to subsection 1, the department shall do the
8following in the order prescribed:
9a. Transfer the revenues collected under chapter 423B.
10b. Transfer from the remaining revenues the amounts required
11under Article VII, section 10, of the Constitution of the State
12of Iowa to the natural resources and outdoor recreation trust
13fund created in section 461.31, if applicable.
14c. Transfer one-sixth of the remaining revenues to the
15secure an advanced vision for education fund created in section
16423F.2. This paragraph “c” is repealed December 31, 2029.
17d. Transfer to the baseball and softball complex sales tax
18rebate fund that portion of the sales tax receipts described
19in subsection 1, paragraph “b”, remaining after the transfers
20required under paragraphs “a”, “b”, and “c” of this subsection
212. This paragraph is repealed thirty days following the date
22on which five million dollars in total rebates have been
23provided under section 423.4, subsection 10.
24e. Beginning the first day of the calendar quarter
25beginning on the reinvestment district’s commencement date,
26subject to remittance limitations established by the economic
27development authority board pursuant to section 15J.4,
28subsection 3, transfer to a district account created in the
29state reinvestment district fund for each reinvestment district
30established under chapter 15J, the amount of new state sales
31tax revenue, determined in section 15J.5, subsection 1,
32paragraph “b”, in the district, that remains after the prior
33transfers required under this subsection 2. Such transfers
34shall cease pursuant to section 15J.8.
35f. Subject to the limitation on the calculation and
-65-1deposit of sales tax increment revenues in section 418.12,
2beginning the first day of the quarter following adoption
3of the resolution pursuant to section 418.4, subsection 3,
4paragraph “d”, transfer to the account created in the sales tax
5increment fund for each governmental entity approved to use
6sales tax increment revenues under chapter 418, that portion
7of the increase in sales tax revenue, determined in section
8418.11, subsection 2, paragraph “d”, in the applicable area of
9the governmental entity, that remains after the other transfers
10required under this subsection 2.
11g. Beginning the first day of the quarter following July
121, 2014, transfer to the raceway facility tax rebate fund
13created in section 423.4, subsection 11, paragraph “e”, that
14portion of the sales tax receipts collected and remitted upon
15sales of tangible personal property or services furnished by
16retailers at a raceway facility meeting the qualifications of
17section 423.4, subsection 11, that remains after the transfers
18required in paragraphs “a” through “f” of this subsection
192. This subparagraph is repealed June 30, 2025, or thirty
20days following the date on which an amount of total rebates
21specified in section 423.4, subsection 11, paragraph “c”,
22subparagraph (4), subparagraph division (a) or (b), whichever
23is applicable, has been provided or thirty days following the
24date on which rebates cease as provided in section 423.4,
25subsection 11, paragraph “c”, subparagraph (5), whichever is
26earliest.
273. Of the amount of sales tax revenue actually transferred
28per quarter pursuant to subsection 2, paragraphs “e” and “f”,
29the department shall retain an amount equal to the actual cost
30of administering the transfers under subsection 2, paragraphs
31“e” and “f”, or twenty-five thousand dollars, whichever is
32less. The amount retained by the department pursuant to this
33subsection shall be divided pro rata each quarter between
34the amounts that would have been transferred pursuant to
35subsection 2, paragraphs “e” and “f”, without the deduction
-66-1made by operation of this subsection. Revenues retained by
2the department pursuant to this subsection shall be considered
3repayment receipts as defined in section 8.2.
4 Sec. 150. Section 423.3, subsections 1, 2, and 17, Code
52018, are amended to read as follows:
61. The sales price from sales of tangible personal property,
7specified digital products, and services furnished which this
8state is prohibited from taxing under the Constitution or laws
9of the United States or under the Constitution of this state.
102. The sales price of sales for resale of tangible personal
11property or taxable services, or for resale of tangible
12personal property in connection with the furnishing of taxable
13services, except for sales, the following:
14a. Sales,other than leases or rentals, which are sales
15to nonqualified dealers of machinery, equipment, attachments,
16and replacement parts specifically enumerated in subsection 37
17and used in the manner described in subsection 37 or the. For
18purposes of this paragraph, “nonqualified dealer” means any
19dealer who is not a party to a dealership agreement, as those
20terms are defined in section 322F.1.
21b. Thepurchase of tangible personal property, the leasing
22or rental of which is exempted from tax by subsection 49.
2317. The sales price of all goods, wares, or merchandise,
24 tangible personal property, specified digital products, or
25services, used for educational purposes sold to any private
26nonprofit educational institution in this state. For the
27purpose of this subsection, “educational institution” means an
28institution which primarily functions as a school, college,
29or university with students, faculty, and an established
30curriculum. The faculty of an educational institution must be
31associated with the institution and the curriculum must include
32basic courses which are offered every year. “Educational
33institution” includes an institution primarily functioning as
34a library.
35 Sec. 151. Section 423.3, subsection 3, Code 2018, is amended
-67-1by striking the subsection and inserting in lieu thereof the
2following:
33. a. The sales price of tangible personal property used
4primarily in agricultural production by a commercial farmer
5if the cost of the tangible personal property is properly
6claimed as a business deduction for purposes of chapter 422 and
7the tangible personal property is used on land eligible for
8the agricultural land credit created in chapter 426. If the
9other requirements of this subsection are satisfied, “tangible
10personal property” includes but is not limited to the following:
11(1) Farm machinery and equipment, including supplies,
12replacement parts, and auxiliary attachments which improve the
13performance, safety, operation, or efficiency of the machinery
14and equipment.
15(2) Agricultural breeding livestock, domesticated fowl,
16preserve whitetail as defined in section 484C.1, and draft
17horses.
18b. Vehicles subject to registration, as defined in section
19423.1, and replacement parts for such vehicles, are not exempt
20under paragraph “a” of this subsection.
21 Sec. 152. Section 423.3, subsections 3A, 4, 5, 6, 7, 8,
229, 10, 11, 12, 13, 14, 15, and 16, Code 2018, are amended by
23striking the subsections.
24 Sec. 153. Section 423.3, subsection 18, unnumbered
25paragraph 1, Code 2018, is amended to read as follows:
26The sales price of tangible personal property or specified
27digital products sold, or of services furnished, to the
28following nonprofit corporations:
29 Sec. 154. Section 423.3, subsections 20, 21, 22, 23, 26, 27,
3028, and 31, Code 2018, are amended to read as follows:
3120. The sales price of tangible personal property or
32specified digital products sold, or of services furnished, to
33nonprofit legal aid organizations.
3421. The sales price of goods, wares, or merchandise,
35 tangible personal property, of specified digital products,
-68-1 or of services, used for educational, scientific, historic
2preservation, or aesthetic purpose sold to a nonprofit private
3museum.
422. The sales price from sales of goods, wares, or
5merchandise, tangible personal property, of specified digital
6products, or from services furnished, to a nonprofit private
7art center to be used in the operation of the art center.
823. The sales price of tangible personal property or
9specified digital products sold, or of services furnished, by a
10fair organized under chapter 174.
1126. The sales price of tangible personal property or
12specified digital products sold, or of services furnished, to a
13statewide nonprofit organ procurement organization, as defined
14in section 142C.2.
1527. The sales price of tangible personal property or
16specified digital products sold, or of services furnished, to a
17nonprofit hospital licensed pursuant to chapter 135B to be used
18in the operation of the hospital.
1928. The sales price of tangible personal property or
20specified digital products sold, or of services furnished, to
21a freestanding nonprofit hospice facility which operates a
22hospice program as defined in 42 C.F.R. ch.IV, §418.3, which
23property or services are to be used in the hospice program.
2431. a. The sales price of goods, wares, or merchandise
25 tangible personal property or specified digital products sold
26to and of services furnished, and used for public purposes
27sold to a tax-certifying or tax-levying body of the state or
28a governmental subdivision of the state, including regional
29transit systems, as defined in section 324A.1, the state board
30of regents, department of human services, state department of
31transportation, any municipally owned solid waste facility
32which sells all or part of its processed waste as fuel to a
33municipally owned public utility, and all divisions, boards,
34commissions, agencies, or instrumentalities of state, federal,
35county, or municipal government which have no earnings going to
-69-1the benefit of an equity investor or stockholder, except any
2of the following:
3(1) a. The sales price of goods, wares, or merchandise
4 tangible personal property or specified digital products sold
5to, or of services furnished, and used by or in connection with
6the operation of any municipally owned public utility engaged
7in selling gas, electricity, heat, pay television service, or
8communication service to the general public.
9(2) b. The sales price of furnishing of sewage services to
10a county or municipality on behalf of nonresidential commercial
11operations.
12(3) c. The furnishing of solid waste collection and
13disposal service to a county or municipality on behalf of
14nonresidential commercial operations located within the county
15or municipality.
16b. The exemption provided by this subsection shall also
17apply to all such sales of goods, wares, or merchandise or of
18services furnished and subject to use tax.
19 Sec. 155. Section 423.3, subsection 32, unnumbered
20paragraph 1, Code 2018, is amended to read as follows:
21The sales price of tangible personal property or specified
22digital products sold, or of services furnished, by a county or
23city. This exemption does not apply to any of the following:
24 Sec. 156. Section 423.3, subsection 36, unnumbered
25paragraph 1, Code 2018, is amended to read as follows:
26The sales price from sales of tangible personal property
27or specified digital products or of the sale or furnishing of
28electrical energy, natural or artificial gas, or communication
29service to another state or political subdivision of another
30state if the other state provides a similar reciprocal
31exemption for this state and political subdivision of this
32state.
33 Sec. 157. Section 423.3, subsection 39, paragraph a,
34subparagraphs (1) and (2), Code 2018, are amended to read as
35follows:
-70- 1(1) Sales of tangible personal property or specified
2digital products, or the furnishing of services, of a
3nonrecurring nature, by the owner, if the seller, at the time
4of the sale, is not engaged for profit in the business of
5selling tangible personal property, specified digital products,
6 or services taxed under section 423.2.
7(2) The sale of all or substantially all of the tangible
8personal property, or specified digital products, or services
9held or used by a seller in the course of the seller’s trade or
10business for which the seller is required to hold a sales tax
11permit when the seller sells or otherwise transfers the trade
12or business to another person who shall engage in a similar
13trade or business.
14 Sec. 158. Section 423.3, subsection 47, paragraph d,
15subparagraph (4), Code 2018, is amended by striking the
16subparagraph and inserting in lieu thereof the following:
17(4) (a) “Manufacturer” means a business that primarily
18purchases, receives, or holds personal property of any
19description for the purpose of adding to its value by a process
20of manufacturing with a view to selling the property for gain
21or profit.
22(b) “Manufacturer” includes contract manufacturers. A
23contract manufacturer is a manufacturer that otherwise falls
24within the definition of manufacturer, except that a contract
25manufacturer does not sell the tangible personal property
26the contract manufacturer processes on behalf of other
27manufacturers.
28(c) For purposes of this subparagraph, “business” means
29those businesses conducted for profit, but excludes professions
30and occupations and nonprofit organizations.
31(d) For purposes of this subparagraph, “manufacturing”
32means those activities commonly understood within the ordinary
33meaning of the term, and shall include:
34(i) Refining.
35(ii) Purifying.
-71- 1(iii) Combining of different materials.
2(iv) Packing of meats.
3(v) Activities subsequent to the extractive process of
4quarrying or mining, such as crushing, washing, sizing, or
5blending of aggregate materials.
6(e) “Manufacturer” does not include persons who are not
7commonly understood as manufacturers, including but not limited
8to persons engaged in any of the following activities:
9(i) Construction contracting.
10(ii) Repairing tangible personal property or real property.
11(iii) Providing health care.
12(iv) Farming, including cultivating agricultural products
13and raising livestock.
14(v) Transporting for hire.
15(vi) Making retail sales to consumers.
16 Sec. 159. Section 423.3, subsection 63, Code 2018, is
17amended to read as follows:
1863. The sales price from the sale of tangible personal
19property, specified digital products, or services which will be
20given as prizes to players in games of skill, games of chance,
21raffles, and bingo games as defined in chapter 99B.
22 Sec. 160. Section 423.3, subsections 65, 66, and 67, Code
232018, are amended by striking the subsections.
24 Sec. 161. Section 423.3, subsection 78, paragraph a,
25unnumbered paragraph 1, Code 2018, is amended to read as
26follows:
27The sales price from sales or rental the sale of tangible
28personal property, specified digital products, or services
29rendered by any entity where the profits from the sales or
30rental sale of the tangible personal property, specified
31digital products, or services rendered, are used by or donated
32to a nonprofit entity that is exempt from federal income
33taxation pursuant to section 501(c)(3) of the Internal Revenue
34Code, a government entity, or a nonprofit private educational
35institution, and where the entire proceeds from the sales,
-72-1rental, sale or services are expended for any of the following
2purposes:
3 Sec. 162. Section 423.3, subsection 79, Code 2018, is
4amended to read as follows:
579. The sales price from the sale or rental of tangible
6personal property or specified digital products, or from
7services furnished, to a recognized community action agency as
8provided in section 216A.93 to be used for the purposes of the
9agency.
10 Sec. 163. Section 423.3, Code 2018, is amended by adding the
11following new subsections:
12 NEW SUBSECTION. 103. a. The sales price of specified
13digital products sold, and of enumerated services described in
14section 423.2, subsection 6, paragraphs “bq”, “br”, “bs”, and
15“bu” furnished, to a commercial enterprise for use exclusively
16by the commercial enterprise. The use of a specified digital
17product or service fails to qualify as a use exclusively by the
18commercial enterprise if its use for noncommercial purposes is
19more than de minimis.
20b. For purposes of this subsection:
21(1) “Commercial enterprise” means the same as defined in
22section 423.3, subsection 47, paragraph “d”, subparagraph (1).
23(2) “De minimis” and “noncommercial purposes” shall be
24defined by the director by rule.
25 NEW SUBSECTION. 104. The sales price of specified digital
26products sold to a non-end user. For purposes of this
27subsection, “non-end user” means a person who receives by
28contract a specified digital product for further commercial
29broadcast, rebroadcast, transmission, retransmission,
30licensing, relicensing, distribution, redistribution, or
31exhibition of the product, in whole or in part, to another
32person.
33 NEW SUBSECTION. 105. The sales price from the sale of a
34grain bin or materials used to construct a grain bin. For
35purposes of this subsection, “grain bin” means property that is
-73-1vented and covered with corrugated metal or similar material,
2and that is primarily used to hold loose grain for drying or
3storage.
4 Sec. 164. Section 423.4, subsection 3, unnumbered paragraph
51, Code 2018, is amended to read as follows:
6A relief agency may apply to the director for refund of the
7amount of sales or use tax imposed and paid upon sales to it
8of any goods, wares, merchandise, tangible personal property
9or specified digital products, or services furnished, used for
10free distribution to the poor and needy.
11 Sec. 165. Section 423.4, subsection 3, paragraph a,
12subparagraph (1), Code 2018, is amended to read as follows:
13(1) On forms furnished by the department, and filed within
14the time as the director shall provide by rule, the relief
15agency shall report to the department the total amount or
16amounts, valued in money, expended directly or indirectly
17for goods, wares, merchandise, tangible personal property or
18specified digital products, or services furnished, used for
19free distribution to the poor and needy.
20 Sec. 166. Section 423.4, subsection 10, paragraph e, Code
212018, is amended to read as follows:
22e. There is established within the state treasury under the
23control of the department a baseball and softball complex sales
24tax rebate fund consisting of the amount of state sales tax
25revenues transferred pursuant to section 423.2, subsection 11,
26paragraph “b”, subparagraph (4) 423.2A, subsection 2, paragraph
27“d”. An account is created within the fund for each baseball
28and softball complex receiving an award under section 15F.207
29and meeting the qualifications of this subsection. Moneys
30in the fund shall only be used to provide rebates of state
31sales tax pursuant to this subsection, and only the state sales
32tax revenues in the baseball and softball complex rebate fund
33are subject to rebate under this subsection. The amount of
34rebates paid from each baseball and softball complex’s account
35within the fund shall not exceed the amount of the award under
-74-1section 15F.207, and not more than five million dollars in
2total rebates shall be paid from the fund. Any moneys in the
3fund which represent state sales tax revenue for which the time
4period in paragraph “c” for receiving a rebate has expired,
5or which otherwise represent state sales tax revenue that has
6become ineligible for rebate pursuant to this subsection, shall
7immediately revert to the general fund of this state.
8 Sec. 167. Section 423.4, subsection 11, paragraph b,
9subparagraph (1), Code 2018, is amended to read as follows:
10(1) Sales tax imposed and collected by retailers upon
11sales of tangible personal property or services furnished to
12purchasers at the raceway facility. Notwithstanding the state
13sales tax imposed in section 423.2, a sales tax rebate issued
14pursuant to this subparagraph shall not exceed the amounts
15transferred to the raceway facility tax rebate fund pursuant to
16section 423.2, subsection 11, paragraph “b”, subparagraph (7)
17 423.2A, subsection 2, paragraph “g”.
18 Sec. 168. Section 423.4, subsection 11, paragraph b,
19subparagraph (2), subparagraph division (c), Code 2018, is
20amended to read as follows:
21(c) Notwithstanding the state sales tax imposed in section
22423.2, a sales tax rebate issued pursuant to this subparagraph
23shall not exceed the amounts remaining after the transfers
24required under section 423.2, subsection 11, paragraph “b”,
25subparagraphs (1) through (6) 423.2A, subsection 2, paragraphs
26“a” through “f”, have been made from the total amount of sales
27tax for which the rebate is requested.
28 Sec. 169. Section 423.4, subsection 11, paragraph e, Code
292018, is amended to read as follows:
30e. There is established within the state treasury under
31the control of the department a raceway facility tax rebate
32fund consisting of the amount of state sales tax revenues
33transferred pursuant to section 423.2, subsection 11, paragraph
34“b”, subparagraph (7) 423.2A, subsection 2, paragraph “g”. An
35account is created within the fund for each raceway facility
-75-1meeting the qualifications of this subsection. Moneys in the
2fund shall only be used to provide rebates of state sales tax
3pursuant to paragraph “b”, subparagraph (1). The total amount
4of rebates paid from the fund shall not exceed the amount
5specified in paragraph “c”, subparagraph (4), subparagraph
6division (a) or (b), whichever is applicable. Any moneys in
7the fund which represent state sales tax revenue for which the
8time period in paragraph “c” for receiving a rebate has expired,
9or which otherwise represent state sales tax revenue that has
10become ineligible for rebate pursuant to this subsection shall
11immediately revert to the general fund of the state.
12 Sec. 170. Section 423.5, subsection 1, paragraph a, Code
132018, is amended to read as follows:
14a. The use in this state of tangible personal property
15as defined in section 423.1, including aircraft subject to
16registration under section 328.20, purchased for use in this
17state. For the purposes of this subchapter, the furnishing
18or use of the following services is also treated as the use
19of tangible personal property: optional service or warranty
20contracts, except residential service contracts regulated under
21chapter 523C, vulcanizing, recapping, or retreading services,
22engraving, photography, retouching, printing, or binding
23services, and communication service when furnished or delivered
24to consumers or users within this state.
25 Sec. 171. Section 423.5, subsection 1, paragraph d, Code
262018, is amended to read as follows:
27d. Purchases of tangible personal property or specified
28digital products made from the government of the United States
29or any of its agencies by ultimate consumers shall be subject
30to the tax imposed by this section. Services purchased from
31the same source or sources shall be subject to the service
32tax imposed by this subchapter and apply to the user of the
33services.
34 Sec. 172. Section 423.5, subsection 1, Code 2018, is amended
35by adding the following new paragraph:
-76-1 NEW PARAGRAPH. f. (1) The use in this state of specified
2digital products. The tax applies whether the purchaser
3obtains permanent use or less than permanent use of the
4specified digital product, whether the use is conditioned or
5not conditioned upon continued payment from the purchaser,
6and whether the use is on a subscription basis or is not on a
7subscription basis.
8(2) The use of a digital code that may be used to obtain
9or access a specified digital product shall be taxed in the
10same manner as the specified digital product. For purposes of
11this subparagraph, “digital code” means the same as defined in
12section 423.2, subsection 9A.
13 Sec. 173. Section 423.5, subsection 3, Code 2018, is amended
14to read as follows:
153. For the purpose of the proper administration of the use
16tax and to prevent its evasion, evidence that tangible personal
17property was or specified digital products were sold by any
18person for delivery in this state shall be prima facie evidence
19that such tangible personal property was or specified digital
20products were sold for use in this state.
21 Sec. 174. Section 423.5, subsection 4, Code 2018, is amended
22by striking the subsection.
23 Sec. 175. Section 423.6, unnumbered paragraph 1, Code 2018,
24is amended to read as follows:
25The use in this state of the following tangible personal
26property, specified digital products, and services is exempted
27from the tax imposed by this subchapter:
28 Sec. 176. Section 423.6, subsections 1, 2, 4, and 6, Code
292018, are amended to read as follows:
301. Tangible personal property, specified digital products,
31 and enumerated services, the sales price from the sale of which
32are required to be included in the measure of the sales tax, if
33that tax has been paid to the department or the retailer. This
34exemption does not include vehicles subject to registration or
35subject only to the issuance of a certificate of title.
-77- 12. The sale of tangible personal property, specified
2digital products, or the furnishing of services in the regular
3course of business.
44. All articles of tangible personal property and all
5specified digital products brought into the state of Iowa by a
6nonresident individual for the individual’s use or enjoyment
7while within the state.
86. Tangible personal property, specified digital products,
9 or services the sales price of which is exempt from the sales
10tax under section 423.3, except section 423.3, subsections 39
11and 73, as it relates to the sale, but not the lease or rental,
12of vehicles subject only to the issuance of a certificate of
13title and as it relates to aircraft subject to registration
14under section 328.20.
15 Sec. 177. Section 423.14, subsection 2, paragraphs b and c,
16Code 2018, are amended to read as follows:
17b. The tax upon the use of all tangible personal property
18and specified digital products other than that enumerated in
19paragraph “a”, which is sold by a seller who is a retailer
20maintaining a place of business in this state, or by such other
21retailer or agent as the director shall authorize pursuant to
22section 423.30 or its agent that is not otherwise required
23to collect sales tax under the provisions of this chapter,
24shall be collected by the retailer or agent and remitted to the
25department, pursuant to the provisions of paragraph “e”, and
26sections 423.24, 423.29, 423.30, 423.32, and 423.33.
27c. The tax upon the use of all tangible personal property
28and specified digital products not paid pursuant to paragraphs
29“a” and “b” shall be paid to the department directly by any
30person using the property within this state, pursuant to the
31provisions of section 423.34.
32 Sec. 178. NEW SECTION. 423.14A Persons required to collect
33sales and use tax — supplemental conditions, requirements, and
34responsibilities.
351. For purposes of this section, “Iowa sales” means sales
-78-1of tangible personal property, services, or specified digital
2products sourced to this state pursuant to section 423.15,
3423.16, 423.17, 423.19, or 423.20, or that are otherwise sold
4in this state or for delivery into this state.
52. In addition to and not in lieu of any application of
6this chapter to sellers who are retailers and sellers who are
7retailers maintaining a place of business in this state, any
8person described in subsection 3, or the person’s agents,
9shall be considered a retailer in this state and a retailer
10maintaining a place of business in this state for purposes of
11this chapter on or after January 1, 2019, and shall be subject
12to all requirements of this chapter imposed on retailers and
13retailers maintaining a place of business in this state,
14including but not limited to the requirement to collect and
15remit sales and use taxes pursuant to sections 423.14 and
16423.29, and local option taxes under chapter 423B.
173. a. A retailer that has gross revenue from Iowa sales
18equal to or exceeding one hundred thousand dollars for the
19immediately preceding calendar year or the current calendar
20year.
21b. A retailer that makes Iowa sales in two hundred or more
22separate transactions for the immediately preceding calendar
23year or the current calendar year.
24c. (1) A retailer that owns, licenses, or uses software
25or data files that are installed or stored on property used
26in this state. For purposes of this subparagraph, “software
27or data files” include but are not limited to software that is
28affirmatively downloaded by a user, software that is downloaded
29as a result of the use of a website, preloaded software, and
30cookies.
31(2) A retailer that uses in-state software to make Iowa
32sales. For purposes of this subparagraph, “in-state software”
33means computer software that is stored on property located in
34this state or that is distributed within this state for the
35purpose of facilitating a sale by the retailer.
-79- 1(3) A retailer that provides, or enters into an agreement
2with another person to provide, a content distribution network
3in this state to facilitate, accelerate, or enhance the
4delivery of the retailer’s internet site to purchasers. For
5purposes of this subparagraph, “content distribution network”
6means a system of distributed servers that deliver internet
7sites and other internet content to a user based on the
8geographic location of the user, the origin of the internet
9site or internet content, and a content delivery server.
10(4) This paragraph “c” shall not apply to a retailer that
11has gross revenue from Iowa sales of less than one hundred
12thousand dollars for the immediately preceding calendar year
13or the current calendar year.
14d. (1) A retailer that makes Iowa sales through a
15marketplace provider. This subparagraph shall not apply to a
16retailer that has gross revenue from Iowa sales of less than
17ten thousand dollars for the immediately preceding calendar
18year or the current calendar year.
19(2) A marketplace provider that makes or facilitates Iowa
20sales for one or more retailers equal to or exceeding one
21hundred thousand dollars, or in two hundred or more separate
22transactions, for the immediately preceding calendar year or
23the current calendar year.
24(3) Retailers and marketplace providers subject to this
25paragraph may enter into agreements regarding the fulfillment
26of the requirements of this chapter.
27(4) A marketplace provider shall collect sales and use tax
28on the entire sales price or purchase price paid by a purchaser
29on each Iowa sale made or facilitated by the marketplace
30provider that is subject to sales and use tax, regardless of
31the amount of the sales price or purchase price that will
32ultimately accrue to or benefit the marketplace provider,
33another retailer, or any other person. This sales and use tax
34collection responsibility of a marketplace provider applies but
35shall not be limited to sales facilitated through a computer
-80-1software application, commonly referred to as in-app purchases,
2or through a specified digital product.
3(5) If a retail sale subject to the sales and use tax
4involves both a marketplace provider and another retailer
5that is required to collect and remit sales and use tax,
6the marketplace provider and any other retailer involved in
7the transaction shall be jointly and severally liable for
8collecting and remitting sales and use tax under this chapter.
9(6) (a) For purposes of this paragraph, “marketplace
10provider” means a person who facilitates a retail sale by
11satisfying subparagraph divisions (i) and (ii) as follows:
12(i) The person directly or indirectly does any of the
13following:
14(A) Lists, makes available, or advertises tangible personal
15property, services, or specified digital products for sale by a
16retailer in any forum.
17(B) Transmits or otherwise communicates an offer or
18acceptance of a retail sale of tangible personal property,
19services, or specified digital products between a retailer and
20a purchaser.
21(C) Owns, rents, licenses, makes available, or operates
22any electronic or physical infrastructure or any property,
23process, method, copyright, trademark, or patent that connects
24retailers to purchasers for the purpose of making retail sales
25of tangible personal property, services, or specified digital
26products.
27(D) Provides a platform or other marketplace for making
28retail sales of tangible personal property, services, or
29specified digital products, or otherwise facilitates retail
30sales of tangible personal property, services, or specified
31digital products, regardless of ownership or control of the
32tangible personal property, services, or specified digital
33products that are the subject of the retail sale.
34(E) Provides software development or research and
35development activities related to any activity described in
-81-1this subparagraph subdivision (i), if such software development
2or research and development activities are directly related
3to the physical or electronic marketplace provided by a
4marketplace provider.
5(F) Provides or offers fulfillment or storage services for
6a retailer.
7(G) Sets prices for a retailer’s sale of tangible personal
8property, services, or specified digital products.
9(H) Provides or offers customer service to a retailer or
10a retailer’s customers, or accepts or assists with returns or
11exchanges of tangible personal property, services, or specified
12digital products sold by a retailer.
13(ii) The person directly or indirectly does any of the
14following:
15(A) Collects the sales price or purchase price of a retail
16sale of tangible personal property, services, or specified
17digital products.
18(B) Provides payment processing services for a retail sale
19of tangible personal property, services, or specified digital
20products.
21(C) Charges, collects, or otherwise receives selling
22fees, listing fees, referral fees, closing fees, fees for
23inserting or making available tangible personal property,
24services, or specified digital products on a marketplace, or
25other consideration from the facilitation of a retail sale of
26tangible personal property, services, or specified digital
27products, regardless of ownership or control of the tangible
28personal property, services, or specified digital products that
29are the subject of the retail sale.
30(D) Through terms and conditions, agreements, or
31arrangements with a third party, collects payment in connection
32with a retail sale of tangible personal property, services,
33or specified digital products from a purchaser and transmits
34that payment to the retailer, regardless of whether the person
35collecting and transmitting such payment receives compensation
-82-1or other consideration in exchange for the service.
2(E) Provides a virtual currency that purchasers are allowed
3or required to use to purchase tangible personal property,
4services, or specified digital products.
5(b) For purposes of this paragraph, “marketplace provider”
6includes but is not limited to a digital distribution service,
7digital distribution platform, online portal, or an application
8store.
9e. (1) A retailer that makes Iowa sales through the use of
10a solicitor. For purposes of this paragraph, “solicitor” means
11a person that directly or indirectly solicits business for a
12retailer.
13(2) (a) A retailer is deemed to have a solicitor in
14this state if the retailer enters into an agreement with a
15resident under which the resident, for a commission, fee, or
16other similar consideration, directly or indirectly refers
17potential customers, whether by link on an internet site,
18or otherwise, to the retailer. This determination may be
19rebutted by a showing of proof that the resident with whom the
20retailer has an agreement did not engage in any solicitation
21in this state on behalf of the retailer that would satisfy the
22nexus requirement of the United States Constitution during the
23calendar year in question.
24(b) This subparagraph (2) shall not apply to a retailer that
25has Iowa gross revenue from Iowa sales of ten thousand dollars
26or less for the immediately preceding calendar year or the
27current calendar year.
28(c) For purposes of this subparagraph (2):
29(i) “Iowa gross revenue” means gross revenue from Iowa
30sales to purchasers who were referred to the retailer by all
31solicitors who are residents.
32(ii) “Resident” includes an individual who is a resident
33of this state, as defined in section 422.4, and any business
34that owns any tangible or intangible property with a situs in
35this state, or that has one or more employees performing or
-83-1providing services for the business in this state.
2(d) This paragraph “e” does not apply to chapter 422 and
3does not expand or contract the state’s jurisdiction to tax a
4trade or business under chapter 422.
5f. A retailer that owns, controls, rents, licenses, makes
6available, or uses any tangible or intangible property in this
7state or with a situs in this state, to make or otherwise
8facilitate a retail sale.
9g. (1) Any person that enters into a contract or agreement
10with a governmental entity, including but not limited to
11contracts for the provision of financial assistance or
12incentives such as a tax credit, forgivable loan, grant, tax
13rebate, or any other thing of value. For purposes of this
14subparagraph, “governmental entity” means any unit of government
15in the executive, legislative, or judicial branch, or any
16political subdivision of the state, including but not limited
17to a city, county, township, or school district.
18(2) Every bid submitted and each contract or agreement
19executed by a state agency shall contain a certification by
20the bidder or contractor stating that the bidder or contractor
21is registered with the department pursuant to this chapter
22and will collect and remit Iowa sales and use tax due under
23this chapter. In the certification, the bidder or contractor
24shall also acknowledge that the state agency may declare the
25contractor or bid void if the certification is false or becomes
26false. Fraudulent certification, by act or omission, may
27result in the state agency or its representative filing for
28damages for breach of contract.
29h. Any affiliate of any retailer that is required to collect
30and remit sales and use tax under this chapter, provided the
31affiliate makes retail sales.
32 Sec. 179. Section 423.15, unnumbered paragraph 1, Code
332018, is amended to read as follows:
34All sales of products tangible personal property, services,
35or specified digital products, except those sales enumerated
-84-1in section 423.16, shall be sourced according to this section
2by sellers obligated to collect Iowa sales and use tax. The
3sourcing rules described in this section apply to sales of
4tangible personal property, specified digital goods products,
5and all services other than telecommunications services. This
6section only applies to determine a seller’s obligation to pay
7or collect and remit a Iowa sales or use tax with respect to
8the seller’s sale of a product. This section does not affect
9the obligation of a purchaser or lessee to remit tax on the use
10of the product to the taxing jurisdictions in which the use
11occurs. A seller’s obligation to collect Iowa sales tax or
12Iowa use tax only occurs if the sale is sourced to this state.
13Whether Iowa sales tax applies to a sale sourced to Iowa shall
14be determined based on the location at which the sale is
15consummated by delivery or, in the case of a service, where the
16first use of the service occurs made by a seller subject to
17section 423.1, subsection 48, or section 423.14A.
18 Sec. 180. Section 423.15, subsection 1, paragraph e, Code
192018, is amended to read as follows:
20e. When paragraphs “a”, “b”, “c”, and “d” do not apply,
21including the circumstance where the seller is without
22sufficient information to apply the previous rules, then the
23location will be determined by the address from which tangible
24personal property was shipped, from which the specified digital
25good product or the computer software delivered electronically
26was first available for transmission by the seller, or from
27which the service was provided disregarding for these purposes
28any location that merely provided the digital transfer of the
29product sold.
30 Sec. 181. Section 423.22, Code 2018, is amended to read as
31follows:
32423.22 Taxation in another state.
33If any person who causes tangible personal property or
34specified digital products to be brought into this state or
35who uses in this state services enumerated in section 423.2
-85-1has already paid a tax in another state in respect to the sale
2or use of the property or the performance of the service, or
3an occupation tax in respect to the property or service, in
4an amount less than the tax imposed by subchapter II or III,
5the provisions of those subchapters shall apply, but at a rate
6measured by the difference only between the rate fixed by
7subchapter II or III and the rate by which the previous tax on
8the sale or use, or the occupation tax, was computed. If the
9tax imposed and paid in the other state is equal to or more than
10the tax imposed by those subchapters, then a tax is not due in
11this state on the personal property or service.
12 Sec. 182. Section 423.29, subsection 1, Code 2018, is
13amended to read as follows:
141. Every seller who is a retailer and who is making taxable
15sales of tangible personal property or specified digital
16products in Iowa shall, at the time of selling the property
17 making the sale, collect the sales tax. Every seller who
18is a retailer maintaining a place of business in this state
19 that is not otherwise required to collect sales tax under the
20provisions of this chapter and who is selling tangible personal
21property or specified digital products for use in Iowa shall,
22at the time of making the sale, whether within or without the
23state, collect the use tax. Sellers required to collect sales
24or use tax shall give to any purchaser a receipt for the tax
25collected in the manner and form prescribed by the director.
26 Sec. 183. Section 423.30, subsection 1, Code 2018, is
27amended to read as follows:
281. The director may, upon application, authorize the
29collection of the use tax by any seller who is a retailer not
30maintaining a place of business within this state and not
31registered under the agreement, who, to the satisfaction of
32the director, furnishes adequate security to ensure collection
33and payment of the tax. Such sellers shall be issued, without
34charge, permits to collect tax subject to any regulations
35which the director shall prescribe. When so authorized, it
-86-1shall be the duty of foreign sellers to collect the tax upon
2all tangible personal property and specified digital products
3 sold, to the retailer’s knowledge, for use within this state,
4in the same manner and subject to the same requirements as a
5retailer maintaining a place of business within this state.
6The authority and permit may be canceled when, at any time, the
7director considers the security inadequate, or that tax can
8more effectively be collected from the person using property
9in this state.
10 Sec. 184. Section 423.31, subsection 1, Code 2018, is
11amended to read as follows:
121. Each person subject to this section and section 423.36
13and in accordance with the provisions of this section and
14section 423.36 shall, on or before the last day of the month
15following the close of each calendar quarter during which
16such person is or has become or ceased being subject to the
17provisions of this section and section 423.36, make, sign, and
18file a return for the calendar quarter in the form as may be
19required. Returns shall show information relating to sales
20prices including goods, wares, tangible personal property,
21specified digital products, and services converted to the
22use of such person, the amounts of sales prices excluded and
23exempt from the tax, the amounts of sales prices subject to
24tax, a calculation of tax due, and any other information for
25the period covered by the return as may be required. Returns
26shall be signed by the retailer or the retailer’s authorized
27agent and must be certified by the retailer to be correct in
28accordance with forms and rules prescribed by the director.
29 Sec. 185. Section 423.31, subsection 5, paragraph a, Code
302018, is amended to read as follows:
31a. Upon making application and receiving approval from
32the director, a parent corporation person and its affiliated
33corporations affiliates that make retail sales of tangible
34personal property, specified digital products, or taxable
35enumerated services may make deposits and file a consolidated
-87-1sales tax return for the affiliated group, pursuant to rules
2adopted by the director. A parent corporation person and each
3affiliate corporation that files a consolidated return are
4jointly and severally liable for all tax, penalty, and interest
5found due for the tax period for which a consolidated return is
6filed or required to be filed.
7 Sec. 186. Section 423.32, subsection 1, paragraph b, Code
82018, is amended to read as follows:
9b. The deposit form is due on or before the twentieth day of
10the month following the month of collection, except a deposit
11is not required for the third month of the calendar quarter,
12and the total quarterly amount, less the amounts deposited for
13the first two months of the quarter, is due with the quarterly
14report on the last day of the month following the month of
15collection. At that time, the retailer shall file with the
16department a return for the preceding quarterly period in the
17form prescribed by the director showing the purchase price of
18the tangible personal property, specified digital products, and
19services sold by the retailer during the preceding quarterly
20period, the use of which is subject to the use tax imposed
21by this chapter, and other information the director deems
22necessary for the proper administration of the use tax.
23 Sec. 187. Section 423.33, subsection 3, Code 2018, is
24amended to read as follows:
253. Event sponsor’s liability for sales tax. A person
26sponsoring a flea market or a craft, antique, coin, or stamp
27show or similar event shall obtain from every retailer selling
28tangible personal property, specified digital products,
29 or taxable services at the event proof that the retailer
30possesses a valid sales tax permit or secure from the retailer
31a statement, taken in good faith, that tangible personal
32 property, specified digital products, or services offered for
33sale are not subject to sales tax. Failure to do so renders
34a sponsor of the event liable for payment of any sales tax,
35interest, and penalty due and owing from any retailer selling
-88-1property or services at the event. Sections 423.31, 423.32,
2423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 apply to the
3sponsors. For purposes of this subsection, a “person sponsoring
4a flea market or a craft, antique, coin, or stamp show or similar
5event” does not include an organization which sponsors an
6event determined to qualify as an event involving casual sales
7pursuant to section 423.3, subsection 39, or the state fair or
8a fair as defined in section 174.1.
9 Sec. 188. Section 423.33, Code 2018, is amended by adding
10the following new subsection:
11 NEW SUBSECTION. 4. Liability of affiliates.
12a. Notwithstanding any other provision of law to the
13contrary, if any retailer required to collect and remit sales
14and use tax pursuant to sections 423.14, 423.14A, and 423.29,
15or any other provision of this chapter, fails to do so, all
16affiliates that directly, indirectly, or constructively control
17the retailer shall be jointly and severally liable for any tax,
18penalty, and interest under this chapter, regardless of whether
19the affiliate is a retailer.
20b. Pursuant to paragraph “a”, the department may elect
21to assess the full amount of any tax, penalty, and interest
22against the retailer, an affiliate of the retailer described
23in paragraph “a”, or any combination of the retailer and the
24retailer’s affiliates described in paragraph “a”.
25c. Notwithstanding any other provision of law to the
26contrary, the department has the discretion to deem an
27affiliate of a retailer an agent or alter ego of that retailer.
28d. Notwithstanding any other provision of law to the
29contrary, the department has the discretion to disregard or
30look through any organizational structure of an enterprise in
31order to assess and collect any tax, penalty, and interest
32against an affiliate that is acting to benefit an affiliate or
33an enterprise of which the affiliate is a part.
34 Sec. 189. Section 423.34, Code 2018, is amended to read as
35follows:
-89- 1423.34 Liability of user.
2Any person who uses any tangible personal property,
3specified digital products, or services enumerated in section
4423.2 upon which the use tax has not been paid, either to the
5county treasurer or to a retailer or direct to the department
6as required by this subchapter, shall be liable for the payment
7of tax, and shall on or before the last day of the month next
8succeeding each quarterly period pay the use tax upon all
9property or services used by the person during the preceding
10quarterly period in the manner and accompanied by such returns
11as the director shall prescribe. All of the provisions of
12sections 423.32 and 423.33 with reference to the returns and
13payments shall be applicable to the returns and payments
14required by this section.
15 Sec. 190. Section 423.36, subsection 1, Code 2018, is
16amended to read as follows:
171. A person shall not engage in or transact business as a
18retailer making taxable sales of tangible personal property,
19specified digital products, or furnishing services within
20this state or as a retailer making taxable sales of tangible
21personal property, specified digital products, or furnishing
22services for use within this state, unless a permit has been
23issued to the retailer under this section, except as provided
24in subsection 7. Every person desiring to engage in or
25transact business as a retailer shall file with the department
26an application for a permit to collect sales or use tax. Every
27application for a sales or use tax permit shall be made upon
28a form prescribed by the director and shall set forth any
29information the director may require. The application shall
30be signed by an owner of the business if a natural person; in
31the case of a retailer which is an association or partnership,
32by a member or partner; and in the case of a retailer which
33is a corporation, by an executive officer or some person
34specifically authorized by the corporation to sign the
35application, to which shall be attached the written evidence of
-90-1the person’s authority.
2 Sec. 191. Section 423.36, subsection 2, paragraph a, Code
32018, is amended to read as follows:
4a. Notwithstanding subsection 1, if any person will make
5taxable sales of tangible personal property, specified digital
6products, or furnish services to any state agency, that person
7shall, prior to the sale, apply for and receive a permit to
8collect sales or use tax pursuant to this section. A state
9agency shall not purchase tangible personal property, specified
10digital products, or services from any person unless that
11person has a valid, unexpired permit issued pursuant to this
12section and is in compliance with all other requirements in
13this chapter imposed upon retailers, including but not limited
14to the requirement to collect and remit sales and use tax and
15file sales and use tax returns.
16 Sec. 192. Section 423.36, subsection 7, paragraph b, Code
172018, is amended to read as follows:
18b. Persons engaged in selling tangible personal property,
19specified digital products, or furnishing services shall not be
20required to obtain or retain a sales tax permit for a place of
21business at which taxable sales of tangible personal property,
22specified digital products, or taxable performance of services
23will not occur.
24 Sec. 193. Section 423.36, subsection 9, paragraph a, Code
252018, is amended to read as follows:
26a. Except as provided in paragraph “b”, purchasers, users,
27and consumers of tangible personal property, specified digital
28products, or enumerated services taxed pursuant to subchapter
29II or III of this chapter or chapter 423B may be authorized,
30pursuant to rules adopted by the director, to remit tax owed
31directly to the department instead of the tax being collected
32and paid by the seller. To qualify for a direct pay tax permit,
33the purchaser, user, or consumer must accrue a tax liability
34of more than four thousand dollars in tax under subchapters
35II and III in a semimonthly period and make deposits and file
-91-1returns pursuant to section 423.31. This authority shall not
2be granted or exercised except upon application to the director
3and then only after issuance by the director of a direct pay
4tax permit.
5 Sec. 194. Section 423.40, subsection 2, Code 2018, is
6amended to read as follows:
72. a. Any person who knowingly sells tangible personal
8property, specified digital products, tickets or admissions
9to places of amusement and athletic events, or gas, water,
10electricity, or communication service at retail, or engages in
11the furnishing of services enumerated in section 423.2, in this
12state without procuring a permit to collect tax, as provided
13in section 423.36, or who violates section 423.24 and the
14officers of any corporation who so act are guilty of a serious
15misdemeanor.
16b. A person who knowingly sells tangible personal property,
17specified digital products, tickets or admissions to places of
18amusement and athletic events, or gas, water, electricity, or
19communication service at retail, or engages in the furnishing
20of services enumerated in section 423.2, in this state after
21the person’s sales tax permit has been revoked and before it
22has been restored as provided in section 423.36, subsection 6,
23and the officers of any corporation who so act are guilty of an
24aggravated misdemeanor.
25 Sec. 195. Section 423.41, Code 2018, is amended to read as
26follows:
27423.41 Books — examination.
28Every retailer required or authorized to collect taxes
29imposed by this chapter and every person using in this state
30tangible personal property, specified digital products,
31 services, or the product of services shall keep records,
32receipts, invoices, and other pertinent papers as the director
33shall require, in the form that the director shall require,
34for as long as the director has the authority to examine and
35determine tax due. The director or any duly authorized agent
-92-1of the department may examine the books, papers, records,
2and equipment of any person either selling tangible personal
3property, specified digital products, or services or liable
4for the tax imposed by this chapter, and investigate the
5character of the business of any person in order to verify
6the accuracy of any return made, or if a return was not made
7by the person, ascertain and determine the amount due under
8this chapter. These books, papers, and records shall be made
9available within this state for examination upon reasonable
10notice when the director deems it advisable and so orders. If
11the taxpayer maintains any records in an electronic format,
12the taxpayer shall comply with reasonable requests by the
13director or the director’s authorized agents to provide those
14electronic records in a standard record format. The preceding
15requirements shall likewise apply to users and persons
16furnishing services enumerated in section 423.2.
17 Sec. 196. Section 423.45, subsection 4, paragraphs a, b, and
18e, Code 2018, are amended to read as follows:
19a. The department shall issue or the seller may separately
20provide exemption certificates in the form prescribed by the
21director, including certificates not made of paper, which
22conform to the requirements of paragraph “c”, to assist
23retailers in properly accounting for nontaxable sales of
24tangible personal property, specified digital products,
25 or services to purchasers for a nontaxable purpose. The
26department shall also allow the use of exemption certificates
27for those circumstances in which a sale is taxable but the
28seller is not obligated to collect tax from the buyer.
29b. The sales tax liability for all sales of tangible
30personal property and specified digital products and all sales
31of services is upon the seller and the purchaser unless the
32seller takes from the purchaser a valid exemption certificate
33stating under penalty of perjury that the purchase is for a
34nontaxable purpose and is not a retail sale as defined in
35section 423.1, or the seller is not obligated to collect tax
-93-1due, or unless the seller takes a fuel exemption certificate
2pursuant to subsection 5. If the tangible personal property,
3specified digital products, or services are purchased tax free
4pursuant to a valid exemption certificate and the tangible
5personal property, specified digital products, or services are
6used or disposed of by the purchaser in a nonexempt manner, the
7purchaser is solely liable for the taxes and shall remit the
8taxes directly to the department and sections 423.31, 423.32,
9423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 shall apply
10to the purchaser.
11e. If the circumstances change and as a result the tangible
12personal property, specified digital products, or services are
13used or disposed of by the purchaser in a nonexempt manner or
14the purchaser becomes obligated to pay the tax, the purchaser
15is liable solely for the taxes and shall remit the taxes
16directly to the department in accordance with this subsection.
17 Sec. 197. Section 423.57, Code 2018, is amended to read as
18follows:
19423.57 Statutes applicable.
20The director shall administer this subchapter as it relates
21to the taxes imposed in this chapter in the same manner and
22subject to all the provisions of, and all of the powers,
23duties, authority, and restrictions contained in sections
24423.14, 423.14A, 423.15, 423.16, 423.17, 423.19, 423.20,
25423.21, 423.22, 423.23, 423.24, 423.25, 423.29, 423.31, 423.32,
26423.33, 423.34, 423.34A, 423.35, 423.37, 423.38, 423.39,
27423.40, 423.41, and 423.42, section 423.43, subsection 1, and
28sections 423.45, 423.46, and 423.47.
29 Sec. 198. Section 423.58, Code 2018, is amended to read as
30follows:
31423.58 Collection, permit, and tax return exemption for
32certain out-of-state businesses.
33Notwithstanding sections 423.14, 423.14A, 423.29, 423.31,
34423.32, and 423.36, a person meeting the requirements of
35section 29C.24 is not required to obtain a sales or use tax
-94-1permit, collect and remit sales and use tax, or make and file
2applicable sales or use tax returns, as provided in section
329C.24, subsection 3, paragraph “a”, subparagraph (2).
4 Sec. 199. Section 423B.5, subsection 1, Code 2018, is
5amended to read as follows:
61. A local sales and services tax at the rate of not more
7than one percent may be imposed by a county on the sales price
8taxed by the state under chapter 423, subchapter II. A local
9sales and services tax shall be imposed on the same basis as
10the state sales and services tax or in the case of the use of
11natural gas, natural gas service, electricity, or electric
12service on the same basis as the state use tax and shall not
13be imposed on the sale of any property or on any service not
14taxed by the state, except the tax shall not be imposed on
15the sales price from the sale of motor fuel or special fuel
16as defined in chapter 452A which is consumed for highway use
17or in watercraft or aircraft if the fuel tax is paid on the
18transaction and a refund has not or will not be allowed,
19on the sales price from the sale of equipment by the state
20department of transportation, or on the sales price from the
21sale or use of natural gas, natural gas service, electricity,
22or electric service in a city or county where the sales price
23from the sale of natural gas or electric energy is subject to
24a franchise fee or user fee during the period the franchise
25or user fee is imposed. A local sales and services tax is
26applicable to transactions within those incorporated and
27unincorporated areas of the county where it is imposed and,
28which transactions include but are not limited to sales sourced
29pursuant to sections 423.15, 423.17, 423.19, or 423.20, to a
30location within that incorporated or unincorporated area of the
31county. The tax shall be collected by all persons required
32to collect state sales taxes. All cities contiguous to each
33other shall be treated as part of one incorporated area and the
34tax would be imposed in each of those contiguous cities only
35if the majority of those voting in the total area covered by
-95-1the contiguous cities favors its imposition. In the case of a
2local sales and services tax submitted to the registered voters
3of two or more contiguous counties as provided in section
4423B.1, subsection 4, paragraph “c”, all cities contiguous to
5each other shall be treated as part of one incorporated area,
6even if the corporate boundaries of one or more of the cities
7include areas of more than one county, and the tax shall be
8imposed in each of those contiguous cities only if a majority
9of those voting on the tax in the total area covered by the
10contiguous cities favored its imposition.
11 Sec. 200. Section 423B.6, subsection 2, paragraph b, Code
122018, is amended to read as follows:
13b. The ordinance of a county board of supervisors imposing
14a local sales and services tax shall adopt by reference the
15applicable provisions of the appropriate sections of chapter
16423. All powers and requirements of the director to administer
17the state sales tax law and use tax law are applicable to the
18administration of a local sales and services tax law and the
19local excise tax, including but not limited to the provisions
20of section 422.25, subsection 4, sections 422.30, 422.67,
21and 422.68, section 422.69, subsection 1, sections 422.70
22through 422.75, section 423.14, subsection 1 and subsection
232, paragraphs “b” through “e”, and sections 423.14A, 423.15,
24423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 through
25423.42, 423.46, and 423.47. Local officials shall confer
26with the director of revenue for assistance in drafting the
27ordinance imposing a local sales and services tax. A certified
28copy of the ordinance shall be filed with the director as soon
29as possible after passage.
30 Sec. 201. LEGISLATIVE INTENT. It is the intent of the
31general assembly that the provisions of this division of this
32Act amending the definition of “place of business” in section
33423.1, subsection 37, and “sales” in section 423.1, subsection
3450, enacting definitions of “sold at retail in the state” in
35section 423.1, subsection 55A, and “subscription” in section
-96-1423.1, subsection 57A, and amending the enumerated service of
2pay television in 423.2, subsection 6, paragraph “al”, are
3conforming amendments consistent with current state law, and
4that the amendments do not change the application of current
5law but instead reflect current law both before and after the
6enactment of this division of this Act.
7 Sec. 202. RELATIONSHIP TO EXISTING LAW FOR TAXATION OF
8SPECIFIED DIGITAL PRODUCTS. The provisions of this division of
9this Act relating to the imposition of tax on the sale or use of
10“specified digital products”, as defined in this division of
11this Act, shall not be construed as affecting the taxability
12or nontaxability under other provisions of existing law of
13sales or uses occurring prior to the enactment of this division
14of this Act of products meeting the definition of “specified
15digital products”, as defined in this division of this Act.
16 Sec. 203. EFFECTIVE DATE.
171. Except as provided in subsection 2, this division of this
18Act takes effect January 1, 2019.
192. The following take effect July 1, 2018:
20a. The sections of this division of this Act amending
21section 423.1, subsections 37 and 50.
22b. The sections of this division of this Act enacting
23section 423.1, subsections 55A and 57A.
24c. The section of this division of this Act amending section
25423.2, subsection 1, paragraph “a”, subparagraph (1).
26d. The provision amending the enumerated service of pay
27television to include but not be limited to streaming video,
28video on-demand, and pay-per-view, in the section of this
29division of this Act amending section 423.2, subsection 6.
30e. The provisions adding photography and retouching to the
31list of enumerated services subject to the sales tax in the
32section of this division of this Act amending section 423.2,
33subsection 6.
34f. The section of this division of this Act enacting section
35423.2, subsection 8, paragraph “d”.
-97- 1g. The section of this division of this Act amending section
2423.5, subsection 1, paragraph “a”.
3h. The section of this division of this Act entitled
4“legislative intent” which describes the intent of the general
5assembly with respect to certain amendments in this division of
6this Act to the definition of “place of business” in section
7423.1, subsection 37, “sales” in section 423.1, subsection 50,
8the enactment of a definition for “subscription” in section
9423.1, subsection 57A, and “sold at retail” in section 423.1,
10subsection 55A, and amendments to the enumerated service of pay
11television in section 423.2, subsection 6, paragraph “al”.
12DIVISION VII
13HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE RENTAL EXCISE TAX
14CHANGES
15 Sec. 204. Section 423A.2, subsection 1, Code 2018, is
16amended to read as follows:
171. For the purposes of this chapter, unless the context
18otherwise requires:
19a. “Department” means the department of revenue.
20b. “Lessor” means any of the following:
21(1) Aperson engaged in the business of renting lodging to
22users.
23(2) A person who acquires a right to or interest in any
24lodging with an intent to rent the lodging to another person.
25(3) A person who actually or constructively rents lodging,
26regardless of who owns or controls the lodging.
27(4) A lodging facilitator.
28(5) A retailer or retailer maintaining a place of business
29in this state as defined in section 423.1, including those
30persons who meet the requirements of section 423.14A, which
31retailer or retailer maintaining a place of business in this
32state would be responsible for collection and payment of the
33hotel and motel tax if it were a sales or use tax under chapter
34423.
35c. “Lodging” means rooms, apartments, or sleeping quarters
-98-1in a hotel, motel, inn, public lodging house, rooming house,
2cabin, apartment, residential property, or manufactured or
3mobile home which is tangible personal property, or in a
4tourist court, or in any place where sleeping accommodations
5are furnished to transient guests for rent, whether with or
6without meals. Lodging does not include rooms that are not
7used for sleeping accommodations.
8d. “Lodging facilitator” means any person who facilitates
9the renting of lodging to users by satisfying subparagraphs (1)
10and (2) as follows:
11(1) The person directly or indirectly does any of the
12following:
13(a) Lists, makes available, or advertises lodging for rent
14by a lessor in any forum.
15(b) Transmits or otherwise communicates an offer or
16acceptance between a lessor or user.
17(c) Owns, rents, licenses, makes available, or operates any
18electronic or physical infrastructure or any property, process,
19method, copyright, trademark, or patent that connects lessors
20and users to each other.
21(d) Provides a platform or other marketplace for renting
22lodging or otherwise facilitates the renting of lodging,
23regardless of ownership or control of the lodging.
24(e) Provides software development or research and
25development activities related to any activity described in
26this subparagraph (1), if such software development or research
27and development activities are directly related to the physical
28or electronic marketplace provided by a lodging facilitator.
29(f) Provides or offers fulfillment or storage services for a
30lessor.
31(g) Sets prices for a lessor’s rental of lodging.
32(h) Provides or offers customer service to a lessor or
33a lessor’s customers, or accepts or assists with returns,
34exchanges, cancellations, or rescheduling of the rental of
35lodging by a lessor.
-99- 1(2) The person directly or indirectly does any of the
2following:
3(a) Collects the sales price for the renting of the lodging.
4(b) Provides payment processing services for the renting of
5lodging.
6(c) Charges, collects, or otherwise receives booking fees,
7advertising revenues, or other consideration from the renting
8of lodging or the facilitation of the renting of lodging,
9regardless of ownership or control of the lodging.
10(d) Through terms and conditions, agreements, or
11arrangements with a third party, collects payment in connection
12with a rental of lodging from a user and transmits that payment
13to the lessor, regardless of whether the person collecting
14and transmitting such payment receives compensation or other
15consideration in exchange for the service.
16(e) Provides a virtual currency that users are allowed or
17required to use to rent lodging.
18d. e. “Person” means the same as the term is defined in
19section 423.1.
20e. f. “Renting”, “rental”, or “rent” means a transfer of
21possession or control of lodging for a fixed or indeterminate
22term for consideration and includes any kind of direct or
23indirect charge for such lodging or its use.
24f. g. “Sales price” means the consideration for renting of
25lodging and means the same as the term is defined in section
26423.1 all direct or indirect consideration, including but
27not limited to cash, credit, property, and services, paid in
28connection with any charge of any description associated with
29the renting of lodging or with communicating, negotiating,
30reserving, booking, facilitating, or otherwise arranging to
31rent lodging, including but not limited to booking fees,
32reservation fees, service fees, cleaning fees, linen fees,
33towel fees, and nonrefundable deposits. When determining “sales
34price”, no deduction shall be taken for any of the following:
35(1) The lessor’s cost of the property rented.
-100- 1(2) The cost of materials used, labor or service cost,
2interest, losses, all costs of transportation to the lessor,
3all taxes imposed on the lessor, or any other expenses of the
4lessor.
5(3) Charges by the lessor for any services necessary to
6complete the rental transaction.
7g. h. “User” means a person to whom lodging is rented.
8 Sec. 205. NEW SECTION. 423A.3A Collection and remittance by
9lodging facilitators — joint and several liability.
10If a transaction for the rental of lodging involves both a
11lodging facilitator and another lessor, all of the following
12shall apply:
131. The lodging facilitator shall collect the state-imposed
14tax under section 423A.3 and the locally imposed tax under
15section 423A.4 on the entire sales price paid by the user,
16regardless of the amount of the sales price that will
17ultimately accrue to or benefit the lodging facilitator,
18another lessor, or any other person.
192. The lodging facilitator and any other lessor involved
20in the transaction shall be jointly and severally liable for
21collecting and remitting the tax under sections 423A.3 and
22423A.4.
23 Sec. 206. Section 423A.5, Code 2018, is amended to read as
24follows:
25423A.5 Exemptions.
261. There are exempted from the provisions of this chapter
27and from the computation of any amount of tax imposed by
28section 423A.3 this chapter all of the following:
29a. 1. The sales price from the renting of lodging which is
30rented by the same person for a period of more than thirty-one
31consecutive days.
32b. 2. The sales price from the renting of sleeping rooms
33in dormitories and in memorial unions at all universities and
34colleges located in the state of Iowa.
352. There is exempted from the provisions of this chapter and
-101-1from the computation of any amount of tax imposed by section
2423A.4 all of the following:
3a. The sales price from the renting of lodging or rooms
4exempt under subsection 1.
5b. 3. The sales price of lodging furnished to the guests of
6a religious institution if the property is exempt under section
7427.1, subsection 8, and the purpose of renting is to provide a
8place for a religious retreat or function and not a place for
9transient guests generally.
10 Sec. 207. Section 423A.6, subsection 4, Code 2018, is
11amended to read as follows:
124. Section 422.25, subsection 4, sections 422.30, 422.67,
13and 422.68, section 422.69, subsection 1, sections 422.70,
14422.71, 422.72, 422.74, and 422.75, section 423.14, subsection
151, and sections 423.23, 423.24, 423.25, 423.31, 423.33,
16423.35, 423.37 through 423.42, and 423.47, consistent with the
17provisions of this chapter, apply with respect to the taxes
18authorized under this chapter, in the same manner and with the
19same effect as if the state and local hotel and motel taxes
20were retail sales taxes within the meaning of those statutes.
21Notwithstanding this subsection, the director shall provide for
22quarterly filing of returns and for other than quarterly filing
23of returns both as prescribed in section 423.31. The director
24may require all persons who are engaged in the business of
25deriving any sales price subject to tax under this chapter to
26register with the department. All taxes collected under this
27chapter by a retailer, lessor, or any individual other person
28 are deemed to be held in trust for the state of Iowa and the
29local jurisdictions imposing the taxes.
30 Sec. 208. Section 423C.2, subsection 3, Code 2018, is
31amended to read as follows:
323. “Lessor” means a any of the following:
33a. Aperson engaged in the business of renting automobiles
34to users. “Lessor” includes a
35b. Amotor vehicle dealer licensed pursuant to chapter
-102-1322 who rents automobiles to users. For this purpose, the
2objective of making a profit is not necessary to make the
3renting activity a business.
4c. A person who acquires a right to or interest in any
5automobile with an intent to rent the automobile to another
6person.
7d. A person who actually or constructively rents
8automobiles, regardless of who owns or controls the
9automobiles.
10e. A rental facilitator.
11f. A retailer or retailer maintaining a place of business in
12this state as defined in section 423.1, including those persons
13who meet the requirements of section 423.14A, which retailer or
14retailer maintaining a place of business in this state would be
15responsible for collection and payment of the automobile rental
16excise tax if it were a sales or use tax under chapter 423.
17 Sec. 209. Section 423C.2, Code 2018, is amended by adding
18the following new subsection:
19 NEW SUBSECTION. 06. “Rental facilitator” means any person
20who facilitates the renting of an automobile to users by
21satisfying paragraphs “a” and “b” as follows:
22a. The person directly or indirectly does any of the
23following:
24(1) Lists, makes available, or advertises automobiles for
25rent by a lessor in any forum.
26(2) Transmits or otherwise communicates an offer or
27acceptance between a lessor or user.
28(3) Owns, rents, licenses, makes available, or operates any
29electronic or physical infrastructure or any property, process,
30method, copyright, trademark, or patent that connects lessors
31and users to each other.
32(4) Provides a platform or other marketplace for
33renting automobiles or otherwise facilitates the renting
34of automobiles, regardless of ownership or control of the
35automobile.
-103- 1(5) Provides software development or research and
2development activities related to any activity described in
3this paragraph “a”, if such software development or research and
4development activities are directly related to the physical or
5electronic marketplace provided by a rental facilitator.
6(6) Provides or offers fulfillment or storage services for a
7lessor.
8(7) Sets prices for a lessor’s rental of automobiles.
9(8) Provides or offers customer service to a lessor or
10a lessor’s customers, or accepts or assists with returns,
11exchanges, cancellations, or rescheduling of the rental of
12automobiles by a lessor.
13b. The person directly or indirectly does any of the
14following:
15(1) Collects the rental price for the renting of an
16automobile.
17(2) Provides payment processing services for the renting of
18an automobile.
19(3) Charges, collects, or otherwise receives booking
20fees, advertising revenues, or other consideration from the
21renting of an automobile or the facilitation of the renting
22of an automobile, regardless of ownership or control of the
23automobile.
24(4) Through terms and conditions, agreements, or
25arrangements with a third party, collects payment in connection
26with a rental of automobiles from a user and transmits that
27payment to the lessor, regardless of whether the person
28collecting and transmitting such payment receives compensation
29or other consideration in exchange for the service.
30(5) Provides a virtual currency that users are allowed or
31required to use to rent automobiles.
32 Sec. 210. Section 423C.2, subsection 6, Code 2018, is
33amended by striking the subsection and inserting in lieu
34thereof the following:
356. “Rental price” means all direct or indirect
-104-1consideration, including but not limited to cash, credit,
2property, and services, paid in connection with any charge of
3any description associated with the renting of an automobile
4or with communicating, negotiating, reserving, booking,
5facilitating, or otherwise arranging to rent an automobile,
6including but not limited to booking fees, reservation fees,
7service fees, and nonrefundable deposits. When determining
8“rental price”, no deduction shall be taken for any of the
9following:
10a. The lessor’s cost of the property rented.
11b. The cost of materials used, labor or service cost,
12interest, losses, all costs of transportation to the lessor,
13all taxes imposed on the lessor, or any other expenses of the
14lessor.
15c. Charges by the lessor for any services necessary to
16complete the rental transaction.
17 Sec. 211. NEW SECTION. 423C.3A Collection and remittance by
18rental facilitators — joint and several liability.
19If a transaction for the rental of an automobile involves
20both a rental facilitator and another lessor, all of the
21following shall apply:
221. The rental facilitator shall collect the tax under
23section 423C.3 on the entire rental price paid by the user,
24regardless of the amount of the rental price that will
25ultimately accrue to or benefit the rental facilitator, another
26lessor, or any other person.
272. The rental facilitator and any other lessor involved
28in the transaction shall be jointly and severally liable for
29collecting and remitting the tax under section 423C.3.
30 Sec. 212. LEGISLATIVE INTENT. It is the intent of the
31general assembly that the provision of this division of this
32Act amending the definition of “lodging” in section 423A.2,
33subsection 1, paragraph “c”, is a conforming amendment
34consistent with current state law, and that the amendment
35does not change the application of current law but instead
-105-1reflects current law both before and after the enactment of
2this division of this Act.
3 Sec. 213. EFFECTIVE DATE.
41. Except as provided in subsection 2, this division of this
5Act takes effect January 1, 2019.
62. The following take effect July 1, 2018:
7a. The provision amending the definition of “lodging” in the
8section of this division of this Act amending section 423A.2,
9subsection 1, paragraph “c”.
10b. The section of this division of this Act entitled
11“legislative intent” which describes the intent of the general
12assembly with respect to the amendment in this division of
13this Act to the definition of “lodging” in section 423A.2,
14subsection 1, paragraph “c”.
15EXPLANATION
16The inclusion of this explanation does not constitute agreement with
17the explanation’s substance by the members of the general assembly.
18This bill makes numerous changes to the individual and
19corporate income taxes, the franchise tax, tax credits,
20the moneys and credits tax, the sales and use taxes and
21local option sales tax, the hotel and motel excise tax, the
22automobile rental excise tax, and the Iowa 529 plan and Iowa
23ABLE plan.
24DIVISION I — INCOME TAX CHANGES FOR TAX YEAR 2018. The
25federal Protecting Americans From Tax Hikes Act (PATH Act)
26enacted by Congress in 2015 made permanent certain increased
27phase-out amounts and increased credit percentages of the
28federal earned income tax credit (EITC) that were scheduled
29to expire in 2018, and made permanent the deduction for
30certain expenses incurred by elementary and secondary school
31teachers that was scheduled to expire in 2015. To date, Iowa
32has not coupled with these federal changes for purposes of
33calculating the Iowa EITC or for the teacher expense deduction.
34Division I couples with these federal EITC and teacher expense
35deduction changes for purposes of the Iowa EITC and Iowa net
-106-1income calculation for tax year 2018. Division I also couples
2for tax year 2018 with certain accounting method and other
3miscellaneous changes made in the federal Tax Cuts and Jobs Act
4of 2017 for purposes of the individual and corporate income
5taxes, and the franchise tax, to the extent those amendments
6affect the calculation of federal adjusted gross income or
7federal taxable income for federal tax purposes for tax year
82018. These include amendments contained in the following
9sections of the federal Tax Cuts and Jobs Act: §13102 (small
10business accounting method changes), §13221 (accounting method
11rules for the taxable year of inclusion), §13504 (repeal of
12technical termination of partnerships), §13541 (electing small
13business trust), §13543 (treatment of S corporation conversion
14to C corporation), §13611 (repeal of special rule permitting
15recharacterization of Roth IRA conversions), and §13613
16(extended rollover period for qualified plan loans).
17The division takes effect upon enactment and applies
18retroactively to January 1, 2018, for tax years beginning on or
19after that date, but prior to January 1, 2019.
20DIVISION II — INCOME AND FRANCHISE TAX CHANGES BEGINNING IN
212019. Division II makes numerous changes to the individual and
22corporate income tax and franchise tax.
23INDIVIDUAL INCOME TAX. Under current law, the starting
24point for computing the Iowa individual income tax is federal
25adjusted gross income before the net operating loss deduction,
26which is generally a taxpayer’s gross income minus several
27deductions. From that point, Iowa requires several adjustments
28and then provides taxpayers with a deduction for federal income
29taxes paid, and the option to deduct a standard deduction or
30itemized deductions. The bill changes the starting point for
31computing the individual income tax to federal taxable income,
32which includes all deductions and adjustments taken at the
33federal level in computing tax, including a standard deduction
34or itemized deductions, and the new qualified business income
35deduction allowed for certain income earned from a pass-through
-107-1entity. Because the starting point will now be federal taxable
2income, and federal law does not provide for the filing status
3of married filing separately on a combined return, the bill
4repeals that filing status option for Iowa tax purposes.
5Because net operating loss will no longer be calculated
6at the state level, the bill requires taxpayers to add back
7any federal net operating loss deduction carried over from a
8taxable year beginning prior to January 1, 2019, but allows
9taxpayers to deduct any remaining Iowa net operating loss from
10a prior taxable year.
11The bill repeals the alternative minimum tax, and also
12repeals most deductions and exclusions previously available
13when computing net income and taxable income under Iowa law,
14including the Iowa optional standard deduction and all itemized
15deductions, and the ability to deduct federal income taxes,
16except for a one-year phase-out in 2019 for taxes paid, or
17refunds received, that relate to a prior year.
18The bill keeps the deduction for military pension income
19or military active duty pay. The bill also keeps the general
20pension exclusion available under current law, and increases
21it from $6,000 ($12,000 for married filing jointly) to $10,000
22($20,000 for married filing jointly).
23The bill maintains the deductions for contributions to the
24Iowa 529 plan, the Iowa ABLE plan, the first-time homebuyer
25savings account, the deduction for social security retirement
26benefits, the deduction for certain payments received for
27providing unskilled in-home health care, for contributions
28to an individual development account, for certain amounts
29received from the veterans trust fund, for victim compensation
30awards, and for biodiesel production refunds. The bill
31keeps the deductions for certain wages paid to individuals
32with disabilities or individuals previously convicted of a
33felony, and for certain organ donations, but only for tax years
34beginning before January 1, 2022.
35The bill provides a new deduction for any income of an
-108-1employee resulting from the payment by an employer, whether
2paid to the employee or to a lender, of principal or interest
3on the employee’s qualified education loan.
4Federal income tax law does provide a limited deduction for
5a taxpayer’s payment of interest on qualified education loans,
6and the bill disallows the deduction provided in the bill for
7any amount of income that represents an interest payment that
8was also deducted by the employee in computing federal taxable
9income.
10The term “qualified education loan” is defined to mean the
11same as it does under the Internal Revenue Code (IRC), and
12generally includes debt incurred on behalf of a taxpayer, or a
13taxpayer’s spouse or dependent, to pay expenses of attending
14institutions of higher education participating in the federal
15student financial aid programs.
16Under current law, the Iowa individual income tax conforms
17to the IRC as of a certain date, and the general assembly
18chooses to couple or decouple with changes to the IRC through
19legislation. The bill changes this conformity by permanently
20coupling with the IRC. This permanent coupling has the effect
21of incorporating into Iowa tax law all the changes made to
22the IRC since 2015, including changes made in the federal
23Protecting Americans from Tax Hikes Act of 2015, and the
24federal Tax Cuts and Jobs Act of 2017. This permanent coupling
25also has the effect of automatically incorporating into Iowa
26tax law any future changes that may be made to the IRC, unless
27the general assembly were to affirmatively decouple from a
28particular provision through legislation.
29However, the bill does decouple from the federal additional
30first-year depreciation allowance in section 168(k) of the
31IRC. By decoupling, taxpayers who claim bonus depreciation for
32federal tax purposes are required to add such depreciation
33amounts back to Iowa net income, but are then allowed under
34existing state law to deduct the amount of depreciation that
35would otherwise be allowable under federal law, without regard
-109-1to the bonus depreciation allowance.
2Current law provides nine regular tax brackets containing
3progressively higher amounts of taxable income that are taxed
4at progressively higher tax rates, from a low of 0.36 percent,
5to a high of 8.98 percent. The taxable income amounts in each
6tax bracket are indexed to inflation and increased each year.
7The bill reduces the number of brackets to five and modifies
8the tax rates as follows:
9Income over:But not over:Tax rate:
101) $0$6,0005.00%
112) $6,000$15,0005.25%
123) $15,000$30,0005.50%
134) $30,000$75,0006.00%
145) $75,000 or more6.60%
15The bill further reduces the top tax rate from 6.60% to 6.50%
16in tax year 2020, to 6.40% in tax year 2021, and to 6.30% for
17tax year 2022 and beyond. For a married couple filing a joint
18return, the bill provides that all of the income amounts in
19each bracket above are doubled. Finally, the bill provides
20that beginning in 2023, all of the tax rates will be indexed to
21inflation and reduced each year.
22CORPORATE INCOME TAX AND FRANCHISE TAX. The starting point
23for calculating the corporate income tax and the franchise
24tax is federal taxable income before the net operating loss
25deduction, because net operating loss is calculated at the
26state level. The bill repeals the separate calculation of
27net operating loss at the state level. As a result, the bill
28requires taxpayers to add back any federal net operating loss
29deduction carried over from a taxable year beginning prior to
30January 1, 2019, but allows taxpayers to deduct any remaining
31Iowa net operating loss from a prior taxable year.
32The bill repeals the alternative minimum tax for the
33corporate income tax, and also repeals most deductions and
34exclusions previously available when computing net income and
35taxable income under Iowa law, including the ability to deduct
-110-1federal income taxes, except for a one-year phase-out in 2019
2for taxes paid, or refunds received, that relate to a prior
3year. The bill keeps the deduction for certain wages paid
4to individuals with disabilities or individuals previously
5convicted of a felony, but only for tax years beginning before
6January 1, 2022.
7Under current law, the Iowa corporate income tax and
8franchise tax conforms to the IRC as of a certain date, and the
9general assembly chooses to couple or decouple with changes to
10the IRC through legislation. The bill changes this conformity
11by permanently coupling with the IRC. This permanent coupling
12has the effect of incorporating into Iowa tax law all the
13changes made to the IRC since 2015, including changes made in
14the federal Protecting Americans from Tax Hikes Act of 2015,
15and the federal Tax Cuts and Jobs Act of 2017. This permanent
16coupling also has the effect of automatically incorporating
17into Iowa tax law any future changes that may be made to the
18IRC, unless the general assembly were to affirmatively decouple
19from a particular provision through legislation.
20However, the bill does decouple from the federal additional
21first-year depreciation allowance in section 168(k) of the
22IRC. By decoupling, taxpayers who claim bonus depreciation
23for federal tax purposes are required to add such depreciation
24amounts back to Iowa net income, but are then allowed under
25existing state law to deduct the amount of depreciation that
26would otherwise be allowable under federal law, without regard
27to the bonus depreciation allowance.
28Current law provides four progressively higher tax brackets
29and tax rates for the corporate income tax, ranging from a low
30of 8 percent, to a high of 12 percent. The bill reduces the
31corporate tax rates as follows:
32Income over:But not over:2019202020212022 and later
331) $0$25,0006%6%5.5%5.5%
342) $25,000$100,0008%8%5.5%5.5%
353) $100,000$250,00010%8%5.5%5.5%
-111- 14) $250,000 and more10%10%8%7%
2Division II takes effect January 1, 2019, and applies to tax
3years beginning on or after that date.
4DIVISION III — TAX CREDITS. Division III makes numerous
5changes to tax credits and tax credit programs.
6The bill repeals the taxpayers trust fund tax credit
7effective January 1, 2020.
8The bill increases the annual tax credit allocation limit
9of the angel investor tax credit program from $2 million to
10$4 million, and provides that in any fiscal year in which the
11angel investor program allocation exceeds $2 million, the $8
12million annual tax credit allocation limit of the innovation
13fund investment tax credit program shall be reduced by the
14amount that the angel investor tax credit allocation exceeds $2
15million for that same fiscal year. This change takes effect
16July 1, 2018.
17The bill increases the annual tax credit allocation limit of
18the workforce housing tax incentive program to $22 million from
19$20 million, and provides that the entire $2 million increase
20shall be reserved for housing projects in small cities, thereby
21increasing the small city reserve under the program from $5
22million to $7 million per fiscal year. These changes take
23effect July 1, 2018.
24The bill makes several changes to the high quality jobs
25program. The bill reduces to $80 million the annual tax
26credit allocation limit of the high quality jobs program, for
27fiscal years beginning on or after July 1, 2018. The bill
28also prohibits data center businesses and web search portal
29businesses, as defined in the bill, from participating in
30the high quality jobs program, unless the businesses had a
31physical presence in this state prior to July 1, 2018. The
32bill repeals the ability under the high quality jobs program of
33eligible businesses to receive tax credits and tax refunds for
34taxes attributable to racks, shelving, and conveyor equipment
35to be used in a warehouse or distribution center, beginning
-112-1January 1, 2019. The bill repeals the refundability of the
2supplemental research activities tax credit available under the
3high quality jobs program beginning January 1, 2019. Finally,
4the bill repeals the high quality jobs program effective July
51, 2025.
6The bill increases, from 5 percent and 15 percent, to
77 percent and 17 percent, the two tax credit rates of the
8agricultural asset transfer tax credit, beginning January 1,
92019. The bill also increases from $6 million to $8 million
10the number of tax credits that may be issued per fiscal year
11under the agricultural asset transfer tax credit program,
12beginning July 1, 2018.
13The bill repeals the accelerated career education program
14provided under Code chapter 260G on July 1, 2025.
15The bill extends by one year the deadline for entering into
16withholding agreements under the targeted jobs withholding
17credit pilot project from June 30, 2018, to June 30, 2019.
18The bill reduces to $35 million from $45 million the number
19of historic preservation tax credits that may be awarded each
20fiscal year, beginning July 1, 2018, and repeals the historic
21preservation tax credit program on July 1, 2025.
22The bill modifies the research activities tax credits under
23the individual and corporate income tax by providing that the
24credits will only be available to businesses engaged in the
25manufacturing, life sciences, software engineering, or aviation
26and aerospace industry, and to the extent the business claims
27and is allowed a research credit for such qualified research
28expenses under the IRC for the same taxable year it is claiming
29the state research activities credit. The bill includes
30examples of persons ineligible for the tax credits. These
31changes take effect upon enactment and apply retroactively to
32January 1, 2018, for tax years beginning on or after that date
33and for tax returns, including amended returns, filed on or
34after that date for any tax year.
35The bill further modifies the research activities tax
-113-1credits under the individual and corporate income tax by
2amending the definition of “base amount” for purposes of
3calculating the credits. This change takes effect upon
4enactment and applies retroactively to January 1, 2010, for tax
5years beginning on or after that date.
6Because Division II repeals the individual and corporate
7alternative minimum taxes, the bill allows a taxpayer to
8claim any remaining alternative minimum tax credit against
9the individual’s or corporation’s regular tax liability for
10the 2019 tax year, and the bill then repeals the alternative
11minimum tax credit beginning in tax year 2020.
12The bill increases the total amount of school tuition
13organization tax credits that may be issued per tax year to $13
14million from $12 million for tax years beginning on or after
15January 1, 2019. The bill also increases the household income
16limit at which a student is considered an “eligible student”
17under the school tuition organization tax credit program to
18four times the federal poverty amount for tuition grants
19provided on or after January 1, 2019.
20The bill repeals the tuition and textbook tax credit, the
21volunteer fire fighter and volunteer emergency medical services
22personnel member tax credit, and the reserve peace officer tax
23credit, effective January 1, 2022.
24The bill repeals the geothermal tax credit, the geothermal
25heat pump tax credit, the farm to food donation tax credit, and
26the ethanol promotion tax credit on January 1, 2019.
27The bill repeals the solar energy system tax credits on July
281, 2018, for solar energy system installations occurring on or
29after that date.
30The bill requires the legislative tax expenditure committee
31created in Code section 2.45 to study all tax credits available
32under Iowa law during the 2018 interim, and to submit its
33findings and recommendations to the general assembly for
34consideration during the 2019 legislative session. As part
35of the study, the legislative tax expenditure committee is
-114-1required to consider new or different tax credit or other
2incentive programs for economic development.
3DIVISION IV — FRANCHISE TAX AND MONEYS AND CREDITS TAX.
4 Division IV relates to the state franchise tax and the state
5moneys and credits tax. The bill repeals the state moneys and
6credits tax in Code section 533.329 imposed on the required
7reserves of state credit unions, which are institutions
8organized in Iowa and exempt from the federal income tax.
9The bill includes credit unions incorporated in Iowa as well
10as under the laws of another state within the definition of
11“financial institution” for purposes of the state franchise
12tax on financial institutions, thereby imposing the state
13franchise tax on state and out-of-state credit unions. The
14bill also imposes the state franchise tax on agricultural
15credit associations that are members of the farm credit system
16under the federal Farm Credit Act.
17The bill modifies the state franchise tax to provide that
18neither the state alternative minimum franchise tax (AMT tax),
19a component of the state franchise tax, nor the associated
20alternative minimum tax credit for previous AMT tax paid,
21applies to financial institutions that are exempt from the
22federal income tax. The bill amends the definition of “net
23income” upon which the state franchise tax is computed to
24provide that “net income” for a financial institution that is
25exempt from the federal income tax means the total revenue
26less total expenses as properly reported on the financial
27institution’s internal revenue service form 990 (return of
28organization exempt from income tax) for the same period, with
29the adjustments provided under current law for other financial
30institutions to the extent such adjustments are applicable to
31the federally tax-exempt financial institution’s calculation of
32revenues and expenses, as determined by the director by rule.
33The bill provides that a federally tax-exempt financial
34institution’s state franchise tax is due at the end of the
35taxable year and will be considered delinquent if not paid and
-115-1filed within five months of that date.
2Under current law, the state franchise tax rate is 5 percent
3on all net income of a financial institution. The bill
4reduces the state franchise tax rate to 2 percent on the first
5$7.5 million of net income, and 4 percent on all net income
6exceeding $7.5 million.
7All revenues arising from the state franchise tax are
8deposited in the general fund of the state by operation of
9law. The state moneys and credits tax revenues were shared
10among cities, counties, and the state according to a statutory
11formula.
12The bill makes numerous conforming amendments throughout the
13Code to remove references to the state moneys and credits tax.
14The bill provides that the repeal of the state moneys and
15credits tax shall not affect tax credits issued, awarded,
16or allowed before January 1, 2019, including tax credit
17carryforward amounts, and that any credits that would have been
18eligible to be claimed on or after January 1, 2019, against
19the state moneys and credits tax shall be allowed against the
20franchise tax.
21The division takes effect January 1, 2019, and applies to tax
22years beginning on or after that date.
23DIVISION V — CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST
24AND IOWA ABLE SAVINGS PLAN TRUST. Division V makes several
25changes to the Iowa educational savings plan trust in Code
26chapter 12D (Iowa 529 plan), the disabilities expenses savings
27plan trust in Code chapter 12I (Iowa ABLE plan), and the income
28tax treatment of contributions to and withdrawals from such
29plans.
30IRC §529, which governs state tuition programs, previously
31required that in order for a state tuition program to be
32considered qualified and therefore eligible for certain
33federal tax benefits, the program must be established to
34allow contributions for the purposes of funding certain
35qualifying expenses of attendance at institutions of higher
-116-1education. Accordingly, the Iowa 529 plan allows participants
2to contribute and withdraw funds to and from the Iowa 529 plan
3for the payment of higher education costs related to attendance
4at institutions of higher education.
5The federal Tax Cuts and Jobs Act of 2017 amended IRC
6§529 to provide that during each tax year, up to $10,000 of
7cash distributions from all qualified tuition programs for a
8beneficiary for tuition expenses in connection with enrollment
9or attendance at an elementary or secondary public, private,
10or religious school, may be considered a distribution for
11qualified higher education expenses and thus excludable from
12income for federal income tax purposes. The federal Tax
13Cuts and Jobs Act of 2017 also provided that under certain
14conditions, amounts in qualified tuition programs may be
15transferred to a qualified ABLE account without incurring
16federal income tax consequences.
17The bill amends the Iowa 529 plan to provide for qualified
18withdrawals from the plan for elementary or secondary school
19tuition as is now allowed under federal law pursuant to the
20federal Tax Cuts and Jobs Act of 2017. The bill modifies the
21findings and purpose provision of the Iowa 529 plan in Code
22section 12D.1(1) by striking or amending specific references
23to higher education and institutions of higher education so
24that such provisions more generally reference education and
25educational institutions, and by providing that the Iowa 529
26plan’s purpose is to make available an opportunity to invest in
27a public trust to fund future formal education needs.
28The bill strikes the definition of “higher education costs”,
29as well as numerous references to that term throughout the Iowa
30529 plan, and replaces them with the term “qualified education
31expenses”, which is defined in the bill to mean the same as
32qualified higher education expenses as defined in IRC §529,
33including elementary and secondary school tuition to the extent
34such tuition amounts are described and allowed under IRC §529.
35The bill also replaces numerous references to “institution
-117-1of higher education” throughout the Iowa 529 plan with
2references to a “qualified educational institution”, which
3is defined in the bill to include an institution of higher
4education and any elementary or secondary, public, private, or
5religious school described in IRC §529.
6The federal Tax Cuts and Jobs Act of 2017 also amended
7IRC §529 to allow certain transfers from a qualified tuition
8program to an ABLE account without incurring federal income tax
9consequences. The bill amends the Iowa 529 plan to provide
10that a participant may transfer amounts in an Iowa 529 plan to
11an ABLE account, including the Iowa ABLE plan, if the transfer
12is permitted under IRC §529. The Iowa 529 plan is further
13amended to allow the transfer of funds to another account in
14the Iowa 529 plan, if the transfer is permitted under IRC §529.
15Several other modifications are made to the Iowa 529 plan
16to remove references to the imposition of penalties for
17cancellation and late payments under the trust, to remove
18certain references to the ability to amend participation
19agreements, to describe rules and procedures for determining
20account successors in the case of death of a participant, and
21to modify the permissible investment direction that may be
22provided by participants and beneficiaries under the trust.
23Finally, the bill adds Iowa 529 plan accounts to the list of
24exemptions from execution under Code section 627.6.
25Under current law in Code section 422.7(32)(c), previously
26tax-deducted contributions to an Iowa 529 plan that are
27withdrawn for purposes other than the payment of qualified
28education expenses are required to be added back to income
29in computing Iowa individual income tax. The bill amends
30this provision to provide that Iowa 529 plan withdrawals of
31previously tax-deducted contributions must be added back to
32Iowa income unless the amount is a withdrawal or transfer
33for one of three eligible purposes. First, for the payment
34of qualified higher education expenses. Second, for the
35payment of tuition to an elementary or secondary school if the
-118-1tuition amounts are qualified education expenses. Third, for a
2change in beneficiaries under, or transfer to another account
3within, the Iowa 529 plan, or a transfer to the Iowa ABLE plan,
4provided such beneficiary change or transfer is permitted under
5the Iowa 529 plan. The bill defines “institution of higher
6education” and “tuition” to mean the same as defined under
7the Iowa 529 plan. The bill defines “elementary or secondary
8school” to mean an elementary or secondary school in this state
9which is accredited under Code section 256.11 (educational
10standards), and adheres to the provisions of the federal
11Civil Rights Act of 1964 and Code chapter 216 (civil rights
12commission). The bill defines “qualified higher education
13expenses” to mean the same as defined under IRC §529.
14The bill amends the income tax treatment of contributions
15to and withdrawals from the Iowa ABLE plan to provide that a
16contribution shall not be deducted from Iowa income tax to the
17extent it represents a transfer from the Iowa 529 plan that was
18previously deducted as a contribution to the Iowa 529 plan,
19and that amounts resulting from a cancellation or withdrawal
20from the Iowa ABLE plan for purposes other than the payment of
21qualified disability expenses shall be added back to income in
22computing Iowa individual income tax to the extent the amount
23was previously transferred from the Iowa 529 plan and deducted
24as a contribution to the Iowa 529 plan.
25The division takes effect upon enactment and applies
26retroactively to January 1, 2018, for withdrawals and transfers
27from the Iowa educational savings plan trust made on or after
28that date, and for tax years beginning on or after that date.
29DIVISION VI — SALES AND USE TAXES. Division VI makes
30numerous changes to the sales and use taxes, including the
31local option sales tax.
32SPECIFIED DIGITAL PRODUCTS. The bill imposes the sales and
33use tax at a rate of six percent on the sale or use of specified
34digital products in Iowa. The bill defines “specified digital
35products” as electronically transferred digital audio-visual
-119-1works, digital audio works, digital books, or other digital
2products. These and other related terms are defined in
3the bill in new Code section 423.1(55A). The sales or use
4tax applies whether the purchaser obtains permanent use or
5less than permanent use of the specified digital product,
6whether the sale or use is conditioned or not conditioned upon
7continued payment from the purchaser, and whether the sale or
8use is on a subscription basis or is not on a subscription
9basis. The bill also provides that the sale or use of digital
10code that may be used to obtain or access a specified digital
11product at a later date is taxed in the same manner as a
12specified digital product.
13The bill creates an exemption for the sale or use of
14specified digital products to a non-end user, as defined in the
15bill.
16The bill amends numerous existing sales and use tax
17exemptions to include specified digital products, including
18the following: sales the state is prohibited from taxing
19under the United States Constitution or the Iowa Constitution;
20sales to certain nonprofit corporations, organizations,
21educational institutions, legal aid organizations, museums,
22art centers, organ procurement organizations, hospitals, or
23hospice facilities; sales by a state fair; sales to political
24subdivisions; sales by counties or cities; casual sales; sales
25of property which will be distributed as prizes to players
26of certain amusement games; sales to recognized community
27action agencies; uses of property for which the sales tax has
28already been paid; sales in the regular course of business;
29and property brought into Iowa by a nonresident and used here
30temporarily. The bill amends a sales tax refund provision
31relating to relief agencies that purchase property for free
32distribution to the poor to include purchases of specified
33digital products.
34The bill makes certain other conforming amendments related
35to the treatment of specified digital products for purposes
-120-1of the administration of the sales and use taxes. The bill
2provides that the imposition of tax on the sale or use of
3specified digital products shall not be construed as affecting
4the taxability or nontaxability under other provisions of
5existing law of sales or uses occurring prior to the enactment
6of this division of this Act of products meeting the definition
7of “specified digital products”.
8SUBSCRIPTIONS AND PAY TELEVISION SERVICE. The bill amends
9the definition of “sale” in Code section 423.1(50) for purposes
10of the sales tax to provide that a sale includes but is not
11limited to any transfer, exchange, or barter on a subscription
12basis. The bill defines “subscription” in new Code section
13423.1(57A).
14The bill amends the taxable service of pay television to
15provide that pay television includes but is not limited to
16streaming video, video on-demand, and pay-per-view.
17The bill provides that it is the intent of the general
18assembly that these changes to the definition of “sale” and
19“subscription”, and changes to the service of pay television,
20are conforming amendments consistent with current state law,
21and that the amendments do not change the application of
22current law but instead reflect current law both before and
23after the enactment of these changes.
24These changes take effect July 1, 2018.
25OTHER CHANGES TO TAXABLE SERVICES. Under current law, the
26services of photography and retouching are subject to the
27sales and use tax, but such services are taxed as if they were
28sales of tangible personal property. The bill strikes these
29provisions treating photography and retouching as tangible
30personal property, and adds photography and retouching to the
31list of enumerated services subject to the sales and use tax.
32These changes to photography and retouching take effect July
331, 2018.
34Current law provides that a limousine service is subject
35to the sales and use tax. The bill modifies this service to
-121-1provide that a personal transportation service shall be subject
2to the sales and use tax, and includes taxis, driver services,
3ride sharing services, rides for hire, and limousine services
4as examples of the types of services which qualify as a taxable
5personal transportation service.
6Under current law, the furnishing of information services,
7as defined in Code section 423.3(66), is exempt from the
8sales and use tax. The bill strikes this exemption and makes
9information services a taxable service for purposes of the
10sales and use tax. The bill defines “information services”.
11The bill additionally adds the following services to the
12list of enumerated services subject to the sales and use
13tax: storage of tangible or electronic files, documents, or
14other records; services arising from or related to installing,
15maintaining, servicing, repairing, operating, upgrading, or
16enhancing specified digital products; video game services and
17tournaments; and software as a service.
18OTHER SALES AND USE TAX EXEMPTIONS. Current law provides
19a sales and use tax exemption for access charges related to
20online computer services in Code section 423.3(65), and for any
21retail sale delivered electronically in Code section 423.3(67).
22The bill strikes both of these exemptions.
23The bill creates a sales and use tax exemption in new
24Code section 423.3(103) for certain sales to a commercial
25enterprise for use exclusively by the commercial enterprise.
26The exemption specifies that such a use fails to qualify as
27a use exclusively by the commercial enterprise if its use
28for noncommercial purposes is more than de minimis. The
29bill provides that the terms “de minimis” and “noncommercial
30purposes” shall be defined by the director of revenue by
31rule. The bill defines “commercial enterprise” to mean the
32same as defined under the machinery and equipment sales and
33use tax exemption in Code section 423.3(47), which includes
34businesses and manufacturers conducted for profit and centers
35for data processing services to insurance companies, financial
-122-1institutions, businesses, and manufacturers, but excludes
2professions and occupations and nonprofit organizations.
3The exemption applies to sales of specified digital
4products, and to the furnishing of the following enumerated
5taxable services: storage of tangible or electronic files,
6documents, or other records; information services; services
7arising from or related to installing, maintaining, servicing,
8repairing, operating, upgrading, or enhancing specified digital
9products; and software as a service.
10The bill adds the sale of services to the items that may
11qualify for the sales and use tax exemption in Code section
12423.3(63) relating to items purchased for the purposes of
13providing them as prizes to players of certain amusement games.
14The bill creates a sales and use tax exemption in new Code
15section 423.3(105) for the sale of a grain bin, or materials
16used to construct a grain bin. The bill defines “grain bin”.
17The bill also repeals numerous sales and use tax exemptions
18related to agricultural production and creates a new sales and
19use tax exemption for sales of tangible personal property used
20primarily in agricultural production by a commercial farmer if
21the cost of the tangible personal property is properly claimed
22as a business deduction for Iowa income tax purposes and if
23the tangible personal property is used on land eligible for
24the agricultural land property tax credit. The bill includes
25several categories of items that qualify for the exemption, and
26modifies the definition of “agricultural production” in Code
27section 423.1(5).
28The bill amends the definition of “manufacturer” for
29purposes of the manufacturing and equipment sales and use tax
30exemption in Code section 423.3(47) to require that a business
31be primarily engaged in manufacturing in order to qualify for
32the exemption. The definition includes several examples of
33activities that do and do not qualify as manufacturing for
34purposes of the exemption.
35Finally, the bill amends the sale-for-resale exemption
-123-1as it relates to certain construction equipment. Under
2current law in Code section 423.3(37), the lease or rental
3of machinery, equipment, attachments, and replacement parts
4directly and primarily used in specified construction services
5by an owner, contractor, subcontractor, or builder is exempt
6from the sales tax (construction equipment exemption). Also
7under current law, in Code section 423.3(2), the purchase
8of tangible personal property for subsequent resale, lease,
9or rental is exempt from the sales tax (sale-for-resale
10exemption). However, the purchase of construction equipment
11for a subsequent lease or rental that will qualify for the
12construction equipment exemption does not qualify for the
13sale-for-resale exemption.
14The bill amends the sale-for-resale exemption to provide
15that the purchase of construction equipment for a subsequent
16lease or rental that will qualify for the construction
17equipment exemption will only fail to qualify for the
18sale-for-resale exemption if the sale is to a nonqualified
19dealer. The bill defines “nonqualified dealer” to mean any
20dealer who is not a party to a dealership agreement, as those
21terms are defined in Code section 322F.1. The definitions
22of “dealer” and “dealership agreement” in that Code section
23respectively include persons engaged in the retail sale of
24equipment and agreements between a dealer and supplier which
25grant the dealer the right to sell, distribute, or service the
26supplier’s equipment.
27SALES AND USE TAX NEXUS AND COLLECTION REQUIREMENTS. The
28bill modifies the requirement of persons to collect and remit
29the state sales and use taxes and the local option sales tax.
30Current law requires retailers to collect sales tax for taxable
31items sold at retail in the state. The bill defines “sold
32at retail in the state” and other similar terms to include
33but not be limited to sales sourced to this state under Code
34chapter 423 (sales and use tax), and provides that it is
35the intent of the general assembly that the definition is a
-124-1conforming amendment consistent with current state law, and
2that the amendment does not change the application of current
3law but instead reflects current law both before and after the
4enactment of the definition. The enactment of the definition
5of “sold at retail in the state” takes effect July 1, 2018.
6Under current law, Code section 423.15 provides general
7rules for the sourcing of sales to Iowa. The bill amends a
8provision in this Code section relating to when sales tax
9applies to a sale sourced to Iowa, to provide that Iowa sales
10tax applies to a sale sourced to Iowa made by a seller who is a
11retailer maintaining a place of business in this state, or who
12is subject to the new Code section 423.14A (described below).
13The bill also amends provisions relating to the requirement
14of retailers maintaining a place of business in this state to
15collect use tax in Code sections 423.14 and 423.29, to provide
16that use tax shall be collected by retailers not otherwise
17required to collect sales tax under Code chapter 423 (sales and
18use tax).
19Under current law in Code section 423B.5, the local sales and
20services tax is applicable to transactions within the areas of
21the county imposing the tax. The bill amends this provision
22to provide that a transaction occurring within the taxing area
23includes a sale sourced to a location in that area pursuant
24to the sourcing rules governing the sales and use tax (Code
25sections 423.15 through 423.20).
26The bill creates new Code section 423.14A that deems certain
27persons, or agents of those persons, to be a retailer and
28a retailer maintaining a place of business in this state
29on or after January 1, 2019, and subjects those persons to
30all requirements of Code chapter 423 (sales and use taxes),
31including but not limited to the requirement to collect and
32remit Iowa sales and use tax, and the requirement to collect
33and remit the local option sales tax. The bill provides that
34the requirements in Code section 423.14A are in addition to,
35and not in lieu of, any other application of Code chapter 423
-125-1to a retailer or a retailer maintaining a place of business in
2this state. Qualifying persons required to collect and remit
3Iowa sales and use tax include any person described below. For
4purposes of any threshold requirement described below that
5involves the sales of taxable items, the bill defines “Iowa
6sales” to include any sale sourced to this state under Code
7chapter 423, or otherwise sold in this state or for delivery
8into this state, of tangible personal property, specified
9digital products, or services.
10A qualifying person includes any retailer that has gross
11revenue from Iowa sales equal to or exceeding $100,000 for the
12current or previous calendar year.
13A qualifying person includes any retailer that makes Iowa
14sales in 200 or more separate transactions for the current or
15previous calendar year.
16A qualifying person includes any retailer that owns,
17licenses, or uses software or data files (as defined in the
18bill) that are installed or stored on property used in this
19state.
20A qualifying person includes any retailer that uses in-state
21software (as defined in the bill) to make Iowa sales.
22A qualifying person includes any retailer that provides, or
23enters into an agreement to provide, a content distribution
24network (as defined in the bill) in this state to facilitate,
25accelerate, or enhance the delivery of the retailer’s internet
26site to purchasers. However, this provision does not apply to
27any retailer that has gross revenue from Iowa sales of less
28than $100,000 for the current or previous calendar year.
29A qualifying person includes any retailer that makes Iowa
30sales through a marketplace provider (as defined in the bill).
31However, this provision does not apply to any retailer that
32has gross revenue from Iowa sales of less than $10,000 for the
33current or previous calendar year.
34A qualifying person includes any marketplace provider that
35makes or facilitates Iowa sales for a retailer equal to or
-126-1exceeding $100,000, or in 200 or more separate transactions for
2the current or previous year. The bill requires marketplace
3providers to collect Iowa sales and use tax on the entire
4sales price or purchase price paid the purchaser, regardless
5of the amount that will ultimately accrue to or benefit the
6marketplace provider or any other person, includes other
7provisions related to marketplace providers, and subjects
8certain marketplace providers and retailers described in the
9bill to joint and several liability for the collection and
10payment of Iowa sales and use tax.
11A qualifying person includes a retailer that makes Iowa
12sales through the use of a solicitor (as defined in the bill).
13The bill creates a presumption that a retailer has a solicitor
14in this state under certain circumstances. This provision does
15not apply to retailers that have gross revenue from Iowa sales
16referred by solicitors of $10,000 or less for the current or
17previous calendar year.
18A qualifying person includes any person that owns, controls,
19rents, licenses, makes available, or uses any tangible or
20intangible property in this state or with a situs in this state
21to make or facilitate a retail sale.
22A qualifying person includes any person that enters into a
23contract or agreement with a governmental entity, as defined in
24the bill, including but not limited to contracts or agreements
25for the provision of financial assistance or incentives such as
26a tax credit, forgivable loan, grant, tax rebate, or any other
27thing of value. This provision includes certain requirements
28for contractors who submit bids and agreements to state
29agencies similar to language in current Code section 423.2(10).
30The bill strikes the similar language under existing law in
31Code section 423.2(10).
32A qualifying person includes any affiliate or any retailer
33that is required to collect Iowa sales and use tax, provided
34the affiliate makes retail sales.
35OTHER MISCELLANEOUS SALES AND USE TAX CHANGES. The bill
-127-1moves provisions relating to the deposit and transfer of sales
2tax revenues in Code section 423.11 to a new Code section
3423.2A, and makes corresponding changes to other provisions of
4the Code that reference those deposit and transfer provisions.
5The bill amends the definition of “lease or rental”, “use”,
6“use tax”, and “user” in Code section 423.1. The bill also
7amends the definition of “bundled transaction” in Code section
8423.2(8) to incorporate certain language also included in
9the definition of “bundled transaction” for purposes of the
10streamlined sales tax agreement, of which Iowa is a member
11state. The changes to the definition of bundled transaction
12take effect July 1, 2018.
13The bill defines “personal property” for purposes of the
14sales and use tax to include but not be limited to tangible
15personal property and specified digital products.
16The bill amends the definition of “place of business” in
17Code section 423.1 to include places where specified digital
18products or services are offered for sale, and provides that
19it is the intent of the general assembly that the change to
20the definition is a conforming amendment consistent with
21current state law, and that the amendment does not change the
22application of current law but instead reflects current law
23both before and after the enactment of the change. These
24changes to the definition of “place of business” take effect
25July 1, 2018.
26The bill provides that when any retailer required under
27Iowa law to collect and remit sales and use tax fails to do
28so, the retailer and any affiliate that directly, indirectly,
29or constructively controls the retailer shall be held jointly
30and severally liable for the tax and any resulting penalty and
31interest, regardless of whether the affiliate is a retailer.
32The bill provides the department the authority to assess
33the full amount of any tax, penalty, or interest against
34the retailer and these affiliates, and gives the department
35discretion to disregard or look through any organizational
-128-1structure of an enterprise to assess tax, penalty, and interest
2against an affiliate of a retailer. The term “affiliate” for
3purposes of these provisions is defined under existing law in
4Code section 423.1(2).
5Finally, the bill adds several Code sections relating to
6the requirement to collect sales and use tax to the provisions
7for which failure to comply may subject a retailer to personal
8liability under Code section 421.26.
9EFFECTIVE DATE PROVISIONS. Except as otherwise provided
10above, the division takes effect January 1, 2019.
11DIVISION VII — HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE
12RENTAL EXCISE TAX. The bill amends the hotel and motel excise
13tax in Code chapter 423A and the automobile rental excise tax
14in Code chapter 423C to expand the types of persons who must
15collect and remit the excise taxes, and to make other changes
16to the administration of the taxes.
17Current law requires lessors, as defined with respect to
18each excise tax, to collect the excise tax. The bill amends
19the definition of “lessor” under each tax to more broadly
20include any person who acquires a right or interest in lodging
21or an automobile, any person who actually or constructively
22rents lodging or an automobile, lodging facilitators and rental
23facilitators, and retailers who would be required to collect
24the excise taxes if the excise taxes were a sales and use tax
25under Code chapter 423. The bill defines a lodging facilitator
26with respect to the hotel and motel excise tax, and defines a
27rental facilitator with respect to the automobile rental excise
28tax, to include certain persons who facilitate the renting of
29the taxable items by directly or indirectly performing certain
30acts with regard to the rental transaction. The bill modifies
31the definition of “sales price” for purposes of the hotel
32and motel excise tax and “rental price” with respect to the
33automobile rental excise tax.
34The bill repeals an exemption from the hotel and motel excise
35tax provided for the renting of rooms in a memorial union of an
-129-1Iowa college or university, and expands an exemption for the
2renting of rooms in certain religious institutions so that it
3also applies to the state and local hotel and motel excise tax.
4Under current law, that exemption only applies to the local
5hotel and motel excise tax.
6The bill modifies the definition of “lodging” for purposes
7of the hotel and motel excise tax to include a cabin,
8apartment, or residential property. The bill provides that it
9is the intent of the general assembly that the change to the
10definition of “lodging” is a conforming amendment consistent
11with current state law, and that the amendments do not change
12the application of current law but instead reflect current law
13both before and after the enactment of these changes. The
14changes to the definition of “lodging” take effect July 1,
152018.
16Finally, the bill provides that if a transaction under
17either excise tax involves both a lessor and a lodging
18facilitator or rental facilitator, as applicable, then both
19parties will be jointly and severally liable for the applicable
20tax, and further provides that the lodging facilitator or
21rental facilitator shall collect the entire amount of tax
22due on the transaction, regardless of the amount that will
23ultimately accrue to the benefit of the lodging facilitator or
24rental facilitator, or any other person.
25EFFECTIVE DATE PROVISIONS. Except as otherwise provided
26above, the division takes effect January 1, 2019.
-130-mm/jh
2modifying the individual and corporate income taxes, the
3franchise tax, tax credits, the moneys and credits tax, the
4sales and use taxes and local option sales tax, the hotel
5and motel excise tax, the automobile rental excise tax, the
6Iowa educational savings plan trust, and the disabilities
7expenses savings plan trust, making penalties applicable,
8and including immediate effective date and retroactive and
9other applicability provisions.
10BE 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
6INCOME TAX AND FRANCHISE TAX CHANGES BEGINNING IN 2019
7 Sec. 6. Section 217.39, Code 2018, is amended to read as
8follows:
9217.39 Persecuted victims of World War II — reparations —
10heirs.
11Notwithstanding any other law of this state, payments paid
12to and income from lost property of a victim of persecution
13for racial, ethnic, or religious reasons by Nazi Germany or
14any other Axis regime or as an heir of such victim which is
15exempt from state income tax as provided described in section
16422.7, subsection 35, Code 2018, shall not be considered as
17income or an asset for determining the eligibility for state or
18local government benefit or entitlement programs. The proceeds
19are not subject to recoupment for the receipt of governmental
20benefits or entitlements, and liens, except liens for child
21support, are not enforceable against these sums for any reason.
22 Sec. 7. Section 422.3, subsection 5, Code 2018, is amended
23to read as follows:
245. “Internal Revenue Code” means the Internal Revenue Code
25of 1954, prior to the date of its redesignation as the Internal
26Revenue Code of 1986 by the Tax Reform Act of 1986, or means
27the Internal Revenue Code of 1986, as amended and in effect
28on January 1, 2015. This definition shall not be construed
29to include any amendment to the Internal Revenue Code enacted
30after the date specified in the preceding sentence, including
31any amendment with retroactive applicability or effectiveness.
32 Sec. 8. Section 422.4, subsection 1, paragraphs b and c,
33Code 2018, are amended to read as follows:
34b. “Cumulative inflation factor” means the product of the
35annual inflation factor for the 1988 2022 calendar year and
-2-1all annual inflation factors for subsequent calendar years
2as determined pursuant to this subsection. The cumulative
3inflation factor applies to all tax years beginning on or after
4January 1 of the calendar year for which the latest annual
5inflation factor has been determined.
6c. The annual inflation factor for the 1988 2022 calendar
7year is one hundred percent.
8 Sec. 9. Section 422.4, subsection 2, Code 2018, is amended
9by striking the subsection.
10 Sec. 10. Section 422.4, subsection 16, Code 2018, is amended
11to read as follows:
1216. The words “taxable income” mean the net income as
13defined in section 422.7 minus the deductions deduction allowed
14by section 422.9, if available, in the case of individuals;
15in the case of estates or trusts, the words “taxable income”
16mean the taxable income (without a deduction for personal
17exemption) as computed for federal income tax purposes under
18the Internal Revenue Code, but with the adjustments specified
19in section 422.7 plus the Iowa income tax deducted in computing
20the federal taxable income and minus federal income taxes as
21provided in section 422.9.
22 Sec. 11. Section 422.5, subsection 1, paragraphs a, b, c, d,
23and e, Code 2018, are amended by striking the paragraphs and
24inserting in lieu thereof the following:
25a. On all taxable income from zero through twelve thousand
26dollars in the case of a married couple filing jointly, or from
27zero to six thousand dollars in the case of all other persons,
28five percent.
29b. On all taxable income exceeding twelve thousand dollars
30but not exceeding thirty thousand dollars in the case of a
31married couple filing jointly, or exceeding six thousand
32dollars but not exceeding fifteen thousand dollars in the case
33of all other persons, five and one-quarter percent.
34c. On all taxable income exceeding thirty thousand dollars
35but not exceeding sixty thousand dollars in the case of a
-3-1married couple filing jointly, or exceeding fifteen thousand
2dollars but not exceeding thirty thousand dollars in the case
3of all other persons, five and one-half percent.
4d. On all taxable income exceeding sixty thousand dollars
5but not exceeding one hundred fifty thousand dollars in the
6case of a married couple filing jointly, or exceeding thirty
7thousand dollars but not exceeding seventy-five thousand
8dollars in the case of all other persons, six percent.
9e. On all taxable income exceeding one hundred fifty
10thousand dollars in the case of a married couple filing
11jointly, or exceeding seventy-five thousand dollars in the case
12of all other persons, the following:
13(1) Six and six-tenths percent for tax years beginning
14during the 2019 calendar year.
15(2) Six and one-half percent for tax years beginning during
16the 2020 calendar year.
17(3) Six and four-tenths percent for tax years beginning
18during the 2021 calendar year.
19(4) Six and three-tenths percent for tax years beginning on
20or after January 1, 2022.
21 Sec. 12. Section 422.5, subsection 1, paragraphs f, g, h,
22and i, Code 2018, are amended by striking the paragraphs.
23 Sec. 13. Section 422.5, subsection 1, paragraph j, Code
242018, is amended to read as follows:
25j. (1) The tax imposed upon the taxable income of a
26nonresident shall be computed by reducing the amount determined
27pursuant to paragraphs “a” through “i” “e” by the amounts of
28nonrefundable credits under this division and by multiplying
29this resulting amount by a fraction of which the nonresident’s
30net income allocated to Iowa, as determined in section
31422.8, subsection 2, paragraph “a”, is the numerator and the
32nonresident’s total net income computed under section 422.7 is
33the denominator. This provision also applies to individuals
34who are residents of Iowa for less than the entire tax year.
35(2) (a) The tax imposed upon the taxable income of a
-4-1resident shareholder in an S corporation or of an estate
2or trust with a situs in Iowa that is a shareholder in an S
3corporation, which S corporation has in effect for the tax
4year an election under subchapter S of the Internal Revenue
5Code and carries on business within and without the state,
6may be computed by reducing the amount determined pursuant to
7paragraphs “a” through “i” “e” by the amounts of nonrefundable
8credits under this division and by multiplying this resulting
9amount by a fraction of which the resident’s or estate’s
10or trust’s net income allocated to Iowa, as determined in
11section 422.8, subsection 2, paragraph “b”, is the numerator
12and the resident’s or estate’s or trust’s total net income
13computed under section 422.7 is the denominator. If a resident
14shareholder, or an estate or trust with a situs in Iowa
15that is a shareholder, has elected to take advantage of this
16subparagraph (2), and for the next tax year elects not to take
17advantage of this subparagraph, the resident or estate or
18trust shareholder shall not reelect to take advantage of this
19subparagraph for the three tax years immediately following the
20first tax year for which the shareholder elected not to take
21advantage of this subparagraph, unless the director consents to
22the reelection. This subparagraph also applies to individuals
23who are residents of Iowa for less than the entire tax year.
24(b) This subparagraph (2) shall not affect the amount of
25the taxpayer’s checkoffs under this division, the credits from
26tax provided under this division, and the allocation of these
27credits between spouses if the taxpayers filed separate returns
28or separately on combined returns.
29 Sec. 14. Section 422.5, subsection 2, Code 2018, is amended
30by striking the subsection.
31 Sec. 15. Section 422.5, subsections 3 and 3B, Code 2018, are
32amended to read as follows:
333. a. The tax shall not be imposed on a resident or
34nonresident whose net income, as defined in section 422.7, is
35thirteen thousand five hundred dollars or less in the case
-5-1of married persons filing jointly or filing separately on a
2combined return, heads of household, and surviving spouses or
3nine thousand dollars or less in the case of all other persons;
4but in the event that the payment of tax under this division
5would reduce the net income to less than thirteen thousand five
6hundred dollars or nine thousand dollars as applicable, then
7the tax shall be reduced to that amount which would result
8in allowing the taxpayer to retain a net income of thirteen
9thousand five hundred dollars or nine thousand dollars as
10applicable. The preceding sentence does not apply to estates
11or trusts. For the purpose of this subsection, the entire net
12income, including any part of the net income not allocated
13to Iowa, shall be taken into account. For purposes of this
14subsection, net income includes all amounts of pensions or
15other retirement income, except for military retirement pay
16excluded under section 422.7, subsection 31A, paragraph “a”,
17or section 422.7, subsection 31B, paragraph “a”, received from
18any source which is not taxable under this division as a result
19of the government pension exclusions in section 422.7, or any
20other state law. If the combined net income of a husband and
21wife exceeds thirteen thousand five hundred dollars, neither
22of them shall receive the benefit of this subsection, and it
23is immaterial whether they file a joint return or separate
24returns. However, if a husband and wife file separate returns
25and have a combined net income of thirteen thousand five
26hundred dollars or less, neither spouse shall receive the
27benefit of this paragraph, if one spouse has a net operating
28loss and elects to carry back or carry forward the loss as
29provided under the Internal Revenue Code or in section 422.9,
30subsection 3. A person who is claimed as a dependent by
31another person as defined in section 422.12 shall not receive
32the benefit of this subsection if the person claiming the
33dependent has net income exceeding thirteen thousand five
34hundred dollars or nine thousand dollars as applicable or the
35person claiming the dependent and the person’s spouse have
-6-1combined net income exceeding thirteen thousand five hundred
2dollars or nine thousand dollars as applicable.
3b. In lieu of the computation in subsection 1 or 2, or in
4paragraph “a” of this subsection, if the married persons’,
5 filing jointly or filing separately on a combined return,
6head of household’s, or surviving spouse’s net income exceeds
7thirteen thousand five hundred dollars, the regular tax imposed
8under this division shall be the lesser of the maximum state
9individual income tax rate for the tax year times the portion
10of the net income in excess of thirteen thousand five hundred
11dollars or the regular tax liability computed without regard
12to this sentence. Taxpayers electing to file separately shall
13compute the alternate tax described in this paragraph using the
14total net income of the husband and wife. The alternate tax
15described in this paragraph does not apply if one spouse elects
16to carry back or carry forward the loss as provided under the
17Internal Revenue Code or in section 422.9, subsection 3.
183B. a. The tax shall not be imposed on a resident or
19nonresident who is at least sixty-five years old on December
2031 of the tax year and whose net income, as defined in section
21422.7, is thirty-two thousand dollars or less in the case
22of married persons filing jointly or filing separately on a
23combined return, heads of household, and surviving spouses or
24twenty-four thousand dollars or less in the case of all other
25persons; but in the event that the payment of tax under this
26division would reduce the net income to less than thirty-two
27thousand dollars or twenty-four thousand dollars as applicable,
28then the tax shall be reduced to that amount which would result
29in allowing the taxpayer to retain a net income of thirty-two
30thousand dollars or twenty-four thousand dollars as applicable.
31The preceding sentence does not apply to estates or trusts.
32For the purpose of this subsection, the entire net income,
33including any part of the net income not allocated to Iowa,
34shall be taken into account. For purposes of this subsection,
35net income includes all amounts of pensions or other retirement
-7-1income, except for military retirement pay excluded under
2section 422.7, subsection 31A, paragraph “a”, or section 422.7,
3subsection 31B, paragraph “a”, received from any source which is
4not taxable under this division as a result of the government
5pension exclusions in section 422.7, or any other state law.
6If the combined net income of a husband and wife exceeds
7thirty-two thousand dollars, neither of them shall receive the
8benefit of this subsection, and it is immaterial whether they
9file a joint return or separate returns. However, if a husband
10and wife file separate returns and have a combined net income
11of thirty-two thousand dollars or less, neither spouse shall
12receive the benefit of this paragraph, if one spouse has a net
13operating loss and elects to carry back or carry forward the
14loss as provided under the Internal Revenue Code or in section
15422.9, subsection 3. A person who is claimed as a dependent by
16another person as defined in section 422.12 shall not receive
17the benefit of this subsection if the person claiming the
18dependent has net income exceeding thirty-two thousand dollars
19or twenty-four thousand dollars as applicable or the person
20claiming the dependent and the person’s spouse have combined
21net income exceeding thirty-two thousand dollars or twenty-four
22thousand dollars as applicable.
23b. In lieu of the computation in subsection 1, 2, or 3, if
24the married persons’, filing jointly or filing separately on
25a combined return, head of household’s, or surviving spouse’s
26net income exceeds thirty-two thousand dollars, the regular tax
27imposed under this division shall be the lesser of the maximum
28state individual income tax rate for the tax year times the
29portion of the net income in excess of thirty-two thousand
30dollars or the regular tax liability computed without regard
31to this sentence. Taxpayers electing to file separately shall
32compute the alternate tax described in this paragraph using the
33total net income of the husband and wife. The alternate tax
34described in this paragraph does not apply if one spouse elects
35to carry back or carry forward the loss as provided under the
-8-1Internal Revenue Code or in section 422.9, subsection 3.
2c. This subsection applies even though one spouse has not
3attained the age of sixty-five, if the other spouse is at least
4sixty-five at the end of the tax year.
5 Sec. 16. Section 422.5, subsection 6, Code 2018, is amended
6by striking the subsection and inserting in lieu thereof the
7following:
86. Upon determination of the latest cumulative inflation
9factor, the director shall reduce each tax rate in subsection
101, paragraphs “a” through “d”, and paragraph “e”, subparagraph
11(4), by the same percentage that the latest cumulative
12inflation factor exceeds one hundred percent, shall round off
13the resulting rate to the nearest one-hundredth of one percent,
14and shall incorporate the result into the income tax forms and
15instructions for each tax year.
16 Sec. 17. Section 422.7, unnumbered paragraph 1, Code 2018,
17is amended to read as follows:
18The term “net income” means the adjusted gross income before
19the net operating loss deduction taxable income as properly
20computed for federal income tax purposes under section 63 the
21Internal Revenue Code, with the following adjustments:
22 Sec. 18. Section 422.7, Code 2018, is amended by adding the
23following new subsections:
24 NEW SUBSECTION. 4. Add any federal net operating loss
25deduction carried over from a taxable year beginning prior to
26January 1, 2019.
27 NEW SUBSECTION. 6. a. For tax years beginning in the 2019
28calendar year, subtract the amount of federal income taxes
29paid during the tax year to the extent payment is for a tax
30year beginning prior to January 1, 2019, and add any federal
31income tax refunds received during the tax year to the extent
32the federal income tax was deducted for a tax year beginning
33prior to January 1, 2019. Where married persons who have filed
34a joint federal income tax return file separately for state tax
35purposes, such total shall be divided between them according
-9-1to the portion of the total paid by each. Federal income taxes
2paid for a tax year in which an Iowa return was not required to
3be filed shall not be subtracted.
4b. Notwithstanding any other provision of law to the
5contrary, amounts subtracted or added pursuant to this
6subsection shall not be included in the calculation of net
7income for purposes of section 422.5, subsection 3 or 3B, or
8section 422.13.
9 Sec. 19. Section 422.7, subsection 12, paragraph a,
10unnumbered paragraph 1, Code 2018, is amended to read as
11follows:
12If For tax years beginning prior to January 1, 2022, if the
13adjusted gross federal taxable income includes income or loss
14from a small business operated by the taxpayer, an additional
15deduction shall be allowed in computing the income or loss from
16the small business if the small business hired for employment
17in the state during its annual accounting period ending with or
18during the taxpayer’s tax year any of the following:
19 Sec. 20. Section 422.7, subsection 12A, paragraph a,
20unnumbered paragraph 1, Code 2018, is amended to read as
21follows:
22If For tax years beginning prior to January 1, 2022, if the
23adjusted gross federal taxable income includes income or loss
24from a business operated by the taxpayer, and if the business
25does not qualify for the adjustment under subsection 12, an
26additional deduction shall be allowed in computing the income
27or loss from the business if the business hired for employment
28in the state during its annual accounting period ending with or
29during the taxpayer’s tax year either of the following:
30 Sec. 21. Section 422.7, subsection 13, Code 2018, is amended
31by striking the subsection and inserting in lieu thereof the
32following:
3313. Subtract, to the extent included, the amount of social
34security benefits taxable under section 86 of the Internal
35Revenue Code.
-10-1 Sec. 22. Section 422.7, Code 2018, is amended by adding the
2following new subsections:
3 NEW SUBSECTION. 18. Add, to the extent deducted for federal
4tax purposes, charitable contributions under section 170 of
5the Internal Revenue Code to the extent such contribution was
6made to an organization for the purpose of deposit in the Iowa
7education savings plan trust established in chapter 12D, and
8the taxpayer designated that any part of the contribution be
9used for the direct benefit of any dependent of the taxpayer or
10any other single beneficiary designated by the taxpayer.
11 NEW SUBSECTION. 19. a. Subtract, to the extent included,
12income resulting from the payment by an employer of the
13taxpayer, whether paid to the taxpayer or to a lender, of
14principal or interest on any qualified education loan incurred
15by the taxpayer.
16b. If the taxpayer has a deduction in computing federal
17taxable income under section 221 of the Internal Revenue Code
18for interest on a qualified education loan, the taxpayer shall
19recompute for purposes of this subsection the amount of the
20deduction under paragraph “a” by not subtracting any amount of
21income resulting from the employer’s payment of interest on a
22qualified education loan that was also deducted by the taxpayer
23under section 221 of the Internal Revenue Code.
24c. For purposes of this subsection, “qualified education
25loan” means the same as defined in section 221 of the Internal
26Revenue Code.
27 Sec. 23. Section 422.7, subsection 31, Code 2018, is amended
28to read as follows:
2931. For a person who is disabled, or is fifty-five years of
30age or older, or is the surviving spouse of an individual or
31a survivor having an insurable interest in an individual who
32would have qualified for the exemption under this subsection
33for the tax year, subtract, to the extent included, the
34total amount of a governmental or other pension or retirement
35pay, including, but not limited to, defined benefit or
-11-1defined contribution plans, annuities, individual retirement
2accounts, plans maintained or contributed to by an employer,
3or maintained or contributed to by a self-employed person as
4an employer, and deferred compensation plans or any earnings
5attributable to the deferred compensation plans, up to a
6maximum of six ten thousand dollars for a person, other than a
7husband or wife, who files a separate state income tax return
8and up to a maximum of twelve twenty thousand dollars for a
9husband and wife who file a joint state income tax return.
10However, a surviving spouse who is not disabled or fifty-five
11years of age or older can only exclude the amount of pension or
12retirement pay received as a result of the death of the other
13spouse. A husband and wife filing separate state income tax
14returns or separately on a combined state return are allowed
15a combined maximum exclusion under this subsection of up to
16twelve twenty thousand dollars. The twelve twenty thousand
17dollar exclusion shall be allocated to the husband or wife
18in the proportion that each spouse’s respective pension and
19retirement pay received bears to total combined pension and
20retirement pay received.
21 Sec. 24. Section 422.7, subsection 41, Code 2018, is amended
22by adding the following new paragraph:
23 NEW PARAGRAPH. 0e. Add, to the extent deducted for
24federal tax purposes, interest, taxes, and other miscellaneous
25expenses to the extent such amounts are eligible home costs
26in connection with a qualified home purchase that were paid
27or reimbursed from funds in a first-time homebuyer savings
28account.
29 Sec. 25. Section 422.7, subsection 44, paragraph a,
30unnumbered paragraph 1, Code 2018, is amended to read as
31follows:
32If For tax years beginning before January 1, 2022, if the
33taxpayer, while living, donates one or more of the taxpayer’s
34human organs to another human being for immediate human organ
35transplantation during the tax year, subtract, to the extent
-12-1not otherwise excluded, the following unreimbursed expenses
2incurred by the taxpayer and related to the taxpayer’s organ
3donation:
4 Sec. 26. Section 422.7, subsection 47, Code 2018, is amended
5to read as follows:
647. Subtract, to the extent not otherwise deducted in
7computing adjusted gross federal taxable income, the amounts
8paid by the taxpayer to the department of veterans affairs for
9the purpose of providing grants under the injured veterans
10grant program established in section 35A.14. Amounts
11subtracted under this subsection shall not be used by the
12taxpayer in computing the amount of charitable contributions as
13defined by section 170 of the Internal Revenue Code.
14 Sec. 27. Section 422.7, Code 2018, is amended by adding the
15following new subsection:
16 NEW SUBSECTION. 51. The additional first-year depreciation
17allowance authorized in section 168(k) of the Internal Revenue
18Code does not apply in computing net income for state tax
19purposes. If the taxpayer has taken the additional first-year
20depreciation allowance for purposes of computing federal
21taxable income, then the taxpayer shall make the following
22adjustments to federal taxable income when computing net income
23for state tax purposes:
24a. Add the total amount of depreciation taken under section
25168(k) of the Internal Revenue Code for the tax year.
26b. Subtract the amount of depreciation allowable under the
27modified accelerated cost recovery system described in section
28168 of the Internal Revenue Code and calculated without regard
29to section 168(k).
30c. Any other adjustments to gains or losses necessary to
31reflect the adjustments made in paragraphs “a” and “b”. The
32director shall adopt rules for the administration of this
33paragraph.
34 Sec. 28. Section 422.7, subsections 3, 7, 8, 9, 10, 11, 14,
3515, 16, 20, 21, 22, 23, 24, 25, 26, 29, 30, 35, 36, 37, 39, 39A,
-13-139B, 40, 43, 45, 49, 53, 55, 56, 57, and 58, Code 2018, are
2amended by striking the subsections.
3 Sec. 29. Section 422.8, subsection 4, Code 2018, is amended
4by striking the subsection.
5 Sec. 30. Section 422.9, Code 2018, is amended by striking
6the section and inserting in lieu thereof the following:
7422.9 Iowa net operating loss incurred prior to January 1,
82019.
9Any Iowa net operating loss carried over from a taxable year
10beginning prior to January 1, 2019, may be deducted as provided
11in section 422.9, subsection 3, Code 2018.
12 Sec. 31. Section 422.11S, subsection 4, Code 2018, is
13amended to read as follows:
144. Married taxpayers who file separate returns or file
15separately on a combined return form must determine the tax
16credit under subsection 1 based upon their combined net income
17and allocate the total credit amount to each spouse in the
18proportion that each spouse’s respective net income bears to
19the total combined net income. Nonresidents or part-year
20residents of Iowa must determine their tax credit in the ratio
21of their Iowa source net income to their all source net income.
22Nonresidents or part-year residents who are married and elect
23to file separate returns or to file separately on a combined
24return form must allocate the tax credit between the spouses
25in the ratio of each spouse’s Iowa source net income to the
26combined Iowa source net income of the taxpayers.
27 Sec. 32. Section 422.12B, subsection 2, Code 2018, is
28amended to read as follows:
292. Married taxpayers electing to file separate returns or
30filing separately on a combined return may avail themselves
31of the earned income credit by allocating the earned income
32credit to each spouse in the proportion that each spouse’s
33respective earned income bears to the total combined earned
34income. Taxpayers affected by the allocation provisions of
35section 422.8 shall be permitted a deduction for the credit
-14-1only in the amount fairly and equitably allocable to Iowa under
2rules prescribed by the director.
3 Sec. 33. Section 422.12C, subsection 4, Code 2018, is
4amended to read as follows:
54. Married taxpayers who have filed joint federal returns
6electing to file separate returns or to file separately on a
7combined return form must determine the child and dependent
8care credit under subsection 1 or the early childhood
9development tax credit under subsection 2 based upon their
10combined net income and allocate the total credit amount to
11each spouse in the proportion that each spouse’s respective net
12income bears to the total combined net income. Nonresidents
13or part-year residents of Iowa must determine their Iowa child
14and dependent care credit in the ratio of their Iowa source
15net income to their all source net income. Nonresidents or
16part-year residents who are married and elect to file separate
17returns or to file separately on a combined return form must
18allocate the Iowa child and dependent care credit between the
19spouses in the ratio of each spouse’s Iowa source net income to
20the combined Iowa source net income of the taxpayers.
21 Sec. 34. Section 422.13, subsection 1, paragraph c, Code
222018, is amended by striking the paragraph.
23 Sec. 35. Section 422.16, subsection 1, paragraph f, Code
242018, is amended by striking the paragraph.
25 Sec. 36. Section 422.21, subsections 2, 5, and 7, Code 2018,
26are amended to read as follows:
272. An individual in the armed forces of the United States
28serving in an area designated by the president of the United
29States or the United States Congress as a combat zone or as a
30qualified hazardous duty area, or deployed outside the United
31States away from the individual’s permanent duty station while
32participating in an operation designated by the United States
33secretary of defense as a contingency operation as defined
34in 10 U.S.C. §101(a)(13), or which became such a contingency
35operation by the operation of law, or an individual serving in
-15-1support of those forces, is allowed the same additional time
2period after leaving the combat zone or the qualified hazardous
3duty area, or ceasing to participate in such contingency
4operation, or after a period of continuous hospitalization, to
5file a state income tax return or perform other acts related
6to the department, as would constitute timely filing of the
7return or timely performance of other acts described in section
87508(a) of the Internal Revenue Code. An individual on active
9duty federal military service in the armed forces, armed forces
10military reserve, or national guard who is deployed outside
11the United States in other than a combat zone, qualified
12hazardous duty area, or contingency operation is allowed the
13same additional period of time described in section 7508(a)
14of the Internal Revenue Code to file a state income tax
15return or perform other acts related to the department. For
16the purposes of this subsection, “other acts related to the
17department” includes filing claims for refund for any tax
18administered by the department, making tax payments other than
19withholding payments, filing appeals on the tax matters, filing
20other tax returns, and performing other acts described in the
21department’s rules. The additional time period allowed applies
22to the spouse of the individual described in this subsection
23to the extent the spouse files jointly or separately on the
24combined return form with the individual or when the spouse
25is a party with the individual to any matter for which the
26additional time period is allowed.
275. The director shall determine for the 1989 2022 and each
28subsequent calendar year the annual and cumulative inflation
29factors for each calendar year to be applied to tax years
30beginning on or after January 1 of that calendar year. The
31director shall compute the new dollar amounts tax rates
32 as specified to be adjusted in section 422.5 by the latest
33cumulative inflation factor and round off the result to the
34nearest one dollar one-hundredth of one percent. The annual
35and cumulative inflation factors determined by the director
-16-1are not rules as defined in section 17A.2, subsection 11. The
2director shall determine for the 1990 calendar year and each
3subsequent calendar year the annual and cumulative standard
4deduction factors to be applied to tax years beginning on or
5after January 1 of that calendar year. The director shall
6compute the new dollar amounts of the standard deductions
7specified in section 422.9, subsection 1, by the latest
8cumulative standard deduction factor and round off the result
9to the nearest ten dollars. The annual and cumulative standard
10deduction factors determined by the director are not rules as
11defined in section 17A.2, subsection 11.
127. If married taxpayers file a joint return or file
13separately on a combined return in accordance with rules
14prescribed by the director, both spouses are jointly and
15severally liable for the total tax due on the return, except
16when one spouse is considered to be an innocent spouse under
17criteria established pursuant to section 6015 of the Internal
18Revenue Code.
19 Sec. 37. Section 422.32, subsection 1, paragraph h, Code
202018, is amended to read as follows:
21h. “Internal Revenue Code” means the Internal Revenue Code
22of 1954, prior to the date of its redesignation as the Internal
23Revenue Code of 1986 by the Tax Reform Act of 1986, or means
24the Internal Revenue Code of 1986, as amended and in effect
25on January 1, 2015. This definition shall not be construed
26to include any amendment to the Internal Revenue Code enacted
27after the date specified in the preceding sentence, including
28any amendment with retroactive applicability or effectiveness.
29 Sec. 38. Section 422.33, subsection 1, paragraphs a, b, c,
30and d, Code 2018, are amended to read as follows:
31a. On the first twenty-five thousand dollars of taxable
32income, or any part thereof, the rate of six percent for tax
33years beginning prior to January 1, 2021, and the rate of
34five and one-half percent for tax years beginning on or after
35January 1, 2021.
-17- 1b. On taxable income between twenty-five thousand dollars
2and one hundred thousand dollars or any part thereof, the rate
3of eight percent for tax years beginning prior to January 1,
42021, and the rate of five and one-half percent for tax years
5beginning on or after January 1, 2021.
6c. On taxable income between one hundred thousand dollars
7and two hundred fifty thousand dollars or any part thereof, the
8rate of ten percent for tax years beginning prior to January 1,
92020, the rate of eight percent for tax years beginning during
10the 2020 calendar year, and the rate of five and one-half
11percent for tax years beginning on or after January 1, 2021.
12d. On taxable income of two hundred fifty thousand dollars
13or more, the rate of twelve ten percent for tax years beginning
14on or after January 1, 2019, but prior to January 1, 2021, the
15rate of eight percent for tax years beginning during the 2021
16calendar year, and the rate of seven percent for tax years
17beginning on or after January 1, 2022.
18 Sec. 39. Section 422.33, subsection 4, Code 2018, is amended
19by striking the subsection.
20 Sec. 40. Section 422.35, unnumbered paragraph 1, Code 2018,
21is amended to read as follows:
22The term “net income” means the taxable income before the
23net operating loss deduction, as properly computed for federal
24income tax purposes under the Internal Revenue Code, with the
25following adjustments:
26 Sec. 41. Section 422.35, subsection 4, Code 2018, is amended
27to read as follows:
284. Subtract fifty percent of the federal income taxes paid
29or accrued, as the case may be, during the tax year to the
30extent payment is for a tax year beginning prior to January 1,
312019, adjusted by any federal income tax refunds; and add the
32Iowa income tax deducted in computing said taxable income to
33the extent the tax was deducted for a tax year beginning prior
34to January 1, 2019.
35 Sec. 42. Section 422.35, subsection 6, paragraph a,
-18-1unnumbered paragraph 1, Code 2018, is amended to read as
2follows:
3If For tax years beginning before January 1, 2022, if the
4taxpayer is a small business corporation, subtract an amount
5equal to sixty-five percent of the wages paid to individuals,
6but not to exceed twenty thousand dollars per individual, named
7in subparagraphs (1), (2), and (3) who were hired for the first
8time by the taxpayer during the tax year for work done in this
9state:
10 Sec. 43. Section 422.35, subsection 6A, paragraph a,
11unnumbered paragraph 1, Code 2018, is amended to read as
12follows:
13If For tax years beginning prior to January 1, 2022, if the
14taxpayer is a business corporation and does not qualify for
15the adjustment under subsection 6, subtract an amount equal to
16sixty-five percent of the wages paid to individuals, but shall
17not exceed twenty thousand dollars per individual, named in
18subparagraphs (1) and (2) who were hired for the first time by
19the taxpayer during the tax year for work done in this state:
20 Sec. 44. Section 422.35, subsection 11, Code 2018, is
21amended by striking the subsection and inserting in lieu
22thereof the following:
2311. a. Add any federal net operating loss deduction carried
24over from a taxable year beginning prior to January 1, 2019.
25b. Any Iowa net operating loss carried over from a taxable
26year beginning prior to January 1, 2019, may be deducted as
27provided in section 422.35, subsection 11, Code 2018.
28 Sec. 45. Section 422.35, Code 2018, is amended by adding the
29following new subsection:
30 NEW SUBSECTION. 23. The additional first-year depreciation
31allowance authorized in section 168(k) of the Internal Revenue
32Code does not apply in computing net income for state tax
33purposes. If the taxpayer has taken the additional first-year
34depreciation allowance for purposes of computing federal
35taxable income, then the taxpayer shall make the following
-19-1adjustments to federal taxable income when computing net income
2for state tax purposes:
3a. Add the total amount of depreciation taken under section
4168(k) of the Internal Revenue Code for the tax year.
5b. Subtract the amount of depreciation allowable under the
6modified accelerated cost recovery system described in section
7168 of the Internal Revenue Code and calculated without regard
8to section 168(k).
9c. Any other adjustments to gains or losses necessary to
10reflect the adjustments made in paragraphs “a” and “b”. The
11director shall adopt rules for the administration of this
12paragraph.
13 Sec. 46. Section 422.35, subsections 3, 5, 7, 8, 10, 16,
1417, 18, 19, 19A, 19B, 20, 22, and 24, Code 2018, are amended by
15striking the subsections.
16 Sec. 47. Section 541B.3, subsection 1, paragraph b, Code
172018, is amended to read as follows:
18b. A married couple electing to file a joint Iowa individual
19income tax return may establish a joint first-time homebuyer
20savings account. Married taxpayers electing to file separate
21tax returns or separately on a combined tax return for Iowa tax
22purposes shall not establish or maintain a joint first-time
23homebuyer savings account.
24 Sec. 48. Section 541B.6, Code 2018, is amended to read as
25follows:
26541B.6 Tax considerations.
27The state income tax treatment of a first-time homebuyer
28savings account shall be as provided in section 422.7,
29subsection 41, and section 422.9, subsection 2, paragraph “k”.
30 Sec. 49. EFFECTIVE DATE. This division of this Act takes
31effect January 1, 2019.
32 Sec. 50. APPLICABILITY. This division of this Act applies
33to tax years beginning on or after January 1, 2019.
34DIVISION III
35tax credits
-20-1 Sec. 51. Section 8.57E, subsection 2, Code 2018, is amended
2to read as follows:
32. Moneys in the taxpayers trust fund shall only be used
4pursuant to appropriations or transfers made by the general
5assembly for tax relief. During each fiscal year beginning on
6or after July 1, 2014, but before June 30, 2020, in which the
7balance of the taxpayers trust fund equals or exceeds thirty
8million dollars, there is transferred from the taxpayers trust
9fund to the Iowa taxpayers trust fund tax credit fund created
10in section 422.11E, the entire balance of the taxpayers trust
11fund to be used for the Iowa taxpayers trust fund tax credit in
12accordance with section 422.11E, subsection 5.
13 Sec. 52. Section 15.119, subsection 2, paragraph a, Code
142018, is amended by striking the paragraph and inserting in
15lieu thereof the following:
16a. The high quality jobs program administered pursuant
17to sections 15.326 through 15.336. In allocating tax
18credits pursuant to this subsection, the authority shall not
19allocate more than eighty million dollars for purposes of this
20paragraph.
21 Sec. 53. Section 15.119, subsection 2, paragraphs d, e, and
22g, Code 2018, are amended to read as follows:
23d. The tax credits for investments in qualifying businesses
24issued pursuant to section 15E.43. In allocating tax credits
25pursuant to this subsection, the authority shall not allocate
26two more than four million dollars for purposes of this
27paragraph, unless the authority determines that the tax credits
28awarded will be less than that amount.
29e. The tax credits for investments in an innovation fund
30pursuant to section 15E.52. In allocating tax credits pursuant
31to this subsection in a fiscal year in which the allocation for
32purposes of paragraph “d” does not exceed two million dollars,
33the authority shall not allocate more than eight million
34dollars for purposes of this paragraph, unless the authority
35determines that the tax credits awarded will be less than that
-21-1amount. In allocating tax credits pursuant to this subsection
2in a fiscal year in which the allocation for purposes of
3paragraph “d” exceeds two million dollars, the authority shall
4not allocate for purposes of this paragraph an amount that
5exceeds an amount equal to the difference of eight million
6dollars less the amount that the allocation for purposes of
7paragraph “d” exceeds two million dollars for the same fiscal
8year.
9g. The workforce housing tax incentives program administered
10pursuant to sections 15.351 through 15.356. In allocating
11tax credits pursuant to this subsection, the authority shall
12not allocate more than twenty twenty-two million dollars for
13purposes of this paragraph. Of the moneys allocated under this
14paragraph, five seven million dollars shall be reserved for
15allocation to qualified housing projects in small cities, as
16defined in section 15.352, that are registered on or after July
171, 2017.
18 Sec. 54. Section 15.329, subsection 1, paragraph f, Code
192018, is amended to read as follows:
20f. The business shall not be a retail business or a business
21where entrance is limited by a cover charge or membership
22requirement, or a web search portal business as defined in
23section 423.3, subsection 93, or a data center business as
24defined in section 423.3, subsection 95, unless such web search
25portal business or data center business had a physical presence
26in this state prior to July 1, 2018.
27 Sec. 55. Section 15.331A, subsection 1, Code 2018, is
28amended to read as follows:
291. The eligible business shall be entitled to a refund
30of the sales and use taxes paid under chapter 423 for gas,
31electricity, water, or sewer utility services, goods, wares, or
32merchandise, or on services rendered, furnished, or performed
33to or for a contractor or subcontractor and used in the
34fulfillment of a written contract relating to the construction
35or equipping of a facility that is part of a project of the
-22-1eligible business. Taxes attributable to intangible property
2and furniture and furnishings shall not be refunded. However,
3an eligible business shall be entitled to a refund for taxes
4attributable to racks, shelving, and conveyor equipment to be
5used in a warehouse or distribution center subject to section
615.331C.
7 Sec. 56. Section 15.331C, Code 2018, is amended to read as
8follows:
915.331C Corporate tax credit for certain sales taxes paid by
10third-party developer.
111. An eligible business may claim a corporate tax credit
12in an amount equal to the sales and use taxes paid by a
13third-party developer under chapter 423 for gas, electricity,
14water, or sewer utility services, goods, wares, or merchandise,
15or on services rendered, furnished, or performed to or for a
16contractor or subcontractor and used in the fulfillment of a
17written contract relating to the construction or equipping of
18a facility of the eligible business. Taxes attributable to
19intangible property and furniture and furnishings shall not
20be included, but taxes attributable to racks, shelving, and
21conveyor equipment to be used in a warehouse or distribution
22center shall be included. Any credit in excess of the tax
23liability for the tax year may be credited to the tax liability
24for the following seven years or until depleted, whichever
25occurs earlier. An eligible business may elect to receive a
26refund of all or a portion of an unused tax credit.
272. A third-party developer shall state under oath, on
28forms provided by the department of revenue, the amount of
29taxes paid as described in subsection 1 and shall submit such
30forms to the department of revenue. The taxes paid shall be
31itemized to allow identification of the taxes attributable
32to racks, shelving, and conveyor equipment to be used in a
33warehouse or distribution center. After receiving the form
34from the third-party developer, the department of revenue shall
35issue a tax credit certificate to the eligible business equal
-23-1to the sales and use taxes paid by a third-party developer
2under chapter 423 for gas, electricity, water, or sewer
3utility services, goods, wares, or merchandise, or on services
4rendered, furnished, or performed to or for a contractor or
5subcontractor and used in the fulfillment of a written contract
6relating to the construction or equipping of a facility.
7The department of revenue shall also issue a tax credit
8certificate to the eligible business equal to the taxes paid
9and attributable to racks, shelving, and conveyor equipment to
10be used in a warehouse or distribution center. The aggregate
11combined total amount of tax refunds under section 15.331A for
12taxes attributable to racks, shelving, and conveyor equipment
13to be used in a warehouse or distribution center and of tax
14credit certificates issued by the department of revenue for the
15taxes paid and attributable to racks, shelving, and conveyor
16equipment to be used in a warehouse or distribution center
17shall not exceed five hundred thousand dollars in a fiscal
18year. If an applicant for a tax credit certificate does not
19receive a certificate for the taxes paid and attributable
20to racks, shelving, and conveyor equipment to be used in a
21warehouse or distribution center, the application shall be
22considered in succeeding fiscal years. The eligible business
23shall not claim a tax credit under this section unless a tax
24credit certificate issued by the department of revenue is
25included with the taxpayer’s tax return for the tax year for
26which the tax credit is claimed. A tax credit certificate
27shall contain the eligible business’s name, address, tax
28identification number, the amount of the tax credit, and other
29information deemed necessary by the department of revenue.
30 Sec. 57. Section 15.335, subsection 7, paragraph b, Code
312018, is amended by striking the paragraph and inserting in
32lieu thereof the following:
33b. For purposes of this section, “Internal Revenue Code”
34means the same as defined in section 422.3.
35 Sec. 58. Section 15.335, subsection 8, Code 2018, is amended
-24-1by striking the subsection and inserting in lieu thereof the
2following:
38. Any tax credit in excess of the taxpayer’s liability for
4the tax year is not refundable and may not be credited to the
5tax liability for any other year.
6 Sec. 59. Section 16.80, subsection 5, paragraphs a and b,
7Code 2018, are amended to read as follows:
8a. Except as provided in paragraph “b”, the tax credit shall
9equal five seven percent of the amount paid to the taxpayer
10under the agreement.
11b. The tax credit shall equal fifteen seventeen percent
12of the amount paid to the taxpayer from crops or animals sold
13under an agreement in which the payment is exclusively made
14from the sale of crops or animals.
15 Sec. 60. Section 16.80, subsection 10, Code 2018, is amended
16to read as follows:
1710. The amount of tax credit certificates that may be issued
18pursuant to this section shall not exceed six eight million
19dollars in any fiscal year. The authority shall issue the tax
20credit certificates on a first-come, first-served basis.
21 Sec. 61. NEW SECTION. 260G.8 Future repeal.
22This chapter is repealed effective July 1, 2025.
23 Sec. 62. Section 403.19A, subsection 3, paragraph c,
24subparagraph (2), Code 2018, is amended to read as follows:
25(2) The pilot project city and the economic development
26authority shall not enter into a withholding agreement after
27June 30, 2018 2019.
28 Sec. 63. Section 404A.4, subsection 1, paragraph a, Code
292018, is amended to read as follows:
30a. Except as provided in subsections 2 and 3, the authority
31shall not award in any one fiscal year an amount of tax credits
32provided in section 404A.2 in excess of forty-five thirty-five
33 million dollars.
34 Sec. 64. Section 404A.4, subsections 2 and 3, Code 2018, are
35amended by striking the subsections.
-25-1 Sec. 65. NEW SECTION. 404A.7 Future repeal.
2This chapter is repealed effective July 1, 2025.
3 Sec. 66. Section 422.10, subsection 1, Code 2018, is amended
4by adding the following new paragraph:
5 NEW PARAGRAPH. 0a. An individual shall only be eligible for
6the credit provided in this section if the business conducting
7the research meets all of the following requirements:
8(1) (a) The business is engaged in the manufacturing,
9life sciences, software engineering, or aviation and aerospace
10industry.
11(b) A person who is engaged in agricultural production
12as defined in section 423.1, or who is a contractor,
13subcontractor, builder, or a contractor-retailer that engages
14in commercial and residential repair and installation,
15including but not limited to heating or cooling installation
16and repair, plumbing and pipe fitting, security system
17installation, or electrical installation and repair, does not
18qualify under subparagraph division (a) and is not eligible
19for the credit. For purposes of this subparagraph division,
20“contractor-retailer” means a business that makes frequent
21retail sales to the public or to other contractors and that
22also engages in the performance of construction contracts.
23(2) The business claims and is allowed a research credit
24for such qualified research expenses under section 41 of the
25Internal Revenue Code for the same taxable year as it is
26claiming the credit provided in this section.
27 Sec. 67. Section 422.10, subsection 3, Code 2018, is amended
28by adding the following new paragraph:
29 NEW PARAGRAPH. 0a. For purposes of this section, “base
30amount” means the product of the fixed-based percentage times
31the average annual gross receipts of the taxpayer for the four
32taxable years preceding the taxable year for which the credit
33is being determined, but in no event shall the base amount be
34less than fifty percent of the qualified research expenses for
35the credit year.
-26-1 Sec. 68. Section 422.10, subsection 3, paragraph a, Code
22018, is amended to read as follows:
3a. For purposes of this section, “base amount”, “basic
4research payment”, and “qualified research expense” mean the
5same as defined for the federal credit for increasing research
6activities under section 41 of the Internal Revenue Code,
7except that for the alternative simplified credit such amounts
8are for research conducted within this state.
9 Sec. 69. Section 422.10, subsection 3, paragraph b, Code
102018, is amended by striking the paragraph.
11 Sec. 70. Section 422.11B, Code 2018, is amended to read as
12follows:
13422.11B Minimum tax credit.
141. a. There For tax years beginning before January 1, 2020,
15there is allowed as a credit against the tax determined in
16section 422.5, subsection 1, paragraphs “a” through “j” for a
17tax year an amount equal to the minimum tax credit for that tax
18year.
19b. The minimum tax credit for a tax year is the excess, if
20any, of the net minimum tax imposed for all prior tax years
21beginning on or after January 1, 1987, but before January 1,
222019, over the amount allowable as a credit under this section
23for those prior tax years.
242. a. The allowable credit under subsection 1 for a
25tax year beginning before January 1, 2019, shall not exceed
26the excess, if any, of the tax determined in section 422.5,
27subsection 1, paragraphs “a” through “j” over the state
28alternative minimum tax as determined in section 422.5,
29subsection 2, Code 2018. The allowable credit under subsection
301 for a tax year beginning in the 2019 calendar year shall not
31exceed the tax determined under section 422.5, subsection 1.
32b. The net minimum tax for a tax year is the excess, if
33any, of the tax determined in section 422.5, subsection 2,
34Code 2018, for the tax year over the tax determined in section
35422.5, subsection 1, paragraphs “a” through “j” for the tax
-27-1year.
23. This section is repealed January 1, 2020, for tax years
3beginning on or after January 1, 2020.
4 Sec. 71. Section 422.11E, Code 2018, is amended by adding
5the following new subsection:
6 NEW SUBSECTION. 6. This section is repealed on January 1,
72020.
8 Sec. 72. Section 422.11S, subsection 6, paragraph a, Code
92018, is amended to read as follows:
10a. “Eligible student” means a student who is a member of a
11household whose total annual income during the calendar year
12before the student receives a tuition grant for purposes of
13this section does not exceed an amount equal to three four
14 times the most recently published federal poverty guidelines in
15the federal register by the United States department of health
16and human services.
17 Sec. 73. Section 422.11S, subsection 8, paragraph a,
18subparagraph (2), Code 2018, is amended to read as follows:
19(2) “Total approved tax credits” means for the tax year
20beginning in the 2006 calendar year, two million five hundred
21thousand dollars, for the tax year beginning in the 2007
22calendar year, five million dollars, for tax years beginning
23on or after January 1, 2008, but before January 1, 2012, seven
24million five hundred thousand dollars, for tax years beginning
25on or after January 1, 2012, but before January 1, 2014, eight
26million seven hundred fifty thousand dollars, and for tax years
27beginning on or after January 1, 2014, but before January 1,
282019, twelve million dollars, and for tax years beginning on or
29after January 1, 2019, thirteen million dollars.
30 Sec. 74. Section 422.12, subsection 2, paragraph b, Code
312018, is amended to read as follows:
32b. A For tax years beginning before January 1, 2022, a
33 tuition credit equal to twenty-five percent of the first one
34thousand dollars which the taxpayer has paid to others for each
35dependent in grades kindergarten through twelve, for tuition
-28-1and textbooks of each dependent in attending an elementary or
2secondary school situated in Iowa, which school is accredited
3or approved under section 256.11, which is not operated for
4profit, and which adheres to the provisions of the federal
5Civil Rights Act of 1964 and chapter 216. Notwithstanding
6any other provision, all other credits allowed under this
7subsection shall be deducted before the tuition credit under
8this paragraph. The department, when conducting an audit of
9a taxpayer’s return, shall also audit the tuition tax credit
10portion of the tax return.
11 Sec. 75. Section 422.12, subsection 2, paragraph c,
12subparagraph (1), Code 2018, is amended to read as follows:
13(1) A For tax years beginning before January 1, 2022,
14a volunteer fire fighter and volunteer emergency medical
15services personnel member credit equal to one hundred dollars
16to compensate the taxpayer for the voluntary services if the
17volunteer served for the entire tax year. A taxpayer who
18is a paid employee of an emergency medical services program
19or a fire department and who is also a volunteer emergency
20medical services personnel member or volunteer fire fighter in
21a city, county, or area governed by an agreement pursuant to
22chapter 28E where the emergency medical services program or
23fire department performs services, shall qualify for the credit
24provided under this paragraph “c”.
25 Sec. 76. Section 422.12, subsection 2, paragraph d,
26subparagraph (1), Code 2018, is amended to read as follows:
27(1) A For tax years beginning before January 1, 2022, a
28 reserve peace officer credit equal to one hundred dollars to
29compensate the taxpayer for services as a reserve peace officer
30if the reserve peace officer served for the entire tax year.
31 Sec. 77. Section 422.33, subsection 5, Code 2018, is amended
32by adding the following new paragraph:
33 NEW PARAGRAPH. 0e. A corporation shall only be
34eligible for the credit provided in this subsection if the
35business conducting the research meets all of the following
-29-1requirements:
2(1) (a) The business is engaged in the manufacturing,
3life sciences, software engineering, or aviation and aerospace
4industry.
5(b) A person who is engaged in agricultural production
6as defined in section 423.1, or who is a contractor,
7subcontractor, builder, or a contractor-retailer that engages
8in commercial and residential repair and installation,
9including but not limited to heating or cooling installation
10and repair, plumbing and pipe fitting, security system
11installation, or electrical installation and repair, does not
12qualify under subparagraph division (a) and is not eligible
13for the credit. For purposes of this subparagraph division,
14“contractor-retailer” means a business that makes frequent
15retail sales to the public or to other contractors and that
16also engages in the performance of construction contracts.
17(2) The business claims and is allowed a research credit
18for such qualified research expenses under section 41 of the
19Internal Revenue Code for the same taxable year as it is
20claiming the credit provided in this subsection.
21 Sec. 78. Section 422.33, subsection 5, paragraph e, Code
222018, is amended by adding the following new subparagraph:
23 NEW SUBPARAGRAPH. (01) For purposes of this section, “base
24amount” means the product of the fixed-based percentage times
25the average annual gross receipts of the taxpayer for the four
26taxable years preceding the taxable year for which the credit
27is being determined, but in no event shall the base amount be
28less than fifty percent of the qualified research expenses for
29the credit year.
30 Sec. 79. Section 422.33, subsection 5, paragraph e,
31subparagraph (1), Code 2018, is amended to read as follows:
32(1) For purposes of this subsection, “base amount”, “basic
33research payment”, and “qualified research expense” mean the
34same as defined for the federal credit for increasing research
35activities under section 41 of the Internal Revenue Code,
-30-1except that for the alternative simplified credit such amounts
2are for research conducted within this state.
3 Sec. 80. Section 422.33, subsection 5, paragraph e,
4subparagraph (2), Code 2018, is amended by striking the
5subparagraph.
6 Sec. 81. Section 422.33, subsection 7, Code 2018, is amended
7to read as follows:
87. a. (1) There For tax years beginning before January 1,
92020, there is allowed as a credit against the tax determined
10in subsection 1 for a tax year an amount equal to the minimum
11tax credit for that tax year.
12(2) The minimum tax credit for a tax year is the excess,
13if any, of the net minimum tax imposed for all prior tax years
14beginning on or after January 1, 1987, but before January
151, 2019, over the amount allowable as a credit under this
16subsection for those prior tax years.
17b. (1) The allowable credit under paragraph “a” for a tax
18year beginning before January 1, 2019, shall not exceed the
19excess, if any, of the tax determined in subsection 1 over
20the state alternative minimum tax as determined in subsection
214. The allowable credit under paragraph “a” for a tax year
22beginning in the 2019 calendar year shall not exceed the tax
23determined in subsection 1.
24(2) The net minimum tax for a tax year is the excess, if
25any, of the tax determined in subsection 4 for the tax year
26over the tax determined in subsection 1 for the tax year.
27c. This subsection is repealed January 1, 2020, for tax
28years beginning on or after January 1, 2020.
29 Sec. 82. 2018 INTERIM TAX CREDIT STUDY. The legislative tax
30expenditure committee created in section 2.45 shall study all
31tax credits available under Iowa law during the 2018 interim.
32The study shall comprehensively review and evaluate each tax
33credit to assess its cost, equity, simplicity, competitiveness,
34public purpose, adequacy, effectiveness, and the extent of
35conformance with the original purpose of the tax credit. The
-31-1legislative tax expenditure committee shall also consider
2new or different tax credits or other incentive programs
3for economic development that will improve predictability,
4flexibility, and utilization, and put Iowa in the best position
5for attracting and retaining business in the future. The
6legislative tax expenditure committee shall submit its findings
7and recommendations to the general assembly for consideration
8during the 2019 legislative session.
9 Sec. 83. FUTURE REPEAL. Sections 15.326, 15.327, 15.329,
1015.330, 15.330A, 15.331A, 15.331C, 15.332, 15.333, 15.333A,
1115.335, 15.335A, 15.335B, 15.335C, and 15.336, Code 2018, are
12repealed effective July 1, 2025.
13 Sec. 84. REPEAL. Sections 422.10A, 422.11I, and 422.11N,
14Code 2018, are repealed.
15 Sec. 85. REPEAL. Section 422.11L, Code 2018, is repealed.
16 Sec. 86. REPEAL. Chapter 190B, Code 2018, is repealed.
17 Sec. 87. EFFECTIVE DATE AND APPLICABILITY.
181. Except as provided in subsections 2 through 11, this
19division of this Act takes effect January 1, 2019, and applies
20to tax years beginning on or after that date.
212. The section of this division of this Act repealing
22section 422.11L, takes effect July 1, 2018, and applies to
23solar energy system installations occurring on or after that
24date.
253. The section of this division of this Act striking and
26replacing section 15.119, subsection 2, paragraph “a”, takes
27effect July 1, 2018.
284. The section of this division of this Act amending section
2915.119, subsection 2, paragraphs “d”, “e”, and “g”, takes
30effect July 1, 2018.
315. The sections of this division of this Act amending
32section 404A.4 take effect July 1, 2018.
336. The section of this division of this Act amending section
3416.80, subsection 10, takes effect July 1, 2018.
357. The sections of this division of this Act enacting
-32-1section 422.10, subsection 1, paragraph “0a”, and enacting
2section 422.33, subsection 5, paragraph “0e”, being deemed of
3immediate importance, take effect upon enactment, and apply
4retroactively to January 1, 2018, for tax years beginning on or
5after that date and for tax returns, including amended returns,
6filed on or after that date for any tax year.
78. The sections of this division of this Act amending
8section 422.10, subsection 3, paragraph “a”, and section
9422.33, subsection 5, paragraph “e”, subparagraph (1), and
10enacting section 422.10, subsection 3, paragraph “0a”, and
11section 422.33, subsection 5, paragraph “e”, subparagraph
12(01), being deemed of immediate importance, take effect upon
13enactment, and apply retroactively to January 1, 2010, for tax
14years beginning on or after that date.
159. The section of this division of this Act amending section
1615.329, subsection 1, paragraph “f”, takes effect July 1, 2018.
1710. The section of this division of this Act amending
18section 403.19A, subsection 3, paragraph “c”, subparagraph (2),
19takes effect July 1, 2018.
2011. The section of this division of this Act establishing
21a 2018 interim tax credit study by the legislative tax
22expenditure committee takes effect July 1, 2018.
23DIVISION IV
24FRANCHISE TAX AND MONEYS AND CREDITS TAX
25 Sec. 88. Section 15.293A, subsection 1, paragraph a, Code
262018, is amended to read as follows:
27a. A redevelopment tax credit shall be allowed against
28the taxes imposed in chapter 422, divisions II, III, and V,
29and in chapter 432, and against the moneys and credits tax
30imposed in section 533.329, for a portion of a taxpayer’s
31equity investment, as provided in subsection 3, in a qualifying
32redevelopment project.
33 Sec. 89. Section 15.293A, subsection 2, paragraphs c and f,
34Code 2018, are amended to read as follows:
35c. The tax credit certificate, unless rescinded by the
-33-1authority, shall be accepted by the department of revenue as
2payment for taxes imposed pursuant to chapter 422, divisions
3II, III, and V, and in chapter 432, and for the moneys and
4credits tax imposed in section 533.329, subject to any
5conditions or restrictions placed by the authority upon
6the face of the tax credit certificate and subject to the
7limitations of this section.
8f. A tax credit shall not be claimed by a transferee
9under this section until a replacement tax credit certificate
10identifying the transferee as the proper holder has been
11issued. The transferee may use the amount of the tax credit
12transferred against the taxes imposed in chapter 422, divisions
13II, III, and V, and in chapter 432, and against the moneys and
14credits tax imposed in section 533.329, for any tax year the
15original transferor could have claimed the tax credit. Any
16consideration received for the transfer of the tax credit shall
17not be included as income under chapter 422, divisions II, III,
18and V. Any consideration paid for the transfer of the tax
19credit shall not be deducted from income under chapter 422,
20divisions II, III, and V.
21 Sec. 90. Section 15.333, subsection 1, Code 2018, is amended
22to read as follows:
231. An eligible business may claim a tax credit equal to a
24percentage of the new investment directly related to new jobs
25created or retained by the project. The tax credit shall be
26amortized equally over five calendar years. The tax credit
27shall be allowed against taxes imposed under chapter 422,
28division II, III, or V, and against the moneys and credits tax
29imposed in section 533.329. If the business is a partnership,
30S corporation, limited liability company, cooperative organized
31under chapter 501 and filing as a partnership for federal tax
32purposes, or estate or trust electing to have the income taxed
33directly to the individual, an individual may claim the tax
34credit allowed. The amount claimed by the individual shall
35be based upon the pro rata share of the individual’s earnings
-34-1of the partnership, S corporation, limited liability company,
2cooperative organized under chapter 501 and filing as a
3partnership for federal tax purposes, or estate or trust. The
4percentage shall be determined as provided in section 15.335A.
5 Any tax credit in excess of the tax liability for the tax year
6may be credited to the tax liability for the following seven
7years or until depleted, whichever occurs first.
8 Sec. 91. Section 15.355, subsection 3, paragraph b, Code
92018, is amended to read as follows:
10b. The tax credit shall be allowed against the taxes imposed
11in chapter 422, divisions II, III, and V, and in chapter 432,
12and against the moneys and credits tax imposed in section
13533.329.
14 Sec. 92. Section 15.355, subsection 3, paragraph e,
15subparagraphs (3) and (6), Code 2018, are amended to read as
16follows:
17(3) The tax credit certificate, unless rescinded by the
18authority, shall be accepted by the department of revenue as
19payment for taxes imposed pursuant to chapter 422, divisions
20II, III, and V, and in chapter 432, and for the moneys and
21credits tax imposed in section 533.329, subject to any
22conditions or restrictions placed by the authority upon
23the face of the tax credit certificate and subject to the
24limitations of this program.
25(6) A tax credit shall not be claimed by a transferee
26under this section until a replacement tax credit certificate
27identifying the transferee as the proper holder has been
28issued. The transferee may use the amount of the tax credit
29transferred against the taxes imposed in chapter 422, divisions
30II, III, and V, and in chapter 432, and against the moneys and
31credits tax imposed in section 533.329, for any tax year the
32original transferor could have claimed the tax credit. Any
33consideration received for the transfer of the tax credit shall
34not be included as income under chapter 422, divisions II,
35III, and V. Any consideration paid for the transfer of the tax
-35-1credit shall not be deducted from income under chapter 422,
2divisions II, III, and V.
3 Sec. 93. Section 15E.43, subsection 1, paragraphs a and d,
4Code 2018, are amended to read as follows:
5a. For tax years beginning on or after January 1, 2015,
6a tax credit shall be allowed against the taxes imposed in
7chapter 422, divisions II, III, and V, and in chapter 432, and
8against the moneys and credits tax imposed in section 533.329,
9 for a portion of a taxpayer’s equity investment, as provided in
10subsection 2, in a qualifying business.
11d. For a tax credit claimed against the taxes imposed in
12chapter 422, division II, any tax credit in excess of the
13tax liability is refundable. In lieu of claiming a refund,
14the taxpayer may elect to have the overpayment shown on
15the taxpayer’s final, completed return credited to the tax
16liability for the following tax year. For a tax credit claimed
17against the taxes imposed in chapter 422, divisions III and
18V, and in chapter 432, and against the moneys and credits tax
19imposed in section 533.329, any tax credit in excess of the
20taxpayer’s liability for the tax year may be credited to the
21tax liability for the following three years or until depleted,
22whichever is earlier. A tax credit shall not be carried back
23to a tax year prior to the tax year in which the taxpayer
24redeems the tax credit.
25 Sec. 94. Section 15E.44, subsection 4, Code 2018, is amended
26to read as follows:
274. After verifying the eligibility of a qualifying
28business, the authority shall issue a tax credit certificate
29to be included with the equity investor’s tax return. The tax
30credit certificate shall contain the taxpayer’s name, address,
31tax identification number, the amount of credit, the name of
32the qualifying business, and other information required by the
33department of revenue. The tax credit certificate, unless
34rescinded by the authority, shall be accepted by the department
35of revenue as payment for taxes imposed pursuant to chapter
-36-1422, divisions II, III, and V, and in chapter 432, and for the
2moneys and credits tax imposed in section 533.329, subject to
3any conditions or restrictions placed by the authority upon
4the face of the tax credit certificate and subject to the
5limitations of section 15E.43.
6 Sec. 95. Section 15E.52, subsection 2, paragraph a, Code
72018, is amended to read as follows:
8a. A tax credit shall be allowed against the taxes imposed
9in chapter 422, divisions II, III, and V, and in chapter 432,
10and against the moneys and credits tax imposed in section
11533.329, for a portion of a taxpayer’s equity investment in the
12form of cash in an innovation fund.
13 Sec. 96. Section 15E.52, subsection 13, Code 2018, is
14amended to read as follows:
1513. The transferee may use the amount of the tax credit
16transferred against the taxes imposed in chapter 422, divisions
17II, III, and V, and in chapter 432, and against the moneys and
18credits tax imposed in section 533.329, for any tax year the
19original transferor could have claimed the tax credit. Any
20consideration received for the transfer of the tax credit shall
21not be included as income under chapter 422, divisions II, III,
22and V. Any consideration paid for the transfer of the tax
23credit shall not be deducted from income under chapter 422,
24divisions II, III, and V.
25 Sec. 97. Section 15E.62, subsection 8, Code 2018, is amended
26to read as follows:
278. “Tax credit” means a contingent tax credit issued
28pursuant to section 15E.66 that is available against tax
29liabilities imposed by chapter 422, divisions II, III, and
30V, and by chapter 432 and against the moneys and credits tax
31imposed by section 533.329.
32 Sec. 98. Section 15E.305, subsection 1, Code 2018, is
33amended to read as follows:
341. For tax years beginning on or after January 1, 2003,
35a tax credit shall be allowed against the taxes imposed in
-37-1chapter 422, divisions II, III, and V, and in chapter 432, and
2against the moneys and credits tax imposed in section 533.329
3 equal to twenty-five percent of a taxpayer’s endowment gift to
4an endow Iowa qualified community foundation. An individual
5may claim a tax credit under this section of a partnership,
6limited liability company, S corporation, estate, or trust
7electing to have income taxed directly to the individual. The
8amount claimed by the individual shall be based upon the pro
9rata share of the individual’s earnings from the partnership,
10limited liability company, S corporation, estate, or trust. A
11tax credit shall be allowed only for an endowment gift made to
12an endow Iowa qualified community foundation for a permanent
13endowment fund established to benefit a charitable cause in
14this state. The amount of the endowment gift for which the
15tax credit is claimed shall not be deductible in determining
16taxable income for state income tax purposes. Any tax credit
17in excess of the taxpayer’s tax liability for the tax year may
18be credited to the tax liability for the following five years
19or until depleted, whichever occurs first. A tax credit shall
20not be carried back to a tax year prior to the tax year in which
21the taxpayer claims the tax credit.
22 Sec. 99. Section 331.427, subsection 1, unnumbered
23paragraph 1, Code 2018, is amended to read as follows:
24Except as otherwise provided by state law, county revenues
25from taxes and other sources for general county services shall
26be credited to the general fund of the county, including
27revenues received under sections 9I.11, 101A.3, 101A.7, 123.36,
28123.143, 142D.9, 176A.8, 321.105, 321.152, 321G.7, 321I.8,
29section 331.554, subsection 6, sections 341A.20, 364.3, 368.21,
30423A.7, 428A.8, 433.15, 434.19, 445.57, 453A.35, 458A.21,
31483A.12, 533.329, 556B.1, 583.6, 602.8108, 904.908, and 906.17,
32and the following:
33 Sec. 100. Section 422.60, subsection 2, paragraph a, Code
342018, is amended to read as follows:
35a. In addition to all taxes imposed under this division,
-38-1there is imposed upon each financial institution doing business
2within the state and that is not exempt from the federal income
3tax, the greater of the tax determined in section 422.63 or
4the state alternative minimum tax equal to sixty percent of
5the maximum state franchise tax rate, rounded to the nearest
6one-tenth of one percent, of the state alternative minimum
7taxable income of the taxpayer computed under this subsection.
8 Sec. 101. Section 422.60, subsection 3, paragraph a,
9subparagraph (1), Code 2018, is amended to read as follows:
10(1) There For a financial institution that is not exempt
11from the federal income tax, there is allowed as a credit
12against the tax determined in section 422.63 for a tax year an
13amount equal to the minimum tax credit for that tax year.
14 Sec. 102. Section 422.61, subsections 1, 3, and 4, Code
152018, are amended to read as follows:
161. “Financial institution” means a state bank as defined
17in section 524.103, subsection 41, a state bank chartered
18under the laws of any other state, a national banking
19association, a trust company, a federally chartered savings
20and loan association, an out-of-state state chartered savings
21bank, a credit union as defined in section 533.102 that is
22incorporated or organized under chapter 533 or under the laws
23of another state, a financial institution chartered by the
24federal home loan bank board, a non-Iowa chartered savings and
25loan association, or a production credit association, or an
26agricultural credit association that is a member of the farm
27credit system under the federal Farm Credit Act, 12 U.S.C. ch.
2823, as amended.
293. a. “Net income” means one of the following:
30(1) For a financial institution that is exempt from the
31federal income tax, the total revenue less total expenses as
32properly reported on the financial institution’s internal
33revenue service form 990 covering the same period, with the
34adjustments in paragraph “b” to the extent the taxes, income,
35and deductions described in such adjustments are applicable
-39-1to the financial institution’s calculation of revenues and
2expenses as determined by the director by rule.
3(2) For any other financial institution,the net income of
4the financial institution computed in accordance with section
5422.35, with the following adjustments: in paragraph “b”.
6b. Applicable adjustments in computing “net income”:
7a. (1) Federal income taxes paid or accrued shall not be
8subtracted.
9b. (2) Notwithstanding section 422.35, subsection 2, or
10any other provisions of law, income from obligations of the
11state and its political subdivisions and franchise taxes paid
12or accrued under this division during the taxable year shall
13be added. Income from sales of obligations of the state and
14its political subdivisions and interest and dividend income
15from these obligations are exempt from the taxes imposed by
16this division only if the law authorizing the obligations
17specifically exempts the income from the sale and interest and
18dividend income from the state franchise tax.
19c. (3) Interest and dividends from federal securities shall
20not be subtracted.
21d. (4) Interest and dividends derived from obligations of
22United States possessions, agencies, and instrumentalities,
23including bonds which were purchased after January 1, 1991, and
24issued by the governments of Puerto Rico, Guam, and the Virgin
25Islands shall be added, to the extent they were not included in
26computing federal taxable income.
27e. (5) A deduction disallowed under section 265(b) or
28section 291(e)(1)(B) of the Internal Revenue Code shall be
29subtracted.
30f. (6) A deduction shall not be allowed for that portion of
31the taxpayer’s expenses computed under this paragraph which is
32allocable to an investment in an investment subsidiary. The
33portion of the taxpayer’s expenses which is allocable to an
34investment in an investment subsidiary is an amount which bears
35the same ratio to the taxpayer’s expenses as the taxpayer’s
-40-1average adjusted basis, as computed pursuant to section 1016
2of the Internal Revenue Code, of investment in that investment
3subsidiary bears to the average adjusted basis for all assets
4of the taxpayer. The portion of the taxpayer’s expenses that
5is computed and disallowed under this paragraph shall be added.
6g. (7) Where a financial institution as defined in section
7581 of the Internal Revenue Code is not subject to income tax
8and the shareholders of the financial institution are taxed on
9the financial institution’s income under the provisions of the
10Internal Revenue Code, such tax treatment shall be disregarded
11and the financial institution shall compute its net income for
12franchise tax purposes in the same manner under this subsection
13as a financial institution that is subject to or liable for
14federal income tax under the Internal Revenue Code in effect
15for the applicable year.
164. “Taxable year” means the calendar year or the fiscal year
17ending during a calendar year, for which the tax is payable.
18“Fiscal year” includes a tax period of less than twelve months
19if, under the Internal Revenue Code, a corporation is required
20to file a tax return or internal revenue service form 990
21 covering a tax period of less than twelve months.
22 Sec. 103. Section 422.62, Code 2018, is amended to read as
23follows:
24422.62 Due and delinquent dates.
25The franchise tax is due and payable on the first day
26following the end of the taxable year of each financial
27institution, and for a financial institution that is exempt
28from the federal income tax, the franchise tax is delinquent
29after the last day of the fifth month following the due date.
30For all other financial institutions, the franchise tax is
31delinquent after the last day of the fourth month following the
32due date or forty-five days after the due date of the federal
33tax return, excluding extensions of time to file, whichever is
34the later. Every financial institution shall file a return as
35prescribed by the director on or before the delinquency date.
-41-1 Sec. 104. Section 422.63, Code 2018, is amended to read as
2follows:
3422.63 Amount of tax.
41. The franchise tax is imposed annually in an amount equal
5to five percent of computed by applying the following rates
6of taxation to the net income received or accrued during the
7taxable year:
8a. On net income from zero to seven million five hundred
9thousand dollars, two percent.
10b. On net income exceeding seven million five hundred
11thousand dollars, four percent.
122. If the net income of the financial institution is derived
13from its business carried on entirely within the state, the tax
14in subsection 1 shall be imposed on the entire net income, but
15if the business is carried on partly within and partly without
16the state, the tax in subsection 1 shall be imposed on the
17 portion of net income reasonably attributable to the business
18within the state, which net income shall be specifically
19allocated or equitably apportioned within and without the state
20under rules of the director.
21 Sec. 105. REPEAL. Section 533.329, Code 2018, is repealed.
22 Sec. 106. PRESERVATION OF EXISTING RIGHTS. This division
23of this Act is not intended and shall not limit, modify,
24or otherwise adversely affect any tax credit or tax credit
25certificate issued, awarded, or allowed before January 1, 2019,
26nor shall it limit, modify, or otherwise adversely affect
27a taxpayer’s right to claim or redeem a tax credit issued,
28awarded, or allowed before January 1, 2019, including but not
29limited to any tax credit carryforward amount. Any amount of
30tax credit that would have been eligible to be claimed by a
31taxpayer on or after January 1, 2019, against the moneys and
32credits tax imposed in section 533.329, Code 2018, shall be
33allowed in the same manner and to the same extent as a credit
34against the franchise tax imposed in chapter 422, division V.
35 Sec. 107. EFFECTIVE DATE. This division of this Act takes
-42-1effect January 1, 2019.
2 Sec. 108. APPLICABILITY. This division of this Act applies
3to tax years beginning on or after January 1, 2019.
4DIVISION V
5CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST AND IOWA ABLE
6SAVINGS PLAN TRUST
7 Sec. 109. Section 12D.1, Code 2018, is amended to read as
8follows:
912D.1 Purpose and definitions.
101. The general assembly finds that the general welfare and
11well-being of the state are directly related to educational
12levels and skills of the citizens of the state, and that a
13vital and valid public purpose is served by the creation and
14implementation of programs which encourage and make possible
15the attainment of higher formal education by the greatest
16number of citizens of the state. The state has limited
17resources to provide additional programs for higher education
18funding and the continued operation and maintenance of the
19state’s public institutions of higher education and the general
20welfare of the citizens of the state will be enhanced by
21establishing a program which allows citizens of the state to
22invest money in a public trust for future application to the
23payment of higher education costs qualified education expenses.
24The creation of the means of encouragement for citizens to
25invest in such a program represents the carrying out of a
26vital and valid public purpose. In order to make available
27to the citizens of the state an opportunity to fund future
28higher formal education needs, it is necessary that a public
29trust be established in which moneys may be invested for future
30educational use.
312. As used in this chapter, unless the context otherwise
32requires:
33a. “Account balance limit” means the maximum allowable
34aggregate balance of accounts established for the same
35beneficiary. Account earnings, if any, are included in the
-43-1account balance limit.
2b. “Administrative fund” means the administrative fund
3established under section 12D.4.
4c. “Beneficiary” means the individual designated by a
5participation agreement to benefit from advance payments of
6higher education costs qualified education expenses on behalf
7of the beneficiary.
8d. “Benefits” means the payment of higher education costs
9 qualified education expenses on behalf of a beneficiary by the
10trust during the beneficiary’s attendance at an institution of
11higher education a qualified educational institution.
12e. “Higher education costs” means the same as “qualified
13higher education expenses” as defined insection 529(e)(3) of
14the Internal Revenue Code.
15f. e. “Institution of higher education” means an institution
16described in section 481 of the federal Higher Education Act of
171965, 20 U.S.C. §1088, which is eligible to participate in the
18United States department of education’s student aid programs.
19g. f. “Internal Revenue Code” means the same as defined
20insection 12I.1.
21h. g. “Iowa educational savings plan trust” or “trust” means
22the trust created under section 12D.2.
23i. h. “Participant” means an individual, individual’s legal
24representative, trust, estate, or an organization described
25in section 501(c)(3) of the Internal Revenue Code and exempt
26from taxation under section 501(a) of the Internal Revenue
27Code, that has entered into a participation agreement under
28this chapter for the advance payment of higher education costs
29 qualified education expenses on behalf of a beneficiary.
30j. i. “Participation agreement” means an agreement between
31a participant and the trust entered into under this chapter.
32k. j. “Program fund” means the program fund established
33under section 12D.4.
34k. “Qualified education expenses” means the same as
35“qualified higher education expenses” as defined in section
-44-1529(e)(3) of the Internal Revenue Code, as amended by Pub.L.
2No.115-97, and shall include elementary and secondary school
3expenses for tuition described in section 529(c)(7) of the
4Internal Revenue Code, subject to the limitations imposed by
5section 529(e)(3)(A) of the Internal Revenue Code.
6l. “Qualified educational institution” means an institution
7of higher education, or any elementary or secondary public,
8private, or religious school described in section 529(c)(7) of
9the Internal Revenue Code.
10l. m. “Tuition and fees” “Tuition” means the quarter, or
11 semester, or annual charges imposed to attend an institution
12of higher education a qualified educational institution and
13required as a condition of enrollment or attendance.
14 Sec. 110. Section 12D.2, subsections 2, 5, 9, and 14, Code
152018, are amended to read as follows:
162. Enter into agreements with any institution of higher
17education qualified educational institution, the state, or any
18federal or other state agency, or other entity as required to
19implement this chapter.
205. Carry out studies and projections so the treasurer of
21state may advise participants regarding present and estimated
22future higher education costs qualified education expenses
23 and levels of financial participation in the trust required
24in order to enable participants to achieve their educational
25funding objectives.
269. Make payments to institutions of higher education
27 qualified educational institutions, participants, or
28beneficiaries, pursuant to participation agreements on behalf
29of beneficiaries.
3014. Establish, impose, and collect administrative fees
31and charges in connection with transactions of the trust, and
32provide for reasonable service charges, including penalties for
33cancellations and late payments with respect to participation
34agreements.
35 Sec. 111. Section 12D.3, subsections 1 and 2, Code 2018, are
-45-1amended to read as follows:
21. a. Each participation agreement may require a
3participant to agree to invest a specific amount of money in
4the trust for a specific period of time for the benefit of a
5specific beneficiary. A participant shall not be required to
6make an annual contribution on behalf of a beneficiary. The
7maximum contribution that may be deducted for Iowa income tax
8purposes shall not exceed two thousand dollars per beneficiary
9per year adjusted annually to reflect increases in the consumer
10price index. The treasurer of state shall set an account
11balance limit to maintain compliance with section 529 of the
12Internal Revenue Code. A contribution shall not be permitted
13to the extent it causes the aggregate balance of all accounts
14established for the same beneficiary under the trust to exceed
15the applicable account balance limit.
16b. Participation agreements may be amended to provide for
17adjusted levels of payments based upon changed circumstances or
18changes in educational plans.
192. The execution of a participation agreement by the trust
20shall not guarantee in any way that higher education costs
21 qualified education expenses will be equal to projections
22and estimates provided by the trust or that the beneficiary
23named in any participation agreement will attain any of the
24following:
25a. Be admitted to an institution of higher education a
26qualified educational institution.
27b. If admitted, be determined a resident for tuition
28purposes by the institution of higher education qualified
29educational institution.
30c. Be allowed to continue attendance at the institution of
31higher education qualified educational institution following
32admission.
33d. Graduate from the institution of higher education
34 qualified educational institution.
35 Sec. 112. Section 12D.3, Code 2018, is amended by adding the
-46-1following new subsection:
2 NEW SUBSECTION. 5. A participant may designate a successor
3in accordance with rules adopted by the treasurer of state.
4The designated successor shall succeed to the ownership of the
5account in the event of the death of the participant. In the
6event a participant dies and has not designated a successor to
7the account, the following criteria shall apply:
8a. The beneficiary of the account, if eighteen years of
9age or older, shall become the owner of the account as well as
10remain the beneficiary upon filing the appropriate forms in
11accordance with rules adopted by the treasurer of state.
12b. If the beneficiary of the account is under the age of
13eighteen, account ownership shall be transferred to the first
14surviving parent or other legal guardian of the beneficiary to
15file the appropriate forms in accordance with rules adopted by
16the treasurer of state.
17 Sec. 113. Section 12D.4, Code 2018, is amended to read as
18follows:
1912D.4 Program and administrative funds — investment and
20payments.
211. a. The treasurer of state shall segregate moneys
22received by the trust into two funds: the program fund and the
23administrative fund.
24b. All moneys paid by participants in connection with
25participation agreements shall be deposited as received into
26separate accounts within the program fund.
27c. Contributions to the trust made by participants may only
28be made in the form of cash.
29d. A participant or beneficiary shall not provide investment
30direction regarding program contributions or earnings held by
31the trust may, directly or indirectly, direct the investment of
32any contributions to the trust or any earnings thereon no more
33than two times in a calendar year.
34e. The amount of cash distributions from the trust and all
35other qualified state tuition programs under section 529 of
-47-1the Internal Revenue Code to a beneficiary during any taxable
2year shall, in the aggregate, include no more than ten thousand
3dollars in expenses for tuition in connection with enrollment
4at an elementary or secondary public, private, or religious
5school incurred during the taxable year.
62. Moneys accrued by participants in the program fund of
7the trust may be used for payments to any institution of higher
8education qualified educational institution. Payments can be
9made to the qualified educational institution, the participant,
10or the beneficiary.
11 Sec. 114. Section 12D.6, subsection 1, paragraph a, Code
122018, is amended to read as follows:
13a. A participant retains ownership of all payments made
14under a participation agreement up to the date of utilization
15for payment of higher education costs qualified education
16expenses for the beneficiary.
17 Sec. 115. Section 12D.6, subsections 2, 3, and 5, Code 2018,
18are amended to read as follows:
192. In the event the program is terminated prior to payment
20of higher education costs qualified education expenses for the
21beneficiary, the participant is entitled to a refund of the
22participant’s account balance.
233. The institution of higher education qualified
24educational institution shall obtain ownership of the payments
25made for the higher education costs qualified education
26expenses paid to the institution at the time each payment is
27made to the institution.
285. A participant may transfer ownership rights to another
29eligible individual, including a gift of the ownership rights
30to a minor beneficiary participant, or may transfer funds to
31another plan under the trust or to an ABLE account as permitted
32under section 529(c)(3)(C) of the Internal Revenue Code.
33The transfer shall be made and the property distributed in
34accordance with rules adopted by the treasurer of state or with
35the terms of the participation agreement.
-48-1 Sec. 116. Section 12D.7, Code 2018, is amended to read as
2follows:
312D.7 Effect of payments on determination of need and
4eligibility for student financial aid.
5A student loan program, student grant program, or other
6program administered by any agency of the state, except as
7may be otherwise provided by federal law or the provisions
8of any specific grant applicable to that law, shall not take
9into account and shall not consider amounts available for
10the payment of higher education costs qualified education
11expenses pursuant to the Iowa educational savings plan trust in
12determining need and eligibility for student aid.
13 Sec. 117. Section 12D.9, subsection 1, paragraph a, Code
142018, is amended to read as follows:
15a. Pursuant to section 12D.3, subsection 1, paragraph “a”,
16a participant may make contributions to an account which is
17established for the purpose of meeting the qualified higher
18 education expenses of the designated beneficiary of the
19account.
20 Sec. 118. Section 422.7, subsection 32, paragraph c, Code
212018, is amended by striking the paragraph and inserting in
22lieu thereof the following:
23c. (1) Add, to the extent previously deducted as a
24contribution to the trust, the amount resulting from a
25withdrawal or transfer made by the taxpayer from the Iowa
26educational savings plan trust for purposes other than any of
27the following:
28(a) The payment of qualified higher education expenses.
29(b) The payment of tuition to an elementary or secondary
30school if the tuition amounts are qualified education expenses.
31(c) A change in beneficiaries under, or transfer to another
32account within, the Iowa educational savings plan trust, or a
33transfer to the Iowa ABLE savings plan trust, provided such
34change or transfer is permitted under section 12D.6, subsection
355.
-49- 1(2) For purposes of this paragraph:
2(a) “Elementary or secondary school” means an elementary
3or secondary school in this state which is accredited under
4section 256.11, and adheres to the provisions of the federal
5Civil Rights Act of 1964 and chapter 216.
6(b) “Institution of higher education”, “qualified education
7expenses”, and “tuition” all mean the same as defined in section
812D.1, subsection 2.
9(c) (i) “Qualified higher education expenses” means the same
10as defined in section 529(e)(3) of the Internal Revenue Code.
11(ii) For purposes of this subparagraph division (c),
12“Internal Revenue Code” means the Internal Revenue Code of
131954, prior to the date of its redesignation as the Internal
14Revenue Code of 1986 by the Tax Reform Act of 1986, or means
15the Internal Revenue Code of 1986 as amended and in effect on
16January 1, 2018. This definition shall not be construed to
17include any amendment to the Internal Revenue Code enacted
18after the date specified in the preceding sentence, including
19any amendment with retroactive applicability or effectiveness.
20 Sec. 119. Section 422.7, subsection 34, Code 2018, is
21amended to read as follows:
2234. a. (1) Subtract the amount contributed during the tax
23year on behalf of a designated beneficiary that is a resident
24of this state to the Iowa ABLE savings plan trust or to the
25qualified ABLE program with which the state has contracted
26pursuant to section 12I.10, not to exceed the maximum
27contribution level established in section 12I.3, subsection 1,
28paragraph “d”, or section 12I.10, subsection 2, paragraph “a”,
29as applicable.
30(2) This paragraph “a” shall not apply to any amount
31of contribution that represents a transfer from the Iowa
32educational savings plan trust created in chapter 12D that
33meets the requirements of subsection 32, paragraph “c”,
34subparagraph (1), subparagraph division (c), and that was
35previously deducted as a contribution to the Iowa educational
-50-1savings plan trust.
2b. Add the amount resulting from the cancellation of a
3participation agreement refunded to the taxpayer as an account
4owner in the Iowa ABLE savings plan trust or the qualified
5ABLE program with which the state has contracted pursuant to
6section 12I.10 to the extent previously deducted pursuant
7to this subsection by the taxpayer or any other person as a
8contribution to the trust or qualified ABLE program, or to the
9extent the amount was previously deducted by the taxpayer or
10any other person pursuant to subsection 32, paragraph “a”, and
11qualified as a transfer under paragraph “a”, subparagraph (2),
12of this subsection.
13c. Add the amount resulting from a withdrawal made by a
14taxpayer from the Iowa ABLE savings plan trust or the qualified
15ABLE program with which the state has contracted pursuant to
16section 12I.10 for purposes other than the payment of qualified
17disability expenses to the extent previously deducted pursuant
18to this subsection by the taxpayer or any other person as a
19contribution to the trust or qualified ABLE program, or to the
20extent the amount was previously deducted by the taxpayer or
21any other person pursuant to subsection 32, paragraph “a”, and
22qualified as a transfer under paragraph “a”, subparagraph (2),
23of this subsection.
24 Sec. 120. Section 627.6, Code 2018, is amended by adding the
25following new subsection:
26 NEW SUBSECTION. 17. The debtor’s interest, whether as
27participant or beneficiary, in contributions and assets,
28including the accumulated earnings and market increases in
29value, held in an account in the Iowa educational savings plan
30trust organized under chapter 12D.
31 Sec. 121. EFFECTIVE DATE. This division of this Act, being
32deemed of immediate importance, takes effect upon enactment.
33 Sec. 122. RETROACTIVE APPLICABILITY.
341. Except as provided in subsection 2, this division of this
35Act applies retroactively to January 1, 2018, for withdrawals
-51-1from the Iowa educational savings plan trust made on or after
2that date.
32. The sections of this division of this Act amending
4section 422.7 apply retroactively to January 1, 2018, for tax
5years beginning on or after that date, and for withdrawals from
6the Iowa educational savings plan trust made on or after that
7date.
8DIVISION VI
9SALES AND USE TAXES
10 Sec. 123. Section 15J.4, subsection 3, paragraph f, Code
112018, is amended to read as follows:
12f. The total aggregate amount of state sales tax revenues
13and state hotel and motel tax revenues that may be approved by
14the board for remittance to all municipalities and that may
15be transferred to the state reinvestment district fund under
16section 423.2, subsection 11, 423.2A or section 423A.6, and
17remitted to all municipalities having a reinvestment district
18under this chapter shall not exceed one hundred million
19dollars.
20 Sec. 124. Section 15J.5, subsection 1, paragraph a, Code
212018, is amended to read as follows:
22a. The department shall calculate quarterly the amount of
23new state sales tax revenues for each district established in
24the state to be deposited in the state reinvestment district
25fund created in section 15J.6, pursuant to section 423.2,
26subsection 11, paragraph “b” 423.2A, subsection 2, subject to
27remittance limitations established by the board pursuant to
28section 15J.4, subsection 3.
29 Sec. 125. Section 15J.6, subsection 1, Code 2018, is amended
30to read as follows:
311. A state reinvestment district fund is established in the
32state treasury under the control of the department consisting
33of the new state sales tax revenues collected within each
34district and deposited in the fund pursuant to section 423.2,
35subsection 11, paragraph “b” 423.2A, subsection 2, and the
-52-1new state hotel and motel tax revenues collected within each
2district and deposited in the fund pursuant to section 423A.6.
3Moneys deposited in the fund are appropriated to the department
4for the purposes of this section. Moneys in the fund shall
5only be used for the purposes of this section.
6 Sec. 126. Section 418.11, subsection 1, Code 2018, is
7amended to read as follows:
81. The department of revenue shall calculate quarterly the
9amount of increased sales tax revenues for each governmental
10entity approved to use sales tax increment revenues and the
11amount of such revenues to be transferred to the sales tax
12increment fund pursuant to section 423.2, subsection 11,
13paragraph “b” 423.2A, subsection 2.
14 Sec. 127. Section 418.12, subsection 1, Code 2018, is
15amended to read as follows:
161. A sales tax increment fund is established as a separate
17and distinct fund in the state treasury under the control of
18the department of revenue consisting of the amount of the
19increased state sales and services tax revenues collected by
20the department of revenue within each applicable area specified
21in section 418.11, subsection 3, and deposited in the fund
22pursuant to section 423.2, subsection 11, paragraph “b” 423.2A,
23subsection 2. Moneys deposited in the fund are appropriated
24to the department of revenue for the purposes of this section.
25Moneys in the fund shall only be used for the purposes of this
26section.
27 Sec. 128. Section 421.26, Code 2018, is amended to read as
28follows:
29421.26 Personal liability for tax due.
30If a licensee or other person under section 452A.65, a
31retailer or purchaser under chapter 423A, 423B, or 423E, or
32section sections 423.14, 423.14A, 423.29, 423.31, 423.32, or
33423.33, or a retailer or purchaser under section 423.32, or
34 a user under section 423.34, or a permit holder or licensee
35under section 453A.13, 453A.16, or 453A.44 fails to pay a tax
-53-1under those sections when due, an officer of a corporation
2or association, notwithstanding section 489.304, a member or
3manager of a limited liability company, or a partner of a
4partnership, having control or supervision of or the authority
5for remitting the tax payments and having a substantial legal
6or equitable interest in the ownership of the corporation,
7association, limited liability company, or partnership, who has
8intentionally failed to pay the tax is personally liable for
9the payment of the tax, interest, and penalty due and unpaid.
10However, this section shall not apply to taxes on accounts
11receivable. The dissolution of a corporation, association,
12limited liability company, or partnership shall not discharge a
13person’s liability for failure to remit the tax due.
14 Sec. 129. Section 423.1, subsection 5, Code 2018, is amended
15to read as follows:
165. “Agricultural production” includes means the commercial
17 production of livestock, milk, honey, eggs, or plants,
18including but not limited to flowering, ornamental, or
19vegetable plants in commercial greenhouses or otherwise,
20and commercial production from aquaculture, and commercial
21 production from silvicultural activities. “Agricultural
22products” includes flowering, ornamental, or vegetable plants
23and those products of aquaculture and silviculture.
24 Sec. 130. Section 423.1, Code 2018, is amended by adding the
25following new subsection:
26 NEW SUBSECTION. 22A. “Information services” means every
27activity, process, or function by which a seller accumulates,
28prepares, organizes, conveys, analyzes, or delivers data,
29facts, knowledge, procedures, information, and other similar
30services to a purchaser through any tangible, intangible,
31or electronic medium. Information accumulated, prepared,
32or organized for a purchaser is an information service even
33though it may incorporate preexisting components of data or
34other information. “Information services” includes but is not
35limited to database files, research information, genealogical
-54-1information, and other similar services.
2 Sec. 131. Section 423.1, subsection 24, paragraph a, Code
32018, is amended to read as follows:
4a. “Lease or rental” means any transfer of possession
5or control of, or access to, tangible personal property or
6specified digital products for a fixed or indeterminate term
7for consideration. A “lease or rental” may include future
8options to purchase or extend.
9 Sec. 132. Section 423.1, subsection 37, Code 2018, is
10amended to read as follows:
1137. “Place of business” means any warehouse, store,
12place, office, building, or structure where goods, wares, or
13merchandise tangible personal property, specified digital
14products, or services are offered for sale at retail or where
15any taxable amusement is conducted, or each office where gas,
16water, heat, communication, or electric services are offered
17for sale at retail. When a retailer or amusement operator
18sells merchandise by means of vending machines or operates
19music or amusement devices by coin-operated machines at more
20than one location within the state, the office, building, or
21place where the books, papers, and records of the taxpayer are
22kept shall be deemed to be the taxpayer’s place of business.
23 Sec. 133. Section 423.1, Code 2018, is amended by adding the
24following new subsection:
25 NEW SUBSECTION. 36A. “Personal property” includes but is
26not limited to tangible personal property and specified digital
27products.
28 Sec. 134. Section 423.1, subsection 43, paragraph a,
29subparagraph (3), Code 2018, is amended to read as follows:
30(3) Taking possession or making first use of digital goods
31 specified digital products, whichever comes first.
32 Sec. 135. Section 423.1, subsection 47, Code 2018, is
33amended to read as follows:
3447. “Retailer” means and includes every person engaged
35in the business of selling tangible personal property,
-55-1specified digital products, or taxable services at retail, or
2the furnishing of gas, electricity, water, or communication
3service, and tickets or admissions to places of amusement
4and athletic events or operating amusement devices or other
5forms of commercial amusement from which revenues are derived.
6However, when in the opinion of the director it is necessary
7for the efficient administration of this chapter to regard
8any salespersons, representatives, truckers, peddlers, or
9canvassers as agents of the dealers, distributors, supervisors,
10employers, or persons under whom they operate or from whom
11they obtain tangible personal property, services, or specified
12digital products sold by them irrespective of whether or not
13they are making sales on their own behalf or on behalf of such
14dealers, distributors, supervisors, employers, or persons,
15the director may so regard them, and may regard such dealers,
16distributors, supervisors, employers, or persons as retailers
17for the purposes of this chapter. “Retailer” includes a seller
18obligated to collect sales or use tax, including any person
19obligated to collect sales and use tax pursuant to section
20423.14A.
21 Sec. 136. Section 423.1, subsection 48, paragraph a, Code
222018, is amended to read as follows:
23a. “Retailer maintaining a place of business in this state”
24or any like term includes any of the following:
25(1) Aretailer having or maintaining within this state,
26directly or by a subsidiary, an office, distribution house,
27sales house, warehouse, or other place of business, or any
28representative operating within this state under the authority
29of the retailer or its subsidiary, irrespective of whether that
30place of business or representative is located here permanently
31or temporarily, or whether the retailer or subsidiary is
32admitted to do business within this state pursuant to chapter
33490.
34(2) A person obligated to collect sales and use tax pursuant
35to section 423.14A.
-56-1 Sec. 137. Section 423.1, subsection 48, paragraph b,
2subparagraph (1), unnumbered paragraph 1, Code 2018, is amended
3to read as follows:
4A retailer shall be presumed to be maintaining a place of
5business in this state, as defined in for purposes of paragraph
6“a”, subparagraph (1), if any person that has substantial nexus
7in this state, other than a person acting in its capacity as a
8common carrier, does any of the following:
9 Sec. 138. Section 423.1, subsection 48, paragraph b,
10subparagraph (1), subparagraph division (b), Code 2018, is
11amended to read as follows:
12(b) Maintains an office, distribution facility, warehouse,
13storage place, or similar place of business in this state to
14facilitate the delivery of personal property or services sold
15by the retailer to the retailer’s customers.
16 Sec. 139. Section 423.1, subsection 50, Code 2018, is
17amended to read as follows:
1850. “Sales” or “sale” means any transfer, exchange, or
19barter, conditional or otherwise, in any manner or by any means
20whatsoever, for consideration, including but not limited to any
21such transfer, exchange, or barter on a subscription basis.
22 Sec. 140. Section 423.1, Code 2018, is amended by adding the
23following new subsection:
24 NEW SUBSECTION. 55A. “Sold at retail in the state” and
25other references to sales “in the state” or “in this state”
26includes but is not limited to sales sourced to this state
27under this chapter.
28 Sec. 141. Section 423.1, Code 2018, is amended by adding the
29following new subsection:
30 NEW SUBSECTION. 55B. a. “Specified digital products” means
31electronically transferred digital audio-visual works, digital
32audio works, digital books, or other digital products.
33b. For purposes of this subsection:
34(1) “Digital audio-visual works” means a series of related
35images which, when shown in succession, impart an impression of
-57-1motion, together with accompanying sounds, if any.
2(2) “Digital audio works” means works that result from
3the fixation of a series of musical, spoken, or other sounds,
4including but not limited to ringtones. For purposes of this
5subparagraph, “ringtones” means digitized sound files that are
6downloaded onto a device and that may be used to alert the
7customer with respect to a communication.
8(3) “Digital books” means works that are generally
9recognized in the ordinary and usual sense as books.
10(4) “Electronically transferred” means obtained or accessed
11by the purchaser by means other than tangible storage media,
12including but not limited to a specified digital product
13purchased through a computer software application, commonly
14referred to as an in-app purchase, or through another specified
15digital product, or through any other means.
16(5) “Other digital products” means greeting cards, images,
17video or electronic games or entertainment, news or information
18products, and computer software applications.
19 Sec. 142. Section 423.1, Code 2018, is amended by adding the
20following new subsection:
21 NEW SUBSECTION. 57A. “Subscription” means any arrangement
22in which a person has the right or ability to access,
23receive, use, obtain, purchase, or otherwise acquire tangible
24personal property, specified digital products, or services
25on a permanent or less than permanent basis, regardless of
26whether the person actually accesses, receives, uses, obtains,
27purchases, or otherwise acquires such tangible personal
28property, specified digital product, or service.
29 Sec. 143. Section 423.1, subsections 62, 63, and 64, Code
302018, are amended to read as follows:
3162. “Use” means and includes the exercise by any person of
32any right or power over or access to tangible personal property
33or a specified digital product incident to the ownership of
34that property, or any right or power over or access to the
35product or result of a service. A retailer’s or building
-58-1contractor’s sale of manufactured housing for use in this
2state, whether in the form of tangible personal property or
3of realty, is a use of that property for the purposes of this
4chapter.
563. “Use tax” means the tax levied under subchapter III of
6this chapter for which the retailer collects and remits tax to
7the department.
864. “User” means the immediate recipient of the personal
9property or services who is entitled to exercise a right of or
10 power over or access to the personal property, or the product
11or result of such services.
12 Sec. 144. Section 423.2, subsection 1, paragraph a,
13subparagraph (1), Code 2018, is amended to read as follows:
14(1) Sales of engraving, photography, retouching, printing,
15and binding services.
16 Sec. 145. Section 423.2, subsection 6, Code 2018, is amended
17to read as follows:
186. a. The sales price of any of the following enumerated
19services is subject to the tax imposed by subsection 5:
20a. alteration Alteration and garment repair; armored.
21b. Armoredcar; vehicle.
22c. Vehiclerepair; battery.
23d. Battery, tire, and allied; investment.
24e. Investmentcounseling; service.
25f. Servicecharges of all financial institutions; barber.
26For the purposes of this paragraph, “financial institutions”
27 means all national banks, federally chartered savings and loan
28associations, federally chartered savings banks, federally
29chartered credit unions, banks organized under chapter 524,
30credit unions organized under chapter 533, and all banks,
31savings banks, credit unions, and savings and loan associations
32chartered or otherwise created under the laws of any state and
33doing business in Iowa.
34g. Barberand beauty; boat.
35h. Boatrepair; vehicle.
-59- 1i. Vehicle wash and wax; campgrounds; carpentry; roof.
2j. Campgrounds.
3k. Carpentry.
4l. Roof, shingle, and glass repair; dance.
5m. Danceschools and dance studios; dating.
6n. Datingservices; dry.
7o. Drycleaning, pressing, dyeing, and laundering excluding
8the use of self-pay washers and dryers; electrical.
9p. Electricaland electronic repair and installation;
10excavating.
11q. Excavatingand grading; farm.
12r. Farmimplement repair of all kinds; flying.
13s. Flyingservice; furniture.
14t. Furniture, rug, carpet, and upholstery repair and
15cleaning; fur.
16u. Furstorage and repair; golf.
17v. Golfand country clubs and all commercial recreation;
18gun.
19w. Gunand camera repair; house.
20x. Houseand building moving; household.
21y. Householdappliance, television, and radio repair;
22janitorial.
23z. Janitorialand building maintenance or cleaning; jewelry.
24aa. Jewelryand watch repair; lawn.
25ab. Lawncare, landscaping, and tree trimming and removal;.
26ac. Personal transportation service, including but not
27limited to taxis, driver service, ride sharing service, rides
28for hire, andlimousine service, including driver; machine.
29ad. Machineoperator; machine.
30ae. Machinerepair of all kinds; motor.
31af. Motorrepair; motorcycle.
32ag. Motorcycle, scooter, and bicycle repair; oilers.
33ah. Oilersand lubricators; office.
34ai. Officeand business machine repair; painting.
35aj. Painting, papering, and interior decorating; parking.
-60- 1ak. Parkingfacilities; pay.
2al. Paytelevision; pet, including but not limited to
3streaming video, video on-demand, and pay-per-view.
4am. Petgrooming; pipe.
5an. Pipefitting and plumbing; wood.
6ao. Woodpreparation; executive.
7ap. Executivesearch agencies; private.
8aq. Privateemployment agencies, excluding services for
9placing a person in employment where the principal place of
10employment of that person is to be located outside of the
11state; reflexology; security.
12ar. Reflexology.
13as. Securityand detective services, excluding private
14security and detective services furnished by a peace officer
15with the knowledge and consent of the chief executive officer
16of the peace officer’s law enforcement agency; sewage.
17at. Sewageservices for nonresidential commercial
18operations; sewing.
19au. Sewingand stitching; shoe.
20av. Shoerepair and shoeshine; sign.
21aw. Signconstruction and installation; storage.
22ax. Storageof household goods, mini-storage, and
23warehousing of raw agricultural products; swimming.
24ay. Swimmingpool cleaning and maintenance; tanning.
25az. Tanningbeds or salons; taxidermy.
26ba. Taxidermyservices; telephone.
27bb. Telephoneanswering service; test.
28bc. Testlaboratories, including mobile testing laboratories
29and field testing by testing laboratories, and excluding tests
30on humans or animals and excluding environmental testing
31services; termite.
32bd. Termite, bug, roach, and pest eradicators; tin.
33be. Tinand sheet metal repair; transportation.
34bf. Transportationservice consisting of the rental of
35recreational vehicles or recreational boats, or the rental of
-61-1vehicles subject to registration which are registered for a
2gross weight of thirteen tons or less for a period of sixty
3days or less, or the rental of aircraft for a period of sixty
4days or less;.
5bg. Turkish baths, massage, and reducing salons, excluding
6services provided by massage therapists licensed under chapter
7152C; water.
8bh. Waterconditioning and softening; weighing; welding;
9well.
10bi. Weighing.
11bj. Welding.
12bk. Welldrilling; wrapping.
13bl. Wrapping, packing, and packaging of merchandise other
14than processed meat, fish, fowl, and vegetables; wrecking.
15bm. Wreckingservice; wrecker.
16bn. Wreckerand towing.
17b. For the purposes of this subsection, “financial
18institutions” means all national banks, federally chartered
19savings and loan associations, federally chartered savings
20banks, federally chartered credit unions, banks organized under
21chapter 524, credit unions organized under chapter 533, and
22all banks, savings banks, credit unions, and savings and loan
23associations chartered or otherwise created under the laws of
24any state and doing business in Iowa.
25bo. Photography.
26bp. Retouching.
27bq. Storage of tangible or electronic files, documents, or
28other records.
29br. Information services.
30bs. Services arising from or related to installing,
31maintaining, servicing, repairing, operating, upgrading, or
32enhancing specified digital products.
33bt. Video game services and tournaments.
34bu. Software as a service.
35 Sec. 146. Section 423.2, subsection 8, Code 2018, is amended
-62-1by adding the following new paragraph:
2 NEW PARAGRAPH. d. A transaction that otherwise meets
3the definition of “bundled transaction” as defined in this
4subsection is not a bundled transaction if it is any of the
5following:
6(1) The retail sale of tangible personal property and a
7service where the tangible personal property is essential
8to the use of the service, and is provided exclusively in
9connection with the service, and the true object of the
10transaction is the service.
11(2) The retail sale of services where one service is
12provided that is essential to the use or receipt of a second
13service and the first service is provided exclusively in
14connection with the second service and the true object of the
15transaction is the second service.
16(3) (a) A transaction that includes taxable products and
17nontaxable products and the purchase price or sales price of
18the taxable products is de minimis.
19(b) For purposes of this subparagraph, “de minimis” means
20the seller’s purchase or sales price of the taxable products
21is ten percent or less of the total purchase price or sales
22price of the bundled products. Sellers shall use either the
23purchase price or the sale price of the products to determine
24if the taxable products are de minimis. Sellers may not use
25a combination of the purchase price and sales price of the
26products to determine if the taxable products are de minimis.
27(4) The retail sale of exempt tangible personal property and
28taxable tangible personal property where all of the following
29apply:
30(a) The transaction includes food and food ingredients,
31drugs, durable medical equipment, mobility enhancing equipment,
32prosthetic devices, or medical supplies.
33(b) The seller’s purchase price or sales price of the
34taxable tangible personal property is fifty percent or less
35of the total purchase price or sales price of the bundled
-63-1tangible personal property. Sellers may not use a combination
2of the purchase price and sales price of the tangible personal
3property when making the fifty percent determination for a
4transaction.
5 Sec. 147. Section 423.2, Code 2018, is amended by adding the
6following new subsection:
7 NEW SUBSECTION. 9A. a. A tax of six percent is imposed on
8the sales price of specified digital products sold at retail
9in the state. The tax applies whether the purchaser obtains
10permanent use or less than permanent use of the specified
11digital product, whether the sale is conditioned or not
12conditioned upon continued payment from the purchaser, and
13whether the sale is on a subscription basis or is not on a
14subscription basis.
15b. The sale of a digital code that may be used to obtain
16or access a specified digital product shall be taxed in the
17same manner as the specified digital product. For purposes
18of this paragraph, “digital code” means a method that permits
19a purchaser to obtain or access at a later date a specified
20digital product.
21 Sec. 148. Section 423.2, subsections 10, 11, and 12, Code
222018, are amended by striking the subsections.
23 Sec. 149. NEW SECTION. 423.2A Deposit and transfer of
24revenues.
251. a. All revenues arising under the operation of the
26provisions of this subchapter II shall be deposited into the
27general fund of the state.
28b. Subsequent to the deposit into the general fund of
29the state, the director shall credit an amount equal to the
30product of the sales tax rate imposed in section 423.2 times
31the sales price of the tangible personal property or services
32furnished to purchasers at a baseball and softball complex that
33has received an award under section 15F.207 and that meets
34the qualifications of section 423.4, subsection 10, into the
35baseball and softball complex sales tax rebate fund created
-64-1under section 423.4, subsection 10, paragraph “e”. The director
2shall credit the moneys beginning the first day of the quarter
3following July 1, 2016. This paragraph is repealed thirty
4days following the date on which five million dollars in total
5rebates have been provided under section 423.4, subsection 10.
62. Subsequent to the deposit into the general fund of the
7state pursuant to subsection 1, the department shall do the
8following in the order prescribed:
9a. Transfer the revenues collected under chapter 423B.
10b. Transfer from the remaining revenues the amounts required
11under Article VII, section 10, of the Constitution of the State
12of Iowa to the natural resources and outdoor recreation trust
13fund created in section 461.31, if applicable.
14c. Transfer one-sixth of the remaining revenues to the
15secure an advanced vision for education fund created in section
16423F.2. This paragraph “c” is repealed December 31, 2029.
17d. Transfer to the baseball and softball complex sales tax
18rebate fund that portion of the sales tax receipts described
19in subsection 1, paragraph “b”, remaining after the transfers
20required under paragraphs “a”, “b”, and “c” of this subsection
212. This paragraph is repealed thirty days following the date
22on which five million dollars in total rebates have been
23provided under section 423.4, subsection 10.
24e. Beginning the first day of the calendar quarter
25beginning on the reinvestment district’s commencement date,
26subject to remittance limitations established by the economic
27development authority board pursuant to section 15J.4,
28subsection 3, transfer to a district account created in the
29state reinvestment district fund for each reinvestment district
30established under chapter 15J, the amount of new state sales
31tax revenue, determined in section 15J.5, subsection 1,
32paragraph “b”, in the district, that remains after the prior
33transfers required under this subsection 2. Such transfers
34shall cease pursuant to section 15J.8.
35f. Subject to the limitation on the calculation and
-65-1deposit of sales tax increment revenues in section 418.12,
2beginning the first day of the quarter following adoption
3of the resolution pursuant to section 418.4, subsection 3,
4paragraph “d”, transfer to the account created in the sales tax
5increment fund for each governmental entity approved to use
6sales tax increment revenues under chapter 418, that portion
7of the increase in sales tax revenue, determined in section
8418.11, subsection 2, paragraph “d”, in the applicable area of
9the governmental entity, that remains after the other transfers
10required under this subsection 2.
11g. Beginning the first day of the quarter following July
121, 2014, transfer to the raceway facility tax rebate fund
13created in section 423.4, subsection 11, paragraph “e”, that
14portion of the sales tax receipts collected and remitted upon
15sales of tangible personal property or services furnished by
16retailers at a raceway facility meeting the qualifications of
17section 423.4, subsection 11, that remains after the transfers
18required in paragraphs “a” through “f” of this subsection
192. This subparagraph is repealed June 30, 2025, or thirty
20days following the date on which an amount of total rebates
21specified in section 423.4, subsection 11, paragraph “c”,
22subparagraph (4), subparagraph division (a) or (b), whichever
23is applicable, has been provided or thirty days following the
24date on which rebates cease as provided in section 423.4,
25subsection 11, paragraph “c”, subparagraph (5), whichever is
26earliest.
273. Of the amount of sales tax revenue actually transferred
28per quarter pursuant to subsection 2, paragraphs “e” and “f”,
29the department shall retain an amount equal to the actual cost
30of administering the transfers under subsection 2, paragraphs
31“e” and “f”, or twenty-five thousand dollars, whichever is
32less. The amount retained by the department pursuant to this
33subsection shall be divided pro rata each quarter between
34the amounts that would have been transferred pursuant to
35subsection 2, paragraphs “e” and “f”, without the deduction
-66-1made by operation of this subsection. Revenues retained by
2the department pursuant to this subsection shall be considered
3repayment receipts as defined in section 8.2.
4 Sec. 150. Section 423.3, subsections 1, 2, and 17, Code
52018, are amended to read as follows:
61. The sales price from sales of tangible personal property,
7specified digital products, and services furnished which this
8state is prohibited from taxing under the Constitution or laws
9of the United States or under the Constitution of this state.
102. The sales price of sales for resale of tangible personal
11property or taxable services, or for resale of tangible
12personal property in connection with the furnishing of taxable
13services, except for sales, the following:
14a. Sales,other than leases or rentals, which are sales
15to nonqualified dealers of machinery, equipment, attachments,
16and replacement parts specifically enumerated in subsection 37
17and used in the manner described in subsection 37 or the. For
18purposes of this paragraph, “nonqualified dealer” means any
19dealer who is not a party to a dealership agreement, as those
20terms are defined in section 322F.1.
21b. Thepurchase of tangible personal property, the leasing
22or rental of which is exempted from tax by subsection 49.
2317. The sales price of all goods, wares, or merchandise,
24 tangible personal property, specified digital products, or
25services, used for educational purposes sold to any private
26nonprofit educational institution in this state. For the
27purpose of this subsection, “educational institution” means an
28institution which primarily functions as a school, college,
29or university with students, faculty, and an established
30curriculum. The faculty of an educational institution must be
31associated with the institution and the curriculum must include
32basic courses which are offered every year. “Educational
33institution” includes an institution primarily functioning as
34a library.
35 Sec. 151. Section 423.3, subsection 3, Code 2018, is amended
-67-1by striking the subsection and inserting in lieu thereof the
2following:
33. a. The sales price of tangible personal property used
4primarily in agricultural production by a commercial farmer
5if the cost of the tangible personal property is properly
6claimed as a business deduction for purposes of chapter 422 and
7the tangible personal property is used on land eligible for
8the agricultural land credit created in chapter 426. If the
9other requirements of this subsection are satisfied, “tangible
10personal property” includes but is not limited to the following:
11(1) Farm machinery and equipment, including supplies,
12replacement parts, and auxiliary attachments which improve the
13performance, safety, operation, or efficiency of the machinery
14and equipment.
15(2) Agricultural breeding livestock, domesticated fowl,
16preserve whitetail as defined in section 484C.1, and draft
17horses.
18b. Vehicles subject to registration, as defined in section
19423.1, and replacement parts for such vehicles, are not exempt
20under paragraph “a” of this subsection.
21 Sec. 152. Section 423.3, subsections 3A, 4, 5, 6, 7, 8,
229, 10, 11, 12, 13, 14, 15, and 16, Code 2018, are amended by
23striking the subsections.
24 Sec. 153. Section 423.3, subsection 18, unnumbered
25paragraph 1, Code 2018, is amended to read as follows:
26The sales price of tangible personal property or specified
27digital products sold, or of services furnished, to the
28following nonprofit corporations:
29 Sec. 154. Section 423.3, subsections 20, 21, 22, 23, 26, 27,
3028, and 31, Code 2018, are amended to read as follows:
3120. The sales price of tangible personal property or
32specified digital products sold, or of services furnished, to
33nonprofit legal aid organizations.
3421. The sales price of goods, wares, or merchandise,
35 tangible personal property, of specified digital products,
-68-1 or of services, used for educational, scientific, historic
2preservation, or aesthetic purpose sold to a nonprofit private
3museum.
422. The sales price from sales of goods, wares, or
5merchandise, tangible personal property, of specified digital
6products, or from services furnished, to a nonprofit private
7art center to be used in the operation of the art center.
823. The sales price of tangible personal property or
9specified digital products sold, or of services furnished, by a
10fair organized under chapter 174.
1126. The sales price of tangible personal property or
12specified digital products sold, or of services furnished, to a
13statewide nonprofit organ procurement organization, as defined
14in section 142C.2.
1527. The sales price of tangible personal property or
16specified digital products sold, or of services furnished, to a
17nonprofit hospital licensed pursuant to chapter 135B to be used
18in the operation of the hospital.
1928. The sales price of tangible personal property or
20specified digital products sold, or of services furnished, to
21a freestanding nonprofit hospice facility which operates a
22hospice program as defined in 42 C.F.R. ch.IV, §418.3, which
23property or services are to be used in the hospice program.
2431. a. The sales price of goods, wares, or merchandise
25 tangible personal property or specified digital products sold
26to and of services furnished, and used for public purposes
27sold to a tax-certifying or tax-levying body of the state or
28a governmental subdivision of the state, including regional
29transit systems, as defined in section 324A.1, the state board
30of regents, department of human services, state department of
31transportation, any municipally owned solid waste facility
32which sells all or part of its processed waste as fuel to a
33municipally owned public utility, and all divisions, boards,
34commissions, agencies, or instrumentalities of state, federal,
35county, or municipal government which have no earnings going to
-69-1the benefit of an equity investor or stockholder, except any
2of the following:
3(1) a. The sales price of goods, wares, or merchandise
4 tangible personal property or specified digital products sold
5to, or of services furnished, and used by or in connection with
6the operation of any municipally owned public utility engaged
7in selling gas, electricity, heat, pay television service, or
8communication service to the general public.
9(2) b. The sales price of furnishing of sewage services to
10a county or municipality on behalf of nonresidential commercial
11operations.
12(3) c. The furnishing of solid waste collection and
13disposal service to a county or municipality on behalf of
14nonresidential commercial operations located within the county
15or municipality.
16b. The exemption provided by this subsection shall also
17apply to all such sales of goods, wares, or merchandise or of
18services furnished and subject to use tax.
19 Sec. 155. Section 423.3, subsection 32, unnumbered
20paragraph 1, Code 2018, is amended to read as follows:
21The sales price of tangible personal property or specified
22digital products sold, or of services furnished, by a county or
23city. This exemption does not apply to any of the following:
24 Sec. 156. Section 423.3, subsection 36, unnumbered
25paragraph 1, Code 2018, is amended to read as follows:
26The sales price from sales of tangible personal property
27or specified digital products or of the sale or furnishing of
28electrical energy, natural or artificial gas, or communication
29service to another state or political subdivision of another
30state if the other state provides a similar reciprocal
31exemption for this state and political subdivision of this
32state.
33 Sec. 157. Section 423.3, subsection 39, paragraph a,
34subparagraphs (1) and (2), Code 2018, are amended to read as
35follows:
-70- 1(1) Sales of tangible personal property or specified
2digital products, or the furnishing of services, of a
3nonrecurring nature, by the owner, if the seller, at the time
4of the sale, is not engaged for profit in the business of
5selling tangible personal property, specified digital products,
6 or services taxed under section 423.2.
7(2) The sale of all or substantially all of the tangible
8personal property, or specified digital products, or services
9held or used by a seller in the course of the seller’s trade or
10business for which the seller is required to hold a sales tax
11permit when the seller sells or otherwise transfers the trade
12or business to another person who shall engage in a similar
13trade or business.
14 Sec. 158. Section 423.3, subsection 47, paragraph d,
15subparagraph (4), Code 2018, is amended by striking the
16subparagraph and inserting in lieu thereof the following:
17(4) (a) “Manufacturer” means a business that primarily
18purchases, receives, or holds personal property of any
19description for the purpose of adding to its value by a process
20of manufacturing with a view to selling the property for gain
21or profit.
22(b) “Manufacturer” includes contract manufacturers. A
23contract manufacturer is a manufacturer that otherwise falls
24within the definition of manufacturer, except that a contract
25manufacturer does not sell the tangible personal property
26the contract manufacturer processes on behalf of other
27manufacturers.
28(c) For purposes of this subparagraph, “business” means
29those businesses conducted for profit, but excludes professions
30and occupations and nonprofit organizations.
31(d) For purposes of this subparagraph, “manufacturing”
32means those activities commonly understood within the ordinary
33meaning of the term, and shall include:
34(i) Refining.
35(ii) Purifying.
-71- 1(iii) Combining of different materials.
2(iv) Packing of meats.
3(v) Activities subsequent to the extractive process of
4quarrying or mining, such as crushing, washing, sizing, or
5blending of aggregate materials.
6(e) “Manufacturer” does not include persons who are not
7commonly understood as manufacturers, including but not limited
8to persons engaged in any of the following activities:
9(i) Construction contracting.
10(ii) Repairing tangible personal property or real property.
11(iii) Providing health care.
12(iv) Farming, including cultivating agricultural products
13and raising livestock.
14(v) Transporting for hire.
15(vi) Making retail sales to consumers.
16 Sec. 159. Section 423.3, subsection 63, Code 2018, is
17amended to read as follows:
1863. The sales price from the sale of tangible personal
19property, specified digital products, or services which will be
20given as prizes to players in games of skill, games of chance,
21raffles, and bingo games as defined in chapter 99B.
22 Sec. 160. Section 423.3, subsections 65, 66, and 67, Code
232018, are amended by striking the subsections.
24 Sec. 161. Section 423.3, subsection 78, paragraph a,
25unnumbered paragraph 1, Code 2018, is amended to read as
26follows:
27The sales price from sales or rental the sale of tangible
28personal property, specified digital products, or services
29rendered by any entity where the profits from the sales or
30rental sale of the tangible personal property, specified
31digital products, or services rendered, are used by or donated
32to a nonprofit entity that is exempt from federal income
33taxation pursuant to section 501(c)(3) of the Internal Revenue
34Code, a government entity, or a nonprofit private educational
35institution, and where the entire proceeds from the sales,
-72-1rental, sale or services are expended for any of the following
2purposes:
3 Sec. 162. Section 423.3, subsection 79, Code 2018, is
4amended to read as follows:
579. The sales price from the sale or rental of tangible
6personal property or specified digital products, or from
7services furnished, to a recognized community action agency as
8provided in section 216A.93 to be used for the purposes of the
9agency.
10 Sec. 163. Section 423.3, Code 2018, is amended by adding the
11following new subsections:
12 NEW SUBSECTION. 103. a. The sales price of specified
13digital products sold, and of enumerated services described in
14section 423.2, subsection 6, paragraphs “bq”, “br”, “bs”, and
15“bu” furnished, to a commercial enterprise for use exclusively
16by the commercial enterprise. The use of a specified digital
17product or service fails to qualify as a use exclusively by the
18commercial enterprise if its use for noncommercial purposes is
19more than de minimis.
20b. For purposes of this subsection:
21(1) “Commercial enterprise” means the same as defined in
22section 423.3, subsection 47, paragraph “d”, subparagraph (1).
23(2) “De minimis” and “noncommercial purposes” shall be
24defined by the director by rule.
25 NEW SUBSECTION. 104. The sales price of specified digital
26products sold to a non-end user. For purposes of this
27subsection, “non-end user” means a person who receives by
28contract a specified digital product for further commercial
29broadcast, rebroadcast, transmission, retransmission,
30licensing, relicensing, distribution, redistribution, or
31exhibition of the product, in whole or in part, to another
32person.
33 NEW SUBSECTION. 105. The sales price from the sale of a
34grain bin or materials used to construct a grain bin. For
35purposes of this subsection, “grain bin” means property that is
-73-1vented and covered with corrugated metal or similar material,
2and that is primarily used to hold loose grain for drying or
3storage.
4 Sec. 164. Section 423.4, subsection 3, unnumbered paragraph
51, Code 2018, is amended to read as follows:
6A relief agency may apply to the director for refund of the
7amount of sales or use tax imposed and paid upon sales to it
8of any goods, wares, merchandise, tangible personal property
9or specified digital products, or services furnished, used for
10free distribution to the poor and needy.
11 Sec. 165. Section 423.4, subsection 3, paragraph a,
12subparagraph (1), Code 2018, is amended to read as follows:
13(1) On forms furnished by the department, and filed within
14the time as the director shall provide by rule, the relief
15agency shall report to the department the total amount or
16amounts, valued in money, expended directly or indirectly
17for goods, wares, merchandise, tangible personal property or
18specified digital products, or services furnished, used for
19free distribution to the poor and needy.
20 Sec. 166. Section 423.4, subsection 10, paragraph e, Code
212018, is amended to read as follows:
22e. There is established within the state treasury under the
23control of the department a baseball and softball complex sales
24tax rebate fund consisting of the amount of state sales tax
25revenues transferred pursuant to section 423.2, subsection 11,
26paragraph “b”, subparagraph (4) 423.2A, subsection 2, paragraph
27“d”. An account is created within the fund for each baseball
28and softball complex receiving an award under section 15F.207
29and meeting the qualifications of this subsection. Moneys
30in the fund shall only be used to provide rebates of state
31sales tax pursuant to this subsection, and only the state sales
32tax revenues in the baseball and softball complex rebate fund
33are subject to rebate under this subsection. The amount of
34rebates paid from each baseball and softball complex’s account
35within the fund shall not exceed the amount of the award under
-74-1section 15F.207, and not more than five million dollars in
2total rebates shall be paid from the fund. Any moneys in the
3fund which represent state sales tax revenue for which the time
4period in paragraph “c” for receiving a rebate has expired,
5or which otherwise represent state sales tax revenue that has
6become ineligible for rebate pursuant to this subsection, shall
7immediately revert to the general fund of this state.
8 Sec. 167. Section 423.4, subsection 11, paragraph b,
9subparagraph (1), Code 2018, is amended to read as follows:
10(1) Sales tax imposed and collected by retailers upon
11sales of tangible personal property or services furnished to
12purchasers at the raceway facility. Notwithstanding the state
13sales tax imposed in section 423.2, a sales tax rebate issued
14pursuant to this subparagraph shall not exceed the amounts
15transferred to the raceway facility tax rebate fund pursuant to
16section 423.2, subsection 11, paragraph “b”, subparagraph (7)
17 423.2A, subsection 2, paragraph “g”.
18 Sec. 168. Section 423.4, subsection 11, paragraph b,
19subparagraph (2), subparagraph division (c), Code 2018, is
20amended to read as follows:
21(c) Notwithstanding the state sales tax imposed in section
22423.2, a sales tax rebate issued pursuant to this subparagraph
23shall not exceed the amounts remaining after the transfers
24required under section 423.2, subsection 11, paragraph “b”,
25subparagraphs (1) through (6) 423.2A, subsection 2, paragraphs
26“a” through “f”, have been made from the total amount of sales
27tax for which the rebate is requested.
28 Sec. 169. Section 423.4, subsection 11, paragraph e, Code
292018, is amended to read as follows:
30e. There is established within the state treasury under
31the control of the department a raceway facility tax rebate
32fund consisting of the amount of state sales tax revenues
33transferred pursuant to section 423.2, subsection 11, paragraph
34“b”, subparagraph (7) 423.2A, subsection 2, paragraph “g”. An
35account is created within the fund for each raceway facility
-75-1meeting the qualifications of this subsection. Moneys in the
2fund shall only be used to provide rebates of state sales tax
3pursuant to paragraph “b”, subparagraph (1). The total amount
4of rebates paid from the fund shall not exceed the amount
5specified in paragraph “c”, subparagraph (4), subparagraph
6division (a) or (b), whichever is applicable. Any moneys in
7the fund which represent state sales tax revenue for which the
8time period in paragraph “c” for receiving a rebate has expired,
9or which otherwise represent state sales tax revenue that has
10become ineligible for rebate pursuant to this subsection shall
11immediately revert to the general fund of the state.
12 Sec. 170. Section 423.5, subsection 1, paragraph a, Code
132018, is amended to read as follows:
14a. The use in this state of tangible personal property
15as defined in section 423.1, including aircraft subject to
16registration under section 328.20, purchased for use in this
17state. For the purposes of this subchapter, the furnishing
18or use of the following services is also treated as the use
19of tangible personal property: optional service or warranty
20contracts, except residential service contracts regulated under
21chapter 523C, vulcanizing, recapping, or retreading services,
22engraving, photography, retouching, printing, or binding
23services, and communication service when furnished or delivered
24to consumers or users within this state.
25 Sec. 171. Section 423.5, subsection 1, paragraph d, Code
262018, is amended to read as follows:
27d. Purchases of tangible personal property or specified
28digital products made from the government of the United States
29or any of its agencies by ultimate consumers shall be subject
30to the tax imposed by this section. Services purchased from
31the same source or sources shall be subject to the service
32tax imposed by this subchapter and apply to the user of the
33services.
34 Sec. 172. Section 423.5, subsection 1, Code 2018, is amended
35by adding the following new paragraph:
-76-1 NEW PARAGRAPH. f. (1) The use in this state of specified
2digital products. The tax applies whether the purchaser
3obtains permanent use or less than permanent use of the
4specified digital product, whether the use is conditioned or
5not conditioned upon continued payment from the purchaser,
6and whether the use is on a subscription basis or is not on a
7subscription basis.
8(2) The use of a digital code that may be used to obtain
9or access a specified digital product shall be taxed in the
10same manner as the specified digital product. For purposes of
11this subparagraph, “digital code” means the same as defined in
12section 423.2, subsection 9A.
13 Sec. 173. Section 423.5, subsection 3, Code 2018, is amended
14to read as follows:
153. For the purpose of the proper administration of the use
16tax and to prevent its evasion, evidence that tangible personal
17property was or specified digital products were sold by any
18person for delivery in this state shall be prima facie evidence
19that such tangible personal property was or specified digital
20products were sold for use in this state.
21 Sec. 174. Section 423.5, subsection 4, Code 2018, is amended
22by striking the subsection.
23 Sec. 175. Section 423.6, unnumbered paragraph 1, Code 2018,
24is amended to read as follows:
25The use in this state of the following tangible personal
26property, specified digital products, and services is exempted
27from the tax imposed by this subchapter:
28 Sec. 176. Section 423.6, subsections 1, 2, 4, and 6, Code
292018, are amended to read as follows:
301. Tangible personal property, specified digital products,
31 and enumerated services, the sales price from the sale of which
32are required to be included in the measure of the sales tax, if
33that tax has been paid to the department or the retailer. This
34exemption does not include vehicles subject to registration or
35subject only to the issuance of a certificate of title.
-77- 12. The sale of tangible personal property, specified
2digital products, or the furnishing of services in the regular
3course of business.
44. All articles of tangible personal property and all
5specified digital products brought into the state of Iowa by a
6nonresident individual for the individual’s use or enjoyment
7while within the state.
86. Tangible personal property, specified digital products,
9 or services the sales price of which is exempt from the sales
10tax under section 423.3, except section 423.3, subsections 39
11and 73, as it relates to the sale, but not the lease or rental,
12of vehicles subject only to the issuance of a certificate of
13title and as it relates to aircraft subject to registration
14under section 328.20.
15 Sec. 177. Section 423.14, subsection 2, paragraphs b and c,
16Code 2018, are amended to read as follows:
17b. The tax upon the use of all tangible personal property
18and specified digital products other than that enumerated in
19paragraph “a”, which is sold by a seller who is a retailer
20maintaining a place of business in this state, or by such other
21retailer or agent as the director shall authorize pursuant to
22section 423.30 or its agent that is not otherwise required
23to collect sales tax under the provisions of this chapter,
24shall be collected by the retailer or agent and remitted to the
25department, pursuant to the provisions of paragraph “e”, and
26sections 423.24, 423.29, 423.30, 423.32, and 423.33.
27c. The tax upon the use of all tangible personal property
28and specified digital products not paid pursuant to paragraphs
29“a” and “b” shall be paid to the department directly by any
30person using the property within this state, pursuant to the
31provisions of section 423.34.
32 Sec. 178. NEW SECTION. 423.14A Persons required to collect
33sales and use tax — supplemental conditions, requirements, and
34responsibilities.
351. For purposes of this section, “Iowa sales” means sales
-78-1of tangible personal property, services, or specified digital
2products sourced to this state pursuant to section 423.15,
3423.16, 423.17, 423.19, or 423.20, or that are otherwise sold
4in this state or for delivery into this state.
52. In addition to and not in lieu of any application of
6this chapter to sellers who are retailers and sellers who are
7retailers maintaining a place of business in this state, any
8person described in subsection 3, or the person’s agents,
9shall be considered a retailer in this state and a retailer
10maintaining a place of business in this state for purposes of
11this chapter on or after January 1, 2019, and shall be subject
12to all requirements of this chapter imposed on retailers and
13retailers maintaining a place of business in this state,
14including but not limited to the requirement to collect and
15remit sales and use taxes pursuant to sections 423.14 and
16423.29, and local option taxes under chapter 423B.
173. a. A retailer that has gross revenue from Iowa sales
18equal to or exceeding one hundred thousand dollars for the
19immediately preceding calendar year or the current calendar
20year.
21b. A retailer that makes Iowa sales in two hundred or more
22separate transactions for the immediately preceding calendar
23year or the current calendar year.
24c. (1) A retailer that owns, licenses, or uses software
25or data files that are installed or stored on property used
26in this state. For purposes of this subparagraph, “software
27or data files” include but are not limited to software that is
28affirmatively downloaded by a user, software that is downloaded
29as a result of the use of a website, preloaded software, and
30cookies.
31(2) A retailer that uses in-state software to make Iowa
32sales. For purposes of this subparagraph, “in-state software”
33means computer software that is stored on property located in
34this state or that is distributed within this state for the
35purpose of facilitating a sale by the retailer.
-79- 1(3) A retailer that provides, or enters into an agreement
2with another person to provide, a content distribution network
3in this state to facilitate, accelerate, or enhance the
4delivery of the retailer’s internet site to purchasers. For
5purposes of this subparagraph, “content distribution network”
6means a system of distributed servers that deliver internet
7sites and other internet content to a user based on the
8geographic location of the user, the origin of the internet
9site or internet content, and a content delivery server.
10(4) This paragraph “c” shall not apply to a retailer that
11has gross revenue from Iowa sales of less than one hundred
12thousand dollars for the immediately preceding calendar year
13or the current calendar year.
14d. (1) A retailer that makes Iowa sales through a
15marketplace provider. This subparagraph shall not apply to a
16retailer that has gross revenue from Iowa sales of less than
17ten thousand dollars for the immediately preceding calendar
18year or the current calendar year.
19(2) A marketplace provider that makes or facilitates Iowa
20sales for one or more retailers equal to or exceeding one
21hundred thousand dollars, or in two hundred or more separate
22transactions, for the immediately preceding calendar year or
23the current calendar year.
24(3) Retailers and marketplace providers subject to this
25paragraph may enter into agreements regarding the fulfillment
26of the requirements of this chapter.
27(4) A marketplace provider shall collect sales and use tax
28on the entire sales price or purchase price paid by a purchaser
29on each Iowa sale made or facilitated by the marketplace
30provider that is subject to sales and use tax, regardless of
31the amount of the sales price or purchase price that will
32ultimately accrue to or benefit the marketplace provider,
33another retailer, or any other person. This sales and use tax
34collection responsibility of a marketplace provider applies but
35shall not be limited to sales facilitated through a computer
-80-1software application, commonly referred to as in-app purchases,
2or through a specified digital product.
3(5) If a retail sale subject to the sales and use tax
4involves both a marketplace provider and another retailer
5that is required to collect and remit sales and use tax,
6the marketplace provider and any other retailer involved in
7the transaction shall be jointly and severally liable for
8collecting and remitting sales and use tax under this chapter.
9(6) (a) For purposes of this paragraph, “marketplace
10provider” means a person who facilitates a retail sale by
11satisfying subparagraph divisions (i) and (ii) as follows:
12(i) The person directly or indirectly does any of the
13following:
14(A) Lists, makes available, or advertises tangible personal
15property, services, or specified digital products for sale by a
16retailer in any forum.
17(B) Transmits or otherwise communicates an offer or
18acceptance of a retail sale of tangible personal property,
19services, or specified digital products between a retailer and
20a purchaser.
21(C) Owns, rents, licenses, makes available, or operates
22any electronic or physical infrastructure or any property,
23process, method, copyright, trademark, or patent that connects
24retailers to purchasers for the purpose of making retail sales
25of tangible personal property, services, or specified digital
26products.
27(D) Provides a platform or other marketplace for making
28retail sales of tangible personal property, services, or
29specified digital products, or otherwise facilitates retail
30sales of tangible personal property, services, or specified
31digital products, regardless of ownership or control of the
32tangible personal property, services, or specified digital
33products that are the subject of the retail sale.
34(E) Provides software development or research and
35development activities related to any activity described in
-81-1this subparagraph subdivision (i), if such software development
2or research and development activities are directly related
3to the physical or electronic marketplace provided by a
4marketplace provider.
5(F) Provides or offers fulfillment or storage services for
6a retailer.
7(G) Sets prices for a retailer’s sale of tangible personal
8property, services, or specified digital products.
9(H) Provides or offers customer service to a retailer or
10a retailer’s customers, or accepts or assists with returns or
11exchanges of tangible personal property, services, or specified
12digital products sold by a retailer.
13(ii) The person directly or indirectly does any of the
14following:
15(A) Collects the sales price or purchase price of a retail
16sale of tangible personal property, services, or specified
17digital products.
18(B) Provides payment processing services for a retail sale
19of tangible personal property, services, or specified digital
20products.
21(C) Charges, collects, or otherwise receives selling
22fees, listing fees, referral fees, closing fees, fees for
23inserting or making available tangible personal property,
24services, or specified digital products on a marketplace, or
25other consideration from the facilitation of a retail sale of
26tangible personal property, services, or specified digital
27products, regardless of ownership or control of the tangible
28personal property, services, or specified digital products that
29are the subject of the retail sale.
30(D) Through terms and conditions, agreements, or
31arrangements with a third party, collects payment in connection
32with a retail sale of tangible personal property, services,
33or specified digital products from a purchaser and transmits
34that payment to the retailer, regardless of whether the person
35collecting and transmitting such payment receives compensation
-82-1or other consideration in exchange for the service.
2(E) Provides a virtual currency that purchasers are allowed
3or required to use to purchase tangible personal property,
4services, or specified digital products.
5(b) For purposes of this paragraph, “marketplace provider”
6includes but is not limited to a digital distribution service,
7digital distribution platform, online portal, or an application
8store.
9e. (1) A retailer that makes Iowa sales through the use of
10a solicitor. For purposes of this paragraph, “solicitor” means
11a person that directly or indirectly solicits business for a
12retailer.
13(2) (a) A retailer is deemed to have a solicitor in
14this state if the retailer enters into an agreement with a
15resident under which the resident, for a commission, fee, or
16other similar consideration, directly or indirectly refers
17potential customers, whether by link on an internet site,
18or otherwise, to the retailer. This determination may be
19rebutted by a showing of proof that the resident with whom the
20retailer has an agreement did not engage in any solicitation
21in this state on behalf of the retailer that would satisfy the
22nexus requirement of the United States Constitution during the
23calendar year in question.
24(b) This subparagraph (2) shall not apply to a retailer that
25has Iowa gross revenue from Iowa sales of ten thousand dollars
26or less for the immediately preceding calendar year or the
27current calendar year.
28(c) For purposes of this subparagraph (2):
29(i) “Iowa gross revenue” means gross revenue from Iowa
30sales to purchasers who were referred to the retailer by all
31solicitors who are residents.
32(ii) “Resident” includes an individual who is a resident
33of this state, as defined in section 422.4, and any business
34that owns any tangible or intangible property with a situs in
35this state, or that has one or more employees performing or
-83-1providing services for the business in this state.
2(d) This paragraph “e” does not apply to chapter 422 and
3does not expand or contract the state’s jurisdiction to tax a
4trade or business under chapter 422.
5f. A retailer that owns, controls, rents, licenses, makes
6available, or uses any tangible or intangible property in this
7state or with a situs in this state, to make or otherwise
8facilitate a retail sale.
9g. (1) Any person that enters into a contract or agreement
10with a governmental entity, including but not limited to
11contracts for the provision of financial assistance or
12incentives such as a tax credit, forgivable loan, grant, tax
13rebate, or any other thing of value. For purposes of this
14subparagraph, “governmental entity” means any unit of government
15in the executive, legislative, or judicial branch, or any
16political subdivision of the state, including but not limited
17to a city, county, township, or school district.
18(2) Every bid submitted and each contract or agreement
19executed by a state agency shall contain a certification by
20the bidder or contractor stating that the bidder or contractor
21is registered with the department pursuant to this chapter
22and will collect and remit Iowa sales and use tax due under
23this chapter. In the certification, the bidder or contractor
24shall also acknowledge that the state agency may declare the
25contractor or bid void if the certification is false or becomes
26false. Fraudulent certification, by act or omission, may
27result in the state agency or its representative filing for
28damages for breach of contract.
29h. Any affiliate of any retailer that is required to collect
30and remit sales and use tax under this chapter, provided the
31affiliate makes retail sales.
32 Sec. 179. Section 423.15, unnumbered paragraph 1, Code
332018, is amended to read as follows:
34All sales of products tangible personal property, services,
35or specified digital products, except those sales enumerated
-84-1in section 423.16, shall be sourced according to this section
2by sellers obligated to collect Iowa sales and use tax. The
3sourcing rules described in this section apply to sales of
4tangible personal property, specified digital goods products,
5and all services other than telecommunications services. This
6section only applies to determine a seller’s obligation to pay
7or collect and remit a Iowa sales or use tax with respect to
8the seller’s sale of a product. This section does not affect
9the obligation of a purchaser or lessee to remit tax on the use
10of the product to the taxing jurisdictions in which the use
11occurs. A seller’s obligation to collect Iowa sales tax or
12Iowa use tax only occurs if the sale is sourced to this state.
13Whether Iowa sales tax applies to a sale sourced to Iowa shall
14be determined based on the location at which the sale is
15consummated by delivery or, in the case of a service, where the
16first use of the service occurs made by a seller subject to
17section 423.1, subsection 48, or section 423.14A.
18 Sec. 180. Section 423.15, subsection 1, paragraph e, Code
192018, is amended to read as follows:
20e. When paragraphs “a”, “b”, “c”, and “d” do not apply,
21including the circumstance where the seller is without
22sufficient information to apply the previous rules, then the
23location will be determined by the address from which tangible
24personal property was shipped, from which the specified digital
25good product or the computer software delivered electronically
26was first available for transmission by the seller, or from
27which the service was provided disregarding for these purposes
28any location that merely provided the digital transfer of the
29product sold.
30 Sec. 181. Section 423.22, Code 2018, is amended to read as
31follows:
32423.22 Taxation in another state.
33If any person who causes tangible personal property or
34specified digital products to be brought into this state or
35who uses in this state services enumerated in section 423.2
-85-1has already paid a tax in another state in respect to the sale
2or use of the property or the performance of the service, or
3an occupation tax in respect to the property or service, in
4an amount less than the tax imposed by subchapter II or III,
5the provisions of those subchapters shall apply, but at a rate
6measured by the difference only between the rate fixed by
7subchapter II or III and the rate by which the previous tax on
8the sale or use, or the occupation tax, was computed. If the
9tax imposed and paid in the other state is equal to or more than
10the tax imposed by those subchapters, then a tax is not due in
11this state on the personal property or service.
12 Sec. 182. Section 423.29, subsection 1, Code 2018, is
13amended to read as follows:
141. Every seller who is a retailer and who is making taxable
15sales of tangible personal property or specified digital
16products in Iowa shall, at the time of selling the property
17 making the sale, collect the sales tax. Every seller who
18is a retailer maintaining a place of business in this state
19 that is not otherwise required to collect sales tax under the
20provisions of this chapter and who is selling tangible personal
21property or specified digital products for use in Iowa shall,
22at the time of making the sale, whether within or without the
23state, collect the use tax. Sellers required to collect sales
24or use tax shall give to any purchaser a receipt for the tax
25collected in the manner and form prescribed by the director.
26 Sec. 183. Section 423.30, subsection 1, Code 2018, is
27amended to read as follows:
281. The director may, upon application, authorize the
29collection of the use tax by any seller who is a retailer not
30maintaining a place of business within this state and not
31registered under the agreement, who, to the satisfaction of
32the director, furnishes adequate security to ensure collection
33and payment of the tax. Such sellers shall be issued, without
34charge, permits to collect tax subject to any regulations
35which the director shall prescribe. When so authorized, it
-86-1shall be the duty of foreign sellers to collect the tax upon
2all tangible personal property and specified digital products
3 sold, to the retailer’s knowledge, for use within this state,
4in the same manner and subject to the same requirements as a
5retailer maintaining a place of business within this state.
6The authority and permit may be canceled when, at any time, the
7director considers the security inadequate, or that tax can
8more effectively be collected from the person using property
9in this state.
10 Sec. 184. Section 423.31, subsection 1, Code 2018, is
11amended to read as follows:
121. Each person subject to this section and section 423.36
13and in accordance with the provisions of this section and
14section 423.36 shall, on or before the last day of the month
15following the close of each calendar quarter during which
16such person is or has become or ceased being subject to the
17provisions of this section and section 423.36, make, sign, and
18file a return for the calendar quarter in the form as may be
19required. Returns shall show information relating to sales
20prices including goods, wares, tangible personal property,
21specified digital products, and services converted to the
22use of such person, the amounts of sales prices excluded and
23exempt from the tax, the amounts of sales prices subject to
24tax, a calculation of tax due, and any other information for
25the period covered by the return as may be required. Returns
26shall be signed by the retailer or the retailer’s authorized
27agent and must be certified by the retailer to be correct in
28accordance with forms and rules prescribed by the director.
29 Sec. 185. Section 423.31, subsection 5, paragraph a, Code
302018, is amended to read as follows:
31a. Upon making application and receiving approval from
32the director, a parent corporation person and its affiliated
33corporations affiliates that make retail sales of tangible
34personal property, specified digital products, or taxable
35enumerated services may make deposits and file a consolidated
-87-1sales tax return for the affiliated group, pursuant to rules
2adopted by the director. A parent corporation person and each
3affiliate corporation that files a consolidated return are
4jointly and severally liable for all tax, penalty, and interest
5found due for the tax period for which a consolidated return is
6filed or required to be filed.
7 Sec. 186. Section 423.32, subsection 1, paragraph b, Code
82018, is amended to read as follows:
9b. The deposit form is due on or before the twentieth day of
10the month following the month of collection, except a deposit
11is not required for the third month of the calendar quarter,
12and the total quarterly amount, less the amounts deposited for
13the first two months of the quarter, is due with the quarterly
14report on the last day of the month following the month of
15collection. At that time, the retailer shall file with the
16department a return for the preceding quarterly period in the
17form prescribed by the director showing the purchase price of
18the tangible personal property, specified digital products, and
19services sold by the retailer during the preceding quarterly
20period, the use of which is subject to the use tax imposed
21by this chapter, and other information the director deems
22necessary for the proper administration of the use tax.
23 Sec. 187. Section 423.33, subsection 3, Code 2018, is
24amended to read as follows:
253. Event sponsor’s liability for sales tax. A person
26sponsoring a flea market or a craft, antique, coin, or stamp
27show or similar event shall obtain from every retailer selling
28tangible personal property, specified digital products,
29 or taxable services at the event proof that the retailer
30possesses a valid sales tax permit or secure from the retailer
31a statement, taken in good faith, that tangible personal
32 property, specified digital products, or services offered for
33sale are not subject to sales tax. Failure to do so renders
34a sponsor of the event liable for payment of any sales tax,
35interest, and penalty due and owing from any retailer selling
-88-1property or services at the event. Sections 423.31, 423.32,
2423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 apply to the
3sponsors. For purposes of this subsection, a “person sponsoring
4a flea market or a craft, antique, coin, or stamp show or similar
5event” does not include an organization which sponsors an
6event determined to qualify as an event involving casual sales
7pursuant to section 423.3, subsection 39, or the state fair or
8a fair as defined in section 174.1.
9 Sec. 188. Section 423.33, Code 2018, is amended by adding
10the following new subsection:
11 NEW SUBSECTION. 4. Liability of affiliates.
12a. Notwithstanding any other provision of law to the
13contrary, if any retailer required to collect and remit sales
14and use tax pursuant to sections 423.14, 423.14A, and 423.29,
15or any other provision of this chapter, fails to do so, all
16affiliates that directly, indirectly, or constructively control
17the retailer shall be jointly and severally liable for any tax,
18penalty, and interest under this chapter, regardless of whether
19the affiliate is a retailer.
20b. Pursuant to paragraph “a”, the department may elect
21to assess the full amount of any tax, penalty, and interest
22against the retailer, an affiliate of the retailer described
23in paragraph “a”, or any combination of the retailer and the
24retailer’s affiliates described in paragraph “a”.
25c. Notwithstanding any other provision of law to the
26contrary, the department has the discretion to deem an
27affiliate of a retailer an agent or alter ego of that retailer.
28d. Notwithstanding any other provision of law to the
29contrary, the department has the discretion to disregard or
30look through any organizational structure of an enterprise in
31order to assess and collect any tax, penalty, and interest
32against an affiliate that is acting to benefit an affiliate or
33an enterprise of which the affiliate is a part.
34 Sec. 189. Section 423.34, Code 2018, is amended to read as
35follows:
-89- 1423.34 Liability of user.
2Any person who uses any tangible personal property,
3specified digital products, or services enumerated in section
4423.2 upon which the use tax has not been paid, either to the
5county treasurer or to a retailer or direct to the department
6as required by this subchapter, shall be liable for the payment
7of tax, and shall on or before the last day of the month next
8succeeding each quarterly period pay the use tax upon all
9property or services used by the person during the preceding
10quarterly period in the manner and accompanied by such returns
11as the director shall prescribe. All of the provisions of
12sections 423.32 and 423.33 with reference to the returns and
13payments shall be applicable to the returns and payments
14required by this section.
15 Sec. 190. Section 423.36, subsection 1, Code 2018, is
16amended to read as follows:
171. A person shall not engage in or transact business as a
18retailer making taxable sales of tangible personal property,
19specified digital products, or furnishing services within
20this state or as a retailer making taxable sales of tangible
21personal property, specified digital products, or furnishing
22services for use within this state, unless a permit has been
23issued to the retailer under this section, except as provided
24in subsection 7. Every person desiring to engage in or
25transact business as a retailer shall file with the department
26an application for a permit to collect sales or use tax. Every
27application for a sales or use tax permit shall be made upon
28a form prescribed by the director and shall set forth any
29information the director may require. The application shall
30be signed by an owner of the business if a natural person; in
31the case of a retailer which is an association or partnership,
32by a member or partner; and in the case of a retailer which
33is a corporation, by an executive officer or some person
34specifically authorized by the corporation to sign the
35application, to which shall be attached the written evidence of
-90-1the person’s authority.
2 Sec. 191. Section 423.36, subsection 2, paragraph a, Code
32018, is amended to read as follows:
4a. Notwithstanding subsection 1, if any person will make
5taxable sales of tangible personal property, specified digital
6products, or furnish services to any state agency, that person
7shall, prior to the sale, apply for and receive a permit to
8collect sales or use tax pursuant to this section. A state
9agency shall not purchase tangible personal property, specified
10digital products, or services from any person unless that
11person has a valid, unexpired permit issued pursuant to this
12section and is in compliance with all other requirements in
13this chapter imposed upon retailers, including but not limited
14to the requirement to collect and remit sales and use tax and
15file sales and use tax returns.
16 Sec. 192. Section 423.36, subsection 7, paragraph b, Code
172018, is amended to read as follows:
18b. Persons engaged in selling tangible personal property,
19specified digital products, or furnishing services shall not be
20required to obtain or retain a sales tax permit for a place of
21business at which taxable sales of tangible personal property,
22specified digital products, or taxable performance of services
23will not occur.
24 Sec. 193. Section 423.36, subsection 9, paragraph a, Code
252018, is amended to read as follows:
26a. Except as provided in paragraph “b”, purchasers, users,
27and consumers of tangible personal property, specified digital
28products, or enumerated services taxed pursuant to subchapter
29II or III of this chapter or chapter 423B may be authorized,
30pursuant to rules adopted by the director, to remit tax owed
31directly to the department instead of the tax being collected
32and paid by the seller. To qualify for a direct pay tax permit,
33the purchaser, user, or consumer must accrue a tax liability
34of more than four thousand dollars in tax under subchapters
35II and III in a semimonthly period and make deposits and file
-91-1returns pursuant to section 423.31. This authority shall not
2be granted or exercised except upon application to the director
3and then only after issuance by the director of a direct pay
4tax permit.
5 Sec. 194. Section 423.40, subsection 2, Code 2018, is
6amended to read as follows:
72. a. Any person who knowingly sells tangible personal
8property, specified digital products, tickets or admissions
9to places of amusement and athletic events, or gas, water,
10electricity, or communication service at retail, or engages in
11the furnishing of services enumerated in section 423.2, in this
12state without procuring a permit to collect tax, as provided
13in section 423.36, or who violates section 423.24 and the
14officers of any corporation who so act are guilty of a serious
15misdemeanor.
16b. A person who knowingly sells tangible personal property,
17specified digital products, tickets or admissions to places of
18amusement and athletic events, or gas, water, electricity, or
19communication service at retail, or engages in the furnishing
20of services enumerated in section 423.2, in this state after
21the person’s sales tax permit has been revoked and before it
22has been restored as provided in section 423.36, subsection 6,
23and the officers of any corporation who so act are guilty of an
24aggravated misdemeanor.
25 Sec. 195. Section 423.41, Code 2018, is amended to read as
26follows:
27423.41 Books — examination.
28Every retailer required or authorized to collect taxes
29imposed by this chapter and every person using in this state
30tangible personal property, specified digital products,
31 services, or the product of services shall keep records,
32receipts, invoices, and other pertinent papers as the director
33shall require, in the form that the director shall require,
34for as long as the director has the authority to examine and
35determine tax due. The director or any duly authorized agent
-92-1of the department may examine the books, papers, records,
2and equipment of any person either selling tangible personal
3property, specified digital products, or services or liable
4for the tax imposed by this chapter, and investigate the
5character of the business of any person in order to verify
6the accuracy of any return made, or if a return was not made
7by the person, ascertain and determine the amount due under
8this chapter. These books, papers, and records shall be made
9available within this state for examination upon reasonable
10notice when the director deems it advisable and so orders. If
11the taxpayer maintains any records in an electronic format,
12the taxpayer shall comply with reasonable requests by the
13director or the director’s authorized agents to provide those
14electronic records in a standard record format. The preceding
15requirements shall likewise apply to users and persons
16furnishing services enumerated in section 423.2.
17 Sec. 196. Section 423.45, subsection 4, paragraphs a, b, and
18e, Code 2018, are amended to read as follows:
19a. The department shall issue or the seller may separately
20provide exemption certificates in the form prescribed by the
21director, including certificates not made of paper, which
22conform to the requirements of paragraph “c”, to assist
23retailers in properly accounting for nontaxable sales of
24tangible personal property, specified digital products,
25 or services to purchasers for a nontaxable purpose. The
26department shall also allow the use of exemption certificates
27for those circumstances in which a sale is taxable but the
28seller is not obligated to collect tax from the buyer.
29b. The sales tax liability for all sales of tangible
30personal property and specified digital products and all sales
31of services is upon the seller and the purchaser unless the
32seller takes from the purchaser a valid exemption certificate
33stating under penalty of perjury that the purchase is for a
34nontaxable purpose and is not a retail sale as defined in
35section 423.1, or the seller is not obligated to collect tax
-93-1due, or unless the seller takes a fuel exemption certificate
2pursuant to subsection 5. If the tangible personal property,
3specified digital products, or services are purchased tax free
4pursuant to a valid exemption certificate and the tangible
5personal property, specified digital products, or services are
6used or disposed of by the purchaser in a nonexempt manner, the
7purchaser is solely liable for the taxes and shall remit the
8taxes directly to the department and sections 423.31, 423.32,
9423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 shall apply
10to the purchaser.
11e. If the circumstances change and as a result the tangible
12personal property, specified digital products, or services are
13used or disposed of by the purchaser in a nonexempt manner or
14the purchaser becomes obligated to pay the tax, the purchaser
15is liable solely for the taxes and shall remit the taxes
16directly to the department in accordance with this subsection.
17 Sec. 197. Section 423.57, Code 2018, is amended to read as
18follows:
19423.57 Statutes applicable.
20The director shall administer this subchapter as it relates
21to the taxes imposed in this chapter in the same manner and
22subject to all the provisions of, and all of the powers,
23duties, authority, and restrictions contained in sections
24423.14, 423.14A, 423.15, 423.16, 423.17, 423.19, 423.20,
25423.21, 423.22, 423.23, 423.24, 423.25, 423.29, 423.31, 423.32,
26423.33, 423.34, 423.34A, 423.35, 423.37, 423.38, 423.39,
27423.40, 423.41, and 423.42, section 423.43, subsection 1, and
28sections 423.45, 423.46, and 423.47.
29 Sec. 198. Section 423.58, Code 2018, is amended to read as
30follows:
31423.58 Collection, permit, and tax return exemption for
32certain out-of-state businesses.
33Notwithstanding sections 423.14, 423.14A, 423.29, 423.31,
34423.32, and 423.36, a person meeting the requirements of
35section 29C.24 is not required to obtain a sales or use tax
-94-1permit, collect and remit sales and use tax, or make and file
2applicable sales or use tax returns, as provided in section
329C.24, subsection 3, paragraph “a”, subparagraph (2).
4 Sec. 199. Section 423B.5, subsection 1, Code 2018, is
5amended to read as follows:
61. A local sales and services tax at the rate of not more
7than one percent may be imposed by a county on the sales price
8taxed by the state under chapter 423, subchapter II. A local
9sales and services tax shall be imposed on the same basis as
10the state sales and services tax or in the case of the use of
11natural gas, natural gas service, electricity, or electric
12service on the same basis as the state use tax and shall not
13be imposed on the sale of any property or on any service not
14taxed by the state, except the tax shall not be imposed on
15the sales price from the sale of motor fuel or special fuel
16as defined in chapter 452A which is consumed for highway use
17or in watercraft or aircraft if the fuel tax is paid on the
18transaction and a refund has not or will not be allowed,
19on the sales price from the sale of equipment by the state
20department of transportation, or on the sales price from the
21sale or use of natural gas, natural gas service, electricity,
22or electric service in a city or county where the sales price
23from the sale of natural gas or electric energy is subject to
24a franchise fee or user fee during the period the franchise
25or user fee is imposed. A local sales and services tax is
26applicable to transactions within those incorporated and
27unincorporated areas of the county where it is imposed and,
28which transactions include but are not limited to sales sourced
29pursuant to sections 423.15, 423.17, 423.19, or 423.20, to a
30location within that incorporated or unincorporated area of the
31county. The tax shall be collected by all persons required
32to collect state sales taxes. All cities contiguous to each
33other shall be treated as part of one incorporated area and the
34tax would be imposed in each of those contiguous cities only
35if the majority of those voting in the total area covered by
-95-1the contiguous cities favors its imposition. In the case of a
2local sales and services tax submitted to the registered voters
3of two or more contiguous counties as provided in section
4423B.1, subsection 4, paragraph “c”, all cities contiguous to
5each other shall be treated as part of one incorporated area,
6even if the corporate boundaries of one or more of the cities
7include areas of more than one county, and the tax shall be
8imposed in each of those contiguous cities only if a majority
9of those voting on the tax in the total area covered by the
10contiguous cities favored its imposition.
11 Sec. 200. Section 423B.6, subsection 2, paragraph b, Code
122018, is amended to read as follows:
13b. The ordinance of a county board of supervisors imposing
14a local sales and services tax shall adopt by reference the
15applicable provisions of the appropriate sections of chapter
16423. All powers and requirements of the director to administer
17the state sales tax law and use tax law are applicable to the
18administration of a local sales and services tax law and the
19local excise tax, including but not limited to the provisions
20of section 422.25, subsection 4, sections 422.30, 422.67,
21and 422.68, section 422.69, subsection 1, sections 422.70
22through 422.75, section 423.14, subsection 1 and subsection
232, paragraphs “b” through “e”, and sections 423.14A, 423.15,
24423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 through
25423.42, 423.46, and 423.47. Local officials shall confer
26with the director of revenue for assistance in drafting the
27ordinance imposing a local sales and services tax. A certified
28copy of the ordinance shall be filed with the director as soon
29as possible after passage.
30 Sec. 201. LEGISLATIVE INTENT. It is the intent of the
31general assembly that the provisions of this division of this
32Act amending the definition of “place of business” in section
33423.1, subsection 37, and “sales” in section 423.1, subsection
3450, enacting definitions of “sold at retail in the state” in
35section 423.1, subsection 55A, and “subscription” in section
-96-1423.1, subsection 57A, and amending the enumerated service of
2pay television in 423.2, subsection 6, paragraph “al”, are
3conforming amendments consistent with current state law, and
4that the amendments do not change the application of current
5law but instead reflect current law both before and after the
6enactment of this division of this Act.
7 Sec. 202. RELATIONSHIP TO EXISTING LAW FOR TAXATION OF
8SPECIFIED DIGITAL PRODUCTS. The provisions of this division of
9this Act relating to the imposition of tax on the sale or use of
10“specified digital products”, as defined in this division of
11this Act, shall not be construed as affecting the taxability
12or nontaxability under other provisions of existing law of
13sales or uses occurring prior to the enactment of this division
14of this Act of products meeting the definition of “specified
15digital products”, as defined in this division of this Act.
16 Sec. 203. EFFECTIVE DATE.
171. Except as provided in subsection 2, this division of this
18Act takes effect January 1, 2019.
192. The following take effect July 1, 2018:
20a. The sections of this division of this Act amending
21section 423.1, subsections 37 and 50.
22b. The sections of this division of this Act enacting
23section 423.1, subsections 55A and 57A.
24c. The section of this division of this Act amending section
25423.2, subsection 1, paragraph “a”, subparagraph (1).
26d. The provision amending the enumerated service of pay
27television to include but not be limited to streaming video,
28video on-demand, and pay-per-view, in the section of this
29division of this Act amending section 423.2, subsection 6.
30e. The provisions adding photography and retouching to the
31list of enumerated services subject to the sales tax in the
32section of this division of this Act amending section 423.2,
33subsection 6.
34f. The section of this division of this Act enacting section
35423.2, subsection 8, paragraph “d”.
-97- 1g. The section of this division of this Act amending section
2423.5, subsection 1, paragraph “a”.
3h. The section of this division of this Act entitled
4“legislative intent” which describes the intent of the general
5assembly with respect to certain amendments in this division of
6this Act to the definition of “place of business” in section
7423.1, subsection 37, “sales” in section 423.1, subsection 50,
8the enactment of a definition for “subscription” in section
9423.1, subsection 57A, and “sold at retail” in section 423.1,
10subsection 55A, and amendments to the enumerated service of pay
11television in section 423.2, subsection 6, paragraph “al”.
12DIVISION VII
13HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE RENTAL EXCISE TAX
14CHANGES
15 Sec. 204. Section 423A.2, subsection 1, Code 2018, is
16amended to read as follows:
171. For the purposes of this chapter, unless the context
18otherwise requires:
19a. “Department” means the department of revenue.
20b. “Lessor” means any of the following:
21(1) Aperson engaged in the business of renting lodging to
22users.
23(2) A person who acquires a right to or interest in any
24lodging with an intent to rent the lodging to another person.
25(3) A person who actually or constructively rents lodging,
26regardless of who owns or controls the lodging.
27(4) A lodging facilitator.
28(5) A retailer or retailer maintaining a place of business
29in this state as defined in section 423.1, including those
30persons who meet the requirements of section 423.14A, which
31retailer or retailer maintaining a place of business in this
32state would be responsible for collection and payment of the
33hotel and motel tax if it were a sales or use tax under chapter
34423.
35c. “Lodging” means rooms, apartments, or sleeping quarters
-98-1in a hotel, motel, inn, public lodging house, rooming house,
2cabin, apartment, residential property, or manufactured or
3mobile home which is tangible personal property, or in a
4tourist court, or in any place where sleeping accommodations
5are furnished to transient guests for rent, whether with or
6without meals. Lodging does not include rooms that are not
7used for sleeping accommodations.
8d. “Lodging facilitator” means any person who facilitates
9the renting of lodging to users by satisfying subparagraphs (1)
10and (2) as follows:
11(1) The person directly or indirectly does any of the
12following:
13(a) Lists, makes available, or advertises lodging for rent
14by a lessor in any forum.
15(b) Transmits or otherwise communicates an offer or
16acceptance between a lessor or user.
17(c) Owns, rents, licenses, makes available, or operates any
18electronic or physical infrastructure or any property, process,
19method, copyright, trademark, or patent that connects lessors
20and users to each other.
21(d) Provides a platform or other marketplace for renting
22lodging or otherwise facilitates the renting of lodging,
23regardless of ownership or control of the lodging.
24(e) Provides software development or research and
25development activities related to any activity described in
26this subparagraph (1), if such software development or research
27and development activities are directly related to the physical
28or electronic marketplace provided by a lodging facilitator.
29(f) Provides or offers fulfillment or storage services for a
30lessor.
31(g) Sets prices for a lessor’s rental of lodging.
32(h) Provides or offers customer service to a lessor or
33a lessor’s customers, or accepts or assists with returns,
34exchanges, cancellations, or rescheduling of the rental of
35lodging by a lessor.
-99- 1(2) The person directly or indirectly does any of the
2following:
3(a) Collects the sales price for the renting of the lodging.
4(b) Provides payment processing services for the renting of
5lodging.
6(c) Charges, collects, or otherwise receives booking fees,
7advertising revenues, or other consideration from the renting
8of lodging or the facilitation of the renting of lodging,
9regardless of ownership or control of the lodging.
10(d) Through terms and conditions, agreements, or
11arrangements with a third party, collects payment in connection
12with a rental of lodging from a user and transmits that payment
13to the lessor, regardless of whether the person collecting
14and transmitting such payment receives compensation or other
15consideration in exchange for the service.
16(e) Provides a virtual currency that users are allowed or
17required to use to rent lodging.
18d. e. “Person” means the same as the term is defined in
19section 423.1.
20e. f. “Renting”, “rental”, or “rent” means a transfer of
21possession or control of lodging for a fixed or indeterminate
22term for consideration and includes any kind of direct or
23indirect charge for such lodging or its use.
24f. g. “Sales price” means the consideration for renting of
25lodging and means the same as the term is defined in section
26423.1 all direct or indirect consideration, including but
27not limited to cash, credit, property, and services, paid in
28connection with any charge of any description associated with
29the renting of lodging or with communicating, negotiating,
30reserving, booking, facilitating, or otherwise arranging to
31rent lodging, including but not limited to booking fees,
32reservation fees, service fees, cleaning fees, linen fees,
33towel fees, and nonrefundable deposits. When determining “sales
34price”, no deduction shall be taken for any of the following:
35(1) The lessor’s cost of the property rented.
-100- 1(2) The cost of materials used, labor or service cost,
2interest, losses, all costs of transportation to the lessor,
3all taxes imposed on the lessor, or any other expenses of the
4lessor.
5(3) Charges by the lessor for any services necessary to
6complete the rental transaction.
7g. h. “User” means a person to whom lodging is rented.
8 Sec. 205. NEW SECTION. 423A.3A Collection and remittance by
9lodging facilitators — joint and several liability.
10If a transaction for the rental of lodging involves both a
11lodging facilitator and another lessor, all of the following
12shall apply:
131. The lodging facilitator shall collect the state-imposed
14tax under section 423A.3 and the locally imposed tax under
15section 423A.4 on the entire sales price paid by the user,
16regardless of the amount of the sales price that will
17ultimately accrue to or benefit the lodging facilitator,
18another lessor, or any other person.
192. The lodging facilitator and any other lessor involved
20in the transaction shall be jointly and severally liable for
21collecting and remitting the tax under sections 423A.3 and
22423A.4.
23 Sec. 206. Section 423A.5, Code 2018, is amended to read as
24follows:
25423A.5 Exemptions.
261. There are exempted from the provisions of this chapter
27and from the computation of any amount of tax imposed by
28section 423A.3 this chapter all of the following:
29a. 1. The sales price from the renting of lodging which is
30rented by the same person for a period of more than thirty-one
31consecutive days.
32b. 2. The sales price from the renting of sleeping rooms
33in dormitories and in memorial unions at all universities and
34colleges located in the state of Iowa.
352. There is exempted from the provisions of this chapter and
-101-1from the computation of any amount of tax imposed by section
2423A.4 all of the following:
3a. The sales price from the renting of lodging or rooms
4exempt under subsection 1.
5b. 3. The sales price of lodging furnished to the guests of
6a religious institution if the property is exempt under section
7427.1, subsection 8, and the purpose of renting is to provide a
8place for a religious retreat or function and not a place for
9transient guests generally.
10 Sec. 207. Section 423A.6, subsection 4, Code 2018, is
11amended to read as follows:
124. Section 422.25, subsection 4, sections 422.30, 422.67,
13and 422.68, section 422.69, subsection 1, sections 422.70,
14422.71, 422.72, 422.74, and 422.75, section 423.14, subsection
151, and sections 423.23, 423.24, 423.25, 423.31, 423.33,
16423.35, 423.37 through 423.42, and 423.47, consistent with the
17provisions of this chapter, apply with respect to the taxes
18authorized under this chapter, in the same manner and with the
19same effect as if the state and local hotel and motel taxes
20were retail sales taxes within the meaning of those statutes.
21Notwithstanding this subsection, the director shall provide for
22quarterly filing of returns and for other than quarterly filing
23of returns both as prescribed in section 423.31. The director
24may require all persons who are engaged in the business of
25deriving any sales price subject to tax under this chapter to
26register with the department. All taxes collected under this
27chapter by a retailer, lessor, or any individual other person
28 are deemed to be held in trust for the state of Iowa and the
29local jurisdictions imposing the taxes.
30 Sec. 208. Section 423C.2, subsection 3, Code 2018, is
31amended to read as follows:
323. “Lessor” means a any of the following:
33a. Aperson engaged in the business of renting automobiles
34to users. “Lessor” includes a
35b. Amotor vehicle dealer licensed pursuant to chapter
-102-1322 who rents automobiles to users. For this purpose, the
2objective of making a profit is not necessary to make the
3renting activity a business.
4c. A person who acquires a right to or interest in any
5automobile with an intent to rent the automobile to another
6person.
7d. A person who actually or constructively rents
8automobiles, regardless of who owns or controls the
9automobiles.
10e. A rental facilitator.
11f. A retailer or retailer maintaining a place of business in
12this state as defined in section 423.1, including those persons
13who meet the requirements of section 423.14A, which retailer or
14retailer maintaining a place of business in this state would be
15responsible for collection and payment of the automobile rental
16excise tax if it were a sales or use tax under chapter 423.
17 Sec. 209. Section 423C.2, Code 2018, is amended by adding
18the following new subsection:
19 NEW SUBSECTION. 06. “Rental facilitator” means any person
20who facilitates the renting of an automobile to users by
21satisfying paragraphs “a” and “b” as follows:
22a. The person directly or indirectly does any of the
23following:
24(1) Lists, makes available, or advertises automobiles for
25rent by a lessor in any forum.
26(2) Transmits or otherwise communicates an offer or
27acceptance between a lessor or user.
28(3) Owns, rents, licenses, makes available, or operates any
29electronic or physical infrastructure or any property, process,
30method, copyright, trademark, or patent that connects lessors
31and users to each other.
32(4) Provides a platform or other marketplace for
33renting automobiles or otherwise facilitates the renting
34of automobiles, regardless of ownership or control of the
35automobile.
-103- 1(5) Provides software development or research and
2development activities related to any activity described in
3this paragraph “a”, if such software development or research and
4development activities are directly related to the physical or
5electronic marketplace provided by a rental facilitator.
6(6) Provides or offers fulfillment or storage services for a
7lessor.
8(7) Sets prices for a lessor’s rental of automobiles.
9(8) Provides or offers customer service to a lessor or
10a lessor’s customers, or accepts or assists with returns,
11exchanges, cancellations, or rescheduling of the rental of
12automobiles by a lessor.
13b. The person directly or indirectly does any of the
14following:
15(1) Collects the rental price for the renting of an
16automobile.
17(2) Provides payment processing services for the renting of
18an automobile.
19(3) Charges, collects, or otherwise receives booking
20fees, advertising revenues, or other consideration from the
21renting of an automobile or the facilitation of the renting
22of an automobile, regardless of ownership or control of the
23automobile.
24(4) Through terms and conditions, agreements, or
25arrangements with a third party, collects payment in connection
26with a rental of automobiles from a user and transmits that
27payment to the lessor, regardless of whether the person
28collecting and transmitting such payment receives compensation
29or other consideration in exchange for the service.
30(5) Provides a virtual currency that users are allowed or
31required to use to rent automobiles.
32 Sec. 210. Section 423C.2, subsection 6, Code 2018, is
33amended by striking the subsection and inserting in lieu
34thereof the following:
356. “Rental price” means all direct or indirect
-104-1consideration, including but not limited to cash, credit,
2property, and services, paid in connection with any charge of
3any description associated with the renting of an automobile
4or with communicating, negotiating, reserving, booking,
5facilitating, or otherwise arranging to rent an automobile,
6including but not limited to booking fees, reservation fees,
7service fees, and nonrefundable deposits. When determining
8“rental price”, no deduction shall be taken for any of the
9following:
10a. The lessor’s cost of the property rented.
11b. The cost of materials used, labor or service cost,
12interest, losses, all costs of transportation to the lessor,
13all taxes imposed on the lessor, or any other expenses of the
14lessor.
15c. Charges by the lessor for any services necessary to
16complete the rental transaction.
17 Sec. 211. NEW SECTION. 423C.3A Collection and remittance by
18rental facilitators — joint and several liability.
19If a transaction for the rental of an automobile involves
20both a rental facilitator and another lessor, all of the
21following shall apply:
221. The rental facilitator shall collect the tax under
23section 423C.3 on the entire rental price paid by the user,
24regardless of the amount of the rental price that will
25ultimately accrue to or benefit the rental facilitator, another
26lessor, or any other person.
272. The rental facilitator and any other lessor involved
28in the transaction shall be jointly and severally liable for
29collecting and remitting the tax under section 423C.3.
30 Sec. 212. LEGISLATIVE INTENT. It is the intent of the
31general assembly that the provision of this division of this
32Act amending the definition of “lodging” in section 423A.2,
33subsection 1, paragraph “c”, is a conforming amendment
34consistent with current state law, and that the amendment
35does not change the application of current law but instead
-105-1reflects current law both before and after the enactment of
2this division of this Act.
3 Sec. 213. EFFECTIVE DATE.
41. Except as provided in subsection 2, this division of this
5Act takes effect January 1, 2019.
62. The following take effect July 1, 2018:
7a. The provision amending the definition of “lodging” in the
8section of this division of this Act amending section 423A.2,
9subsection 1, paragraph “c”.
10b. The section of this division of this Act entitled
11“legislative intent” which describes the intent of the general
12assembly with respect to the amendment in this division of
13this Act to the definition of “lodging” in section 423A.2,
14subsection 1, paragraph “c”.
15EXPLANATION
16The inclusion of this explanation does not constitute agreement with
17the explanation’s substance by the members of the general assembly.
18This bill makes numerous changes to the individual and
19corporate income taxes, the franchise tax, tax credits,
20the moneys and credits tax, the sales and use taxes and
21local option sales tax, the hotel and motel excise tax, the
22automobile rental excise tax, and the Iowa 529 plan and Iowa
23ABLE plan.
24DIVISION I — INCOME TAX CHANGES FOR TAX YEAR 2018. The
25federal Protecting Americans From Tax Hikes Act (PATH Act)
26enacted by Congress in 2015 made permanent certain increased
27phase-out amounts and increased credit percentages of the
28federal earned income tax credit (EITC) that were scheduled
29to expire in 2018, and made permanent the deduction for
30certain expenses incurred by elementary and secondary school
31teachers that was scheduled to expire in 2015. To date, Iowa
32has not coupled with these federal changes for purposes of
33calculating the Iowa EITC or for the teacher expense deduction.
34Division I couples with these federal EITC and teacher expense
35deduction changes for purposes of the Iowa EITC and Iowa net
-106-1income calculation for tax year 2018. Division I also couples
2for tax year 2018 with certain accounting method and other
3miscellaneous changes made in the federal Tax Cuts and Jobs Act
4of 2017 for purposes of the individual and corporate income
5taxes, and the franchise tax, to the extent those amendments
6affect the calculation of federal adjusted gross income or
7federal taxable income for federal tax purposes for tax year
82018. These include amendments contained in the following
9sections of the federal Tax Cuts and Jobs Act: §13102 (small
10business accounting method changes), §13221 (accounting method
11rules for the taxable year of inclusion), §13504 (repeal of
12technical termination of partnerships), §13541 (electing small
13business trust), §13543 (treatment of S corporation conversion
14to C corporation), §13611 (repeal of special rule permitting
15recharacterization of Roth IRA conversions), and §13613
16(extended rollover period for qualified plan loans).
17The division takes effect upon enactment and applies
18retroactively to January 1, 2018, for tax years beginning on or
19after that date, but prior to January 1, 2019.
20DIVISION II — INCOME AND FRANCHISE TAX CHANGES BEGINNING IN
212019. Division II makes numerous changes to the individual and
22corporate income tax and franchise tax.
23INDIVIDUAL INCOME TAX. Under current law, the starting
24point for computing the Iowa individual income tax is federal
25adjusted gross income before the net operating loss deduction,
26which is generally a taxpayer’s gross income minus several
27deductions. From that point, Iowa requires several adjustments
28and then provides taxpayers with a deduction for federal income
29taxes paid, and the option to deduct a standard deduction or
30itemized deductions. The bill changes the starting point for
31computing the individual income tax to federal taxable income,
32which includes all deductions and adjustments taken at the
33federal level in computing tax, including a standard deduction
34or itemized deductions, and the new qualified business income
35deduction allowed for certain income earned from a pass-through
-107-1entity. Because the starting point will now be federal taxable
2income, and federal law does not provide for the filing status
3of married filing separately on a combined return, the bill
4repeals that filing status option for Iowa tax purposes.
5Because net operating loss will no longer be calculated
6at the state level, the bill requires taxpayers to add back
7any federal net operating loss deduction carried over from a
8taxable year beginning prior to January 1, 2019, but allows
9taxpayers to deduct any remaining Iowa net operating loss from
10a prior taxable year.
11The bill repeals the alternative minimum tax, and also
12repeals most deductions and exclusions previously available
13when computing net income and taxable income under Iowa law,
14including the Iowa optional standard deduction and all itemized
15deductions, and the ability to deduct federal income taxes,
16except for a one-year phase-out in 2019 for taxes paid, or
17refunds received, that relate to a prior year.
18The bill keeps the deduction for military pension income
19or military active duty pay. The bill also keeps the general
20pension exclusion available under current law, and increases
21it from $6,000 ($12,000 for married filing jointly) to $10,000
22($20,000 for married filing jointly).
23The bill maintains the deductions for contributions to the
24Iowa 529 plan, the Iowa ABLE plan, the first-time homebuyer
25savings account, the deduction for social security retirement
26benefits, the deduction for certain payments received for
27providing unskilled in-home health care, for contributions
28to an individual development account, for certain amounts
29received from the veterans trust fund, for victim compensation
30awards, and for biodiesel production refunds. The bill
31keeps the deductions for certain wages paid to individuals
32with disabilities or individuals previously convicted of a
33felony, and for certain organ donations, but only for tax years
34beginning before January 1, 2022.
35The bill provides a new deduction for any income of an
-108-1employee resulting from the payment by an employer, whether
2paid to the employee or to a lender, of principal or interest
3on the employee’s qualified education loan.
4Federal income tax law does provide a limited deduction for
5a taxpayer’s payment of interest on qualified education loans,
6and the bill disallows the deduction provided in the bill for
7any amount of income that represents an interest payment that
8was also deducted by the employee in computing federal taxable
9income.
10The term “qualified education loan” is defined to mean the
11same as it does under the Internal Revenue Code (IRC), and
12generally includes debt incurred on behalf of a taxpayer, or a
13taxpayer’s spouse or dependent, to pay expenses of attending
14institutions of higher education participating in the federal
15student financial aid programs.
16Under current law, the Iowa individual income tax conforms
17to the IRC as of a certain date, and the general assembly
18chooses to couple or decouple with changes to the IRC through
19legislation. The bill changes this conformity by permanently
20coupling with the IRC. This permanent coupling has the effect
21of incorporating into Iowa tax law all the changes made to
22the IRC since 2015, including changes made in the federal
23Protecting Americans from Tax Hikes Act of 2015, and the
24federal Tax Cuts and Jobs Act of 2017. This permanent coupling
25also has the effect of automatically incorporating into Iowa
26tax law any future changes that may be made to the IRC, unless
27the general assembly were to affirmatively decouple from a
28particular provision through legislation.
29However, the bill does decouple from the federal additional
30first-year depreciation allowance in section 168(k) of the
31IRC. By decoupling, taxpayers who claim bonus depreciation for
32federal tax purposes are required to add such depreciation
33amounts back to Iowa net income, but are then allowed under
34existing state law to deduct the amount of depreciation that
35would otherwise be allowable under federal law, without regard
-109-1to the bonus depreciation allowance.
2Current law provides nine regular tax brackets containing
3progressively higher amounts of taxable income that are taxed
4at progressively higher tax rates, from a low of 0.36 percent,
5to a high of 8.98 percent. The taxable income amounts in each
6tax bracket are indexed to inflation and increased each year.
7The bill reduces the number of brackets to five and modifies
8the tax rates as follows:
9Income over:But not over:Tax rate:
101) $0$6,0005.00%
112) $6,000$15,0005.25%
123) $15,000$30,0005.50%
134) $30,000$75,0006.00%
145) $75,000 or more6.60%
15The bill further reduces the top tax rate from 6.60% to 6.50%
16in tax year 2020, to 6.40% in tax year 2021, and to 6.30% for
17tax year 2022 and beyond. For a married couple filing a joint
18return, the bill provides that all of the income amounts in
19each bracket above are doubled. Finally, the bill provides
20that beginning in 2023, all of the tax rates will be indexed to
21inflation and reduced each year.
22CORPORATE INCOME TAX AND FRANCHISE TAX. The starting point
23for calculating the corporate income tax and the franchise
24tax is federal taxable income before the net operating loss
25deduction, because net operating loss is calculated at the
26state level. The bill repeals the separate calculation of
27net operating loss at the state level. As a result, the bill
28requires taxpayers to add back any federal net operating loss
29deduction carried over from a taxable year beginning prior to
30January 1, 2019, but allows taxpayers to deduct any remaining
31Iowa net operating loss from a prior taxable year.
32The bill repeals the alternative minimum tax for the
33corporate income tax, and also repeals most deductions and
34exclusions previously available when computing net income and
35taxable income under Iowa law, including the ability to deduct
-110-1federal income taxes, except for a one-year phase-out in 2019
2for taxes paid, or refunds received, that relate to a prior
3year. The bill keeps the deduction for certain wages paid
4to individuals with disabilities or individuals previously
5convicted of a felony, but only for tax years beginning before
6January 1, 2022.
7Under current law, the Iowa corporate income tax and
8franchise tax conforms to the IRC as of a certain date, and the
9general assembly chooses to couple or decouple with changes to
10the IRC through legislation. The bill changes this conformity
11by permanently coupling with the IRC. This permanent coupling
12has the effect of incorporating into Iowa tax law all the
13changes made to the IRC since 2015, including changes made in
14the federal Protecting Americans from Tax Hikes Act of 2015,
15and the federal Tax Cuts and Jobs Act of 2017. This permanent
16coupling also has the effect of automatically incorporating
17into Iowa tax law any future changes that may be made to the
18IRC, unless the general assembly were to affirmatively decouple
19from a particular provision through legislation.
20However, the bill does decouple from the federal additional
21first-year depreciation allowance in section 168(k) of the
22IRC. By decoupling, taxpayers who claim bonus depreciation
23for federal tax purposes are required to add such depreciation
24amounts back to Iowa net income, but are then allowed under
25existing state law to deduct the amount of depreciation that
26would otherwise be allowable under federal law, without regard
27to the bonus depreciation allowance.
28Current law provides four progressively higher tax brackets
29and tax rates for the corporate income tax, ranging from a low
30of 8 percent, to a high of 12 percent. The bill reduces the
31corporate tax rates as follows:
32Income over:But not over:2019202020212022 and later
331) $0$25,0006%6%5.5%5.5%
342) $25,000$100,0008%8%5.5%5.5%
353) $100,000$250,00010%8%5.5%5.5%
-111- 14) $250,000 and more10%10%8%7%
2Division II takes effect January 1, 2019, and applies to tax
3years beginning on or after that date.
4DIVISION III — TAX CREDITS. Division III makes numerous
5changes to tax credits and tax credit programs.
6The bill repeals the taxpayers trust fund tax credit
7effective January 1, 2020.
8The bill increases the annual tax credit allocation limit
9of the angel investor tax credit program from $2 million to
10$4 million, and provides that in any fiscal year in which the
11angel investor program allocation exceeds $2 million, the $8
12million annual tax credit allocation limit of the innovation
13fund investment tax credit program shall be reduced by the
14amount that the angel investor tax credit allocation exceeds $2
15million for that same fiscal year. This change takes effect
16July 1, 2018.
17The bill increases the annual tax credit allocation limit of
18the workforce housing tax incentive program to $22 million from
19$20 million, and provides that the entire $2 million increase
20shall be reserved for housing projects in small cities, thereby
21increasing the small city reserve under the program from $5
22million to $7 million per fiscal year. These changes take
23effect July 1, 2018.
24The bill makes several changes to the high quality jobs
25program. The bill reduces to $80 million the annual tax
26credit allocation limit of the high quality jobs program, for
27fiscal years beginning on or after July 1, 2018. The bill
28also prohibits data center businesses and web search portal
29businesses, as defined in the bill, from participating in
30the high quality jobs program, unless the businesses had a
31physical presence in this state prior to July 1, 2018. The
32bill repeals the ability under the high quality jobs program of
33eligible businesses to receive tax credits and tax refunds for
34taxes attributable to racks, shelving, and conveyor equipment
35to be used in a warehouse or distribution center, beginning
-112-1January 1, 2019. The bill repeals the refundability of the
2supplemental research activities tax credit available under the
3high quality jobs program beginning January 1, 2019. Finally,
4the bill repeals the high quality jobs program effective July
51, 2025.
6The bill increases, from 5 percent and 15 percent, to
77 percent and 17 percent, the two tax credit rates of the
8agricultural asset transfer tax credit, beginning January 1,
92019. The bill also increases from $6 million to $8 million
10the number of tax credits that may be issued per fiscal year
11under the agricultural asset transfer tax credit program,
12beginning July 1, 2018.
13The bill repeals the accelerated career education program
14provided under Code chapter 260G on July 1, 2025.
15The bill extends by one year the deadline for entering into
16withholding agreements under the targeted jobs withholding
17credit pilot project from June 30, 2018, to June 30, 2019.
18The bill reduces to $35 million from $45 million the number
19of historic preservation tax credits that may be awarded each
20fiscal year, beginning July 1, 2018, and repeals the historic
21preservation tax credit program on July 1, 2025.
22The bill modifies the research activities tax credits under
23the individual and corporate income tax by providing that the
24credits will only be available to businesses engaged in the
25manufacturing, life sciences, software engineering, or aviation
26and aerospace industry, and to the extent the business claims
27and is allowed a research credit for such qualified research
28expenses under the IRC for the same taxable year it is claiming
29the state research activities credit. The bill includes
30examples of persons ineligible for the tax credits. These
31changes take effect upon enactment and apply retroactively to
32January 1, 2018, for tax years beginning on or after that date
33and for tax returns, including amended returns, filed on or
34after that date for any tax year.
35The bill further modifies the research activities tax
-113-1credits under the individual and corporate income tax by
2amending the definition of “base amount” for purposes of
3calculating the credits. This change takes effect upon
4enactment and applies retroactively to January 1, 2010, for tax
5years beginning on or after that date.
6Because Division II repeals the individual and corporate
7alternative minimum taxes, the bill allows a taxpayer to
8claim any remaining alternative minimum tax credit against
9the individual’s or corporation’s regular tax liability for
10the 2019 tax year, and the bill then repeals the alternative
11minimum tax credit beginning in tax year 2020.
12The bill increases the total amount of school tuition
13organization tax credits that may be issued per tax year to $13
14million from $12 million for tax years beginning on or after
15January 1, 2019. The bill also increases the household income
16limit at which a student is considered an “eligible student”
17under the school tuition organization tax credit program to
18four times the federal poverty amount for tuition grants
19provided on or after January 1, 2019.
20The bill repeals the tuition and textbook tax credit, the
21volunteer fire fighter and volunteer emergency medical services
22personnel member tax credit, and the reserve peace officer tax
23credit, effective January 1, 2022.
24The bill repeals the geothermal tax credit, the geothermal
25heat pump tax credit, the farm to food donation tax credit, and
26the ethanol promotion tax credit on January 1, 2019.
27The bill repeals the solar energy system tax credits on July
281, 2018, for solar energy system installations occurring on or
29after that date.
30The bill requires the legislative tax expenditure committee
31created in Code section 2.45 to study all tax credits available
32under Iowa law during the 2018 interim, and to submit its
33findings and recommendations to the general assembly for
34consideration during the 2019 legislative session. As part
35of the study, the legislative tax expenditure committee is
-114-1required to consider new or different tax credit or other
2incentive programs for economic development.
3DIVISION IV — FRANCHISE TAX AND MONEYS AND CREDITS TAX.
4 Division IV relates to the state franchise tax and the state
5moneys and credits tax. The bill repeals the state moneys and
6credits tax in Code section 533.329 imposed on the required
7reserves of state credit unions, which are institutions
8organized in Iowa and exempt from the federal income tax.
9The bill includes credit unions incorporated in Iowa as well
10as under the laws of another state within the definition of
11“financial institution” for purposes of the state franchise
12tax on financial institutions, thereby imposing the state
13franchise tax on state and out-of-state credit unions. The
14bill also imposes the state franchise tax on agricultural
15credit associations that are members of the farm credit system
16under the federal Farm Credit Act.
17The bill modifies the state franchise tax to provide that
18neither the state alternative minimum franchise tax (AMT tax),
19a component of the state franchise tax, nor the associated
20alternative minimum tax credit for previous AMT tax paid,
21applies to financial institutions that are exempt from the
22federal income tax. The bill amends the definition of “net
23income” upon which the state franchise tax is computed to
24provide that “net income” for a financial institution that is
25exempt from the federal income tax means the total revenue
26less total expenses as properly reported on the financial
27institution’s internal revenue service form 990 (return of
28organization exempt from income tax) for the same period, with
29the adjustments provided under current law for other financial
30institutions to the extent such adjustments are applicable to
31the federally tax-exempt financial institution’s calculation of
32revenues and expenses, as determined by the director by rule.
33The bill provides that a federally tax-exempt financial
34institution’s state franchise tax is due at the end of the
35taxable year and will be considered delinquent if not paid and
-115-1filed within five months of that date.
2Under current law, the state franchise tax rate is 5 percent
3on all net income of a financial institution. The bill
4reduces the state franchise tax rate to 2 percent on the first
5$7.5 million of net income, and 4 percent on all net income
6exceeding $7.5 million.
7All revenues arising from the state franchise tax are
8deposited in the general fund of the state by operation of
9law. The state moneys and credits tax revenues were shared
10among cities, counties, and the state according to a statutory
11formula.
12The bill makes numerous conforming amendments throughout the
13Code to remove references to the state moneys and credits tax.
14The bill provides that the repeal of the state moneys and
15credits tax shall not affect tax credits issued, awarded,
16or allowed before January 1, 2019, including tax credit
17carryforward amounts, and that any credits that would have been
18eligible to be claimed on or after January 1, 2019, against
19the state moneys and credits tax shall be allowed against the
20franchise tax.
21The division takes effect January 1, 2019, and applies to tax
22years beginning on or after that date.
23DIVISION V — CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST
24AND IOWA ABLE SAVINGS PLAN TRUST. Division V makes several
25changes to the Iowa educational savings plan trust in Code
26chapter 12D (Iowa 529 plan), the disabilities expenses savings
27plan trust in Code chapter 12I (Iowa ABLE plan), and the income
28tax treatment of contributions to and withdrawals from such
29plans.
30IRC §529, which governs state tuition programs, previously
31required that in order for a state tuition program to be
32considered qualified and therefore eligible for certain
33federal tax benefits, the program must be established to
34allow contributions for the purposes of funding certain
35qualifying expenses of attendance at institutions of higher
-116-1education. Accordingly, the Iowa 529 plan allows participants
2to contribute and withdraw funds to and from the Iowa 529 plan
3for the payment of higher education costs related to attendance
4at institutions of higher education.
5The federal Tax Cuts and Jobs Act of 2017 amended IRC
6§529 to provide that during each tax year, up to $10,000 of
7cash distributions from all qualified tuition programs for a
8beneficiary for tuition expenses in connection with enrollment
9or attendance at an elementary or secondary public, private,
10or religious school, may be considered a distribution for
11qualified higher education expenses and thus excludable from
12income for federal income tax purposes. The federal Tax
13Cuts and Jobs Act of 2017 also provided that under certain
14conditions, amounts in qualified tuition programs may be
15transferred to a qualified ABLE account without incurring
16federal income tax consequences.
17The bill amends the Iowa 529 plan to provide for qualified
18withdrawals from the plan for elementary or secondary school
19tuition as is now allowed under federal law pursuant to the
20federal Tax Cuts and Jobs Act of 2017. The bill modifies the
21findings and purpose provision of the Iowa 529 plan in Code
22section 12D.1(1) by striking or amending specific references
23to higher education and institutions of higher education so
24that such provisions more generally reference education and
25educational institutions, and by providing that the Iowa 529
26plan’s purpose is to make available an opportunity to invest in
27a public trust to fund future formal education needs.
28The bill strikes the definition of “higher education costs”,
29as well as numerous references to that term throughout the Iowa
30529 plan, and replaces them with the term “qualified education
31expenses”, which is defined in the bill to mean the same as
32qualified higher education expenses as defined in IRC §529,
33including elementary and secondary school tuition to the extent
34such tuition amounts are described and allowed under IRC §529.
35The bill also replaces numerous references to “institution
-117-1of higher education” throughout the Iowa 529 plan with
2references to a “qualified educational institution”, which
3is defined in the bill to include an institution of higher
4education and any elementary or secondary, public, private, or
5religious school described in IRC §529.
6The federal Tax Cuts and Jobs Act of 2017 also amended
7IRC §529 to allow certain transfers from a qualified tuition
8program to an ABLE account without incurring federal income tax
9consequences. The bill amends the Iowa 529 plan to provide
10that a participant may transfer amounts in an Iowa 529 plan to
11an ABLE account, including the Iowa ABLE plan, if the transfer
12is permitted under IRC §529. The Iowa 529 plan is further
13amended to allow the transfer of funds to another account in
14the Iowa 529 plan, if the transfer is permitted under IRC §529.
15Several other modifications are made to the Iowa 529 plan
16to remove references to the imposition of penalties for
17cancellation and late payments under the trust, to remove
18certain references to the ability to amend participation
19agreements, to describe rules and procedures for determining
20account successors in the case of death of a participant, and
21to modify the permissible investment direction that may be
22provided by participants and beneficiaries under the trust.
23Finally, the bill adds Iowa 529 plan accounts to the list of
24exemptions from execution under Code section 627.6.
25Under current law in Code section 422.7(32)(c), previously
26tax-deducted contributions to an Iowa 529 plan that are
27withdrawn for purposes other than the payment of qualified
28education expenses are required to be added back to income
29in computing Iowa individual income tax. The bill amends
30this provision to provide that Iowa 529 plan withdrawals of
31previously tax-deducted contributions must be added back to
32Iowa income unless the amount is a withdrawal or transfer
33for one of three eligible purposes. First, for the payment
34of qualified higher education expenses. Second, for the
35payment of tuition to an elementary or secondary school if the
-118-1tuition amounts are qualified education expenses. Third, for a
2change in beneficiaries under, or transfer to another account
3within, the Iowa 529 plan, or a transfer to the Iowa ABLE plan,
4provided such beneficiary change or transfer is permitted under
5the Iowa 529 plan. The bill defines “institution of higher
6education” and “tuition” to mean the same as defined under
7the Iowa 529 plan. The bill defines “elementary or secondary
8school” to mean an elementary or secondary school in this state
9which is accredited under Code section 256.11 (educational
10standards), and adheres to the provisions of the federal
11Civil Rights Act of 1964 and Code chapter 216 (civil rights
12commission). The bill defines “qualified higher education
13expenses” to mean the same as defined under IRC §529.
14The bill amends the income tax treatment of contributions
15to and withdrawals from the Iowa ABLE plan to provide that a
16contribution shall not be deducted from Iowa income tax to the
17extent it represents a transfer from the Iowa 529 plan that was
18previously deducted as a contribution to the Iowa 529 plan,
19and that amounts resulting from a cancellation or withdrawal
20from the Iowa ABLE plan for purposes other than the payment of
21qualified disability expenses shall be added back to income in
22computing Iowa individual income tax to the extent the amount
23was previously transferred from the Iowa 529 plan and deducted
24as a contribution to the Iowa 529 plan.
25The division takes effect upon enactment and applies
26retroactively to January 1, 2018, for withdrawals and transfers
27from the Iowa educational savings plan trust made on or after
28that date, and for tax years beginning on or after that date.
29DIVISION VI — SALES AND USE TAXES. Division VI makes
30numerous changes to the sales and use taxes, including the
31local option sales tax.
32SPECIFIED DIGITAL PRODUCTS. The bill imposes the sales and
33use tax at a rate of six percent on the sale or use of specified
34digital products in Iowa. The bill defines “specified digital
35products” as electronically transferred digital audio-visual
-119-1works, digital audio works, digital books, or other digital
2products. These and other related terms are defined in
3the bill in new Code section 423.1(55A). The sales or use
4tax applies whether the purchaser obtains permanent use or
5less than permanent use of the specified digital product,
6whether the sale or use is conditioned or not conditioned upon
7continued payment from the purchaser, and whether the sale or
8use is on a subscription basis or is not on a subscription
9basis. The bill also provides that the sale or use of digital
10code that may be used to obtain or access a specified digital
11product at a later date is taxed in the same manner as a
12specified digital product.
13The bill creates an exemption for the sale or use of
14specified digital products to a non-end user, as defined in the
15bill.
16The bill amends numerous existing sales and use tax
17exemptions to include specified digital products, including
18the following: sales the state is prohibited from taxing
19under the United States Constitution or the Iowa Constitution;
20sales to certain nonprofit corporations, organizations,
21educational institutions, legal aid organizations, museums,
22art centers, organ procurement organizations, hospitals, or
23hospice facilities; sales by a state fair; sales to political
24subdivisions; sales by counties or cities; casual sales; sales
25of property which will be distributed as prizes to players
26of certain amusement games; sales to recognized community
27action agencies; uses of property for which the sales tax has
28already been paid; sales in the regular course of business;
29and property brought into Iowa by a nonresident and used here
30temporarily. The bill amends a sales tax refund provision
31relating to relief agencies that purchase property for free
32distribution to the poor to include purchases of specified
33digital products.
34The bill makes certain other conforming amendments related
35to the treatment of specified digital products for purposes
-120-1of the administration of the sales and use taxes. The bill
2provides that the imposition of tax on the sale or use of
3specified digital products shall not be construed as affecting
4the taxability or nontaxability under other provisions of
5existing law of sales or uses occurring prior to the enactment
6of this division of this Act of products meeting the definition
7of “specified digital products”.
8SUBSCRIPTIONS AND PAY TELEVISION SERVICE. The bill amends
9the definition of “sale” in Code section 423.1(50) for purposes
10of the sales tax to provide that a sale includes but is not
11limited to any transfer, exchange, or barter on a subscription
12basis. The bill defines “subscription” in new Code section
13423.1(57A).
14The bill amends the taxable service of pay television to
15provide that pay television includes but is not limited to
16streaming video, video on-demand, and pay-per-view.
17The bill provides that it is the intent of the general
18assembly that these changes to the definition of “sale” and
19“subscription”, and changes to the service of pay television,
20are conforming amendments consistent with current state law,
21and that the amendments do not change the application of
22current law but instead reflect current law both before and
23after the enactment of these changes.
24These changes take effect July 1, 2018.
25OTHER CHANGES TO TAXABLE SERVICES. Under current law, the
26services of photography and retouching are subject to the
27sales and use tax, but such services are taxed as if they were
28sales of tangible personal property. The bill strikes these
29provisions treating photography and retouching as tangible
30personal property, and adds photography and retouching to the
31list of enumerated services subject to the sales and use tax.
32These changes to photography and retouching take effect July
331, 2018.
34Current law provides that a limousine service is subject
35to the sales and use tax. The bill modifies this service to
-121-1provide that a personal transportation service shall be subject
2to the sales and use tax, and includes taxis, driver services,
3ride sharing services, rides for hire, and limousine services
4as examples of the types of services which qualify as a taxable
5personal transportation service.
6Under current law, the furnishing of information services,
7as defined in Code section 423.3(66), is exempt from the
8sales and use tax. The bill strikes this exemption and makes
9information services a taxable service for purposes of the
10sales and use tax. The bill defines “information services”.
11The bill additionally adds the following services to the
12list of enumerated services subject to the sales and use
13tax: storage of tangible or electronic files, documents, or
14other records; services arising from or related to installing,
15maintaining, servicing, repairing, operating, upgrading, or
16enhancing specified digital products; video game services and
17tournaments; and software as a service.
18OTHER SALES AND USE TAX EXEMPTIONS. Current law provides
19a sales and use tax exemption for access charges related to
20online computer services in Code section 423.3(65), and for any
21retail sale delivered electronically in Code section 423.3(67).
22The bill strikes both of these exemptions.
23The bill creates a sales and use tax exemption in new
24Code section 423.3(103) for certain sales to a commercial
25enterprise for use exclusively by the commercial enterprise.
26The exemption specifies that such a use fails to qualify as
27a use exclusively by the commercial enterprise if its use
28for noncommercial purposes is more than de minimis. The
29bill provides that the terms “de minimis” and “noncommercial
30purposes” shall be defined by the director of revenue by
31rule. The bill defines “commercial enterprise” to mean the
32same as defined under the machinery and equipment sales and
33use tax exemption in Code section 423.3(47), which includes
34businesses and manufacturers conducted for profit and centers
35for data processing services to insurance companies, financial
-122-1institutions, businesses, and manufacturers, but excludes
2professions and occupations and nonprofit organizations.
3The exemption applies to sales of specified digital
4products, and to the furnishing of the following enumerated
5taxable services: storage of tangible or electronic files,
6documents, or other records; information services; services
7arising from or related to installing, maintaining, servicing,
8repairing, operating, upgrading, or enhancing specified digital
9products; and software as a service.
10The bill adds the sale of services to the items that may
11qualify for the sales and use tax exemption in Code section
12423.3(63) relating to items purchased for the purposes of
13providing them as prizes to players of certain amusement games.
14The bill creates a sales and use tax exemption in new Code
15section 423.3(105) for the sale of a grain bin, or materials
16used to construct a grain bin. The bill defines “grain bin”.
17The bill also repeals numerous sales and use tax exemptions
18related to agricultural production and creates a new sales and
19use tax exemption for sales of tangible personal property used
20primarily in agricultural production by a commercial farmer if
21the cost of the tangible personal property is properly claimed
22as a business deduction for Iowa income tax purposes and if
23the tangible personal property is used on land eligible for
24the agricultural land property tax credit. The bill includes
25several categories of items that qualify for the exemption, and
26modifies the definition of “agricultural production” in Code
27section 423.1(5).
28The bill amends the definition of “manufacturer” for
29purposes of the manufacturing and equipment sales and use tax
30exemption in Code section 423.3(47) to require that a business
31be primarily engaged in manufacturing in order to qualify for
32the exemption. The definition includes several examples of
33activities that do and do not qualify as manufacturing for
34purposes of the exemption.
35Finally, the bill amends the sale-for-resale exemption
-123-1as it relates to certain construction equipment. Under
2current law in Code section 423.3(37), the lease or rental
3of machinery, equipment, attachments, and replacement parts
4directly and primarily used in specified construction services
5by an owner, contractor, subcontractor, or builder is exempt
6from the sales tax (construction equipment exemption). Also
7under current law, in Code section 423.3(2), the purchase
8of tangible personal property for subsequent resale, lease,
9or rental is exempt from the sales tax (sale-for-resale
10exemption). However, the purchase of construction equipment
11for a subsequent lease or rental that will qualify for the
12construction equipment exemption does not qualify for the
13sale-for-resale exemption.
14The bill amends the sale-for-resale exemption to provide
15that the purchase of construction equipment for a subsequent
16lease or rental that will qualify for the construction
17equipment exemption will only fail to qualify for the
18sale-for-resale exemption if the sale is to a nonqualified
19dealer. The bill defines “nonqualified dealer” to mean any
20dealer who is not a party to a dealership agreement, as those
21terms are defined in Code section 322F.1. The definitions
22of “dealer” and “dealership agreement” in that Code section
23respectively include persons engaged in the retail sale of
24equipment and agreements between a dealer and supplier which
25grant the dealer the right to sell, distribute, or service the
26supplier’s equipment.
27SALES AND USE TAX NEXUS AND COLLECTION REQUIREMENTS. The
28bill modifies the requirement of persons to collect and remit
29the state sales and use taxes and the local option sales tax.
30Current law requires retailers to collect sales tax for taxable
31items sold at retail in the state. The bill defines “sold
32at retail in the state” and other similar terms to include
33but not be limited to sales sourced to this state under Code
34chapter 423 (sales and use tax), and provides that it is
35the intent of the general assembly that the definition is a
-124-1conforming amendment consistent with current state law, and
2that the amendment does not change the application of current
3law but instead reflects current law both before and after the
4enactment of the definition. The enactment of the definition
5of “sold at retail in the state” takes effect July 1, 2018.
6Under current law, Code section 423.15 provides general
7rules for the sourcing of sales to Iowa. The bill amends a
8provision in this Code section relating to when sales tax
9applies to a sale sourced to Iowa, to provide that Iowa sales
10tax applies to a sale sourced to Iowa made by a seller who is a
11retailer maintaining a place of business in this state, or who
12is subject to the new Code section 423.14A (described below).
13The bill also amends provisions relating to the requirement
14of retailers maintaining a place of business in this state to
15collect use tax in Code sections 423.14 and 423.29, to provide
16that use tax shall be collected by retailers not otherwise
17required to collect sales tax under Code chapter 423 (sales and
18use tax).
19Under current law in Code section 423B.5, the local sales and
20services tax is applicable to transactions within the areas of
21the county imposing the tax. The bill amends this provision
22to provide that a transaction occurring within the taxing area
23includes a sale sourced to a location in that area pursuant
24to the sourcing rules governing the sales and use tax (Code
25sections 423.15 through 423.20).
26The bill creates new Code section 423.14A that deems certain
27persons, or agents of those persons, to be a retailer and
28a retailer maintaining a place of business in this state
29on or after January 1, 2019, and subjects those persons to
30all requirements of Code chapter 423 (sales and use taxes),
31including but not limited to the requirement to collect and
32remit Iowa sales and use tax, and the requirement to collect
33and remit the local option sales tax. The bill provides that
34the requirements in Code section 423.14A are in addition to,
35and not in lieu of, any other application of Code chapter 423
-125-1to a retailer or a retailer maintaining a place of business in
2this state. Qualifying persons required to collect and remit
3Iowa sales and use tax include any person described below. For
4purposes of any threshold requirement described below that
5involves the sales of taxable items, the bill defines “Iowa
6sales” to include any sale sourced to this state under Code
7chapter 423, or otherwise sold in this state or for delivery
8into this state, of tangible personal property, specified
9digital products, or services.
10A qualifying person includes any retailer that has gross
11revenue from Iowa sales equal to or exceeding $100,000 for the
12current or previous calendar year.
13A qualifying person includes any retailer that makes Iowa
14sales in 200 or more separate transactions for the current or
15previous calendar year.
16A qualifying person includes any retailer that owns,
17licenses, or uses software or data files (as defined in the
18bill) that are installed or stored on property used in this
19state.
20A qualifying person includes any retailer that uses in-state
21software (as defined in the bill) to make Iowa sales.
22A qualifying person includes any retailer that provides, or
23enters into an agreement to provide, a content distribution
24network (as defined in the bill) in this state to facilitate,
25accelerate, or enhance the delivery of the retailer’s internet
26site to purchasers. However, this provision does not apply to
27any retailer that has gross revenue from Iowa sales of less
28than $100,000 for the current or previous calendar year.
29A qualifying person includes any retailer that makes Iowa
30sales through a marketplace provider (as defined in the bill).
31However, this provision does not apply to any retailer that
32has gross revenue from Iowa sales of less than $10,000 for the
33current or previous calendar year.
34A qualifying person includes any marketplace provider that
35makes or facilitates Iowa sales for a retailer equal to or
-126-1exceeding $100,000, or in 200 or more separate transactions for
2the current or previous year. The bill requires marketplace
3providers to collect Iowa sales and use tax on the entire
4sales price or purchase price paid the purchaser, regardless
5of the amount that will ultimately accrue to or benefit the
6marketplace provider or any other person, includes other
7provisions related to marketplace providers, and subjects
8certain marketplace providers and retailers described in the
9bill to joint and several liability for the collection and
10payment of Iowa sales and use tax.
11A qualifying person includes a retailer that makes Iowa
12sales through the use of a solicitor (as defined in the bill).
13The bill creates a presumption that a retailer has a solicitor
14in this state under certain circumstances. This provision does
15not apply to retailers that have gross revenue from Iowa sales
16referred by solicitors of $10,000 or less for the current or
17previous calendar year.
18A qualifying person includes any person that owns, controls,
19rents, licenses, makes available, or uses any tangible or
20intangible property in this state or with a situs in this state
21to make or facilitate a retail sale.
22A qualifying person includes any person that enters into a
23contract or agreement with a governmental entity, as defined in
24the bill, including but not limited to contracts or agreements
25for the provision of financial assistance or incentives such as
26a tax credit, forgivable loan, grant, tax rebate, or any other
27thing of value. This provision includes certain requirements
28for contractors who submit bids and agreements to state
29agencies similar to language in current Code section 423.2(10).
30The bill strikes the similar language under existing law in
31Code section 423.2(10).
32A qualifying person includes any affiliate or any retailer
33that is required to collect Iowa sales and use tax, provided
34the affiliate makes retail sales.
35OTHER MISCELLANEOUS SALES AND USE TAX CHANGES. The bill
-127-1moves provisions relating to the deposit and transfer of sales
2tax revenues in Code section 423.11 to a new Code section
3423.2A, and makes corresponding changes to other provisions of
4the Code that reference those deposit and transfer provisions.
5The bill amends the definition of “lease or rental”, “use”,
6“use tax”, and “user” in Code section 423.1. The bill also
7amends the definition of “bundled transaction” in Code section
8423.2(8) to incorporate certain language also included in
9the definition of “bundled transaction” for purposes of the
10streamlined sales tax agreement, of which Iowa is a member
11state. The changes to the definition of bundled transaction
12take effect July 1, 2018.
13The bill defines “personal property” for purposes of the
14sales and use tax to include but not be limited to tangible
15personal property and specified digital products.
16The bill amends the definition of “place of business” in
17Code section 423.1 to include places where specified digital
18products or services are offered for sale, and provides that
19it is the intent of the general assembly that the change to
20the definition is a conforming amendment consistent with
21current state law, and that the amendment does not change the
22application of current law but instead reflects current law
23both before and after the enactment of the change. These
24changes to the definition of “place of business” take effect
25July 1, 2018.
26The bill provides that when any retailer required under
27Iowa law to collect and remit sales and use tax fails to do
28so, the retailer and any affiliate that directly, indirectly,
29or constructively controls the retailer shall be held jointly
30and severally liable for the tax and any resulting penalty and
31interest, regardless of whether the affiliate is a retailer.
32The bill provides the department the authority to assess
33the full amount of any tax, penalty, or interest against
34the retailer and these affiliates, and gives the department
35discretion to disregard or look through any organizational
-128-1structure of an enterprise to assess tax, penalty, and interest
2against an affiliate of a retailer. The term “affiliate” for
3purposes of these provisions is defined under existing law in
4Code section 423.1(2).
5Finally, the bill adds several Code sections relating to
6the requirement to collect sales and use tax to the provisions
7for which failure to comply may subject a retailer to personal
8liability under Code section 421.26.
9EFFECTIVE DATE PROVISIONS. Except as otherwise provided
10above, the division takes effect January 1, 2019.
11DIVISION VII — HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE
12RENTAL EXCISE TAX. The bill amends the hotel and motel excise
13tax in Code chapter 423A and the automobile rental excise tax
14in Code chapter 423C to expand the types of persons who must
15collect and remit the excise taxes, and to make other changes
16to the administration of the taxes.
17Current law requires lessors, as defined with respect to
18each excise tax, to collect the excise tax. The bill amends
19the definition of “lessor” under each tax to more broadly
20include any person who acquires a right or interest in lodging
21or an automobile, any person who actually or constructively
22rents lodging or an automobile, lodging facilitators and rental
23facilitators, and retailers who would be required to collect
24the excise taxes if the excise taxes were a sales and use tax
25under Code chapter 423. The bill defines a lodging facilitator
26with respect to the hotel and motel excise tax, and defines a
27rental facilitator with respect to the automobile rental excise
28tax, to include certain persons who facilitate the renting of
29the taxable items by directly or indirectly performing certain
30acts with regard to the rental transaction. The bill modifies
31the definition of “sales price” for purposes of the hotel
32and motel excise tax and “rental price” with respect to the
33automobile rental excise tax.
34The bill repeals an exemption from the hotel and motel excise
35tax provided for the renting of rooms in a memorial union of an
-129-1Iowa college or university, and expands an exemption for the
2renting of rooms in certain religious institutions so that it
3also applies to the state and local hotel and motel excise tax.
4Under current law, that exemption only applies to the local
5hotel and motel excise tax.
6The bill modifies the definition of “lodging” for purposes
7of the hotel and motel excise tax to include a cabin,
8apartment, or residential property. The bill provides that it
9is the intent of the general assembly that the change to the
10definition of “lodging” is a conforming amendment consistent
11with current state law, and that the amendments do not change
12the application of current law but instead reflect current law
13both before and after the enactment of these changes. The
14changes to the definition of “lodging” take effect July 1,
152018.
16Finally, the bill provides that if a transaction under
17either excise tax involves both a lessor and a lodging
18facilitator or rental facilitator, as applicable, then both
19parties will be jointly and severally liable for the applicable
20tax, and further provides that the lodging facilitator or
21rental facilitator shall collect the entire amount of tax
22due on the transaction, regardless of the amount that will
23ultimately accrue to the benefit of the lodging facilitator or
24rental facilitator, or any other person.
25EFFECTIVE DATE PROVISIONS. Except as otherwise provided
26above, the division takes effect January 1, 2019.
-130-mm/jh