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Senate Study Bill 3198 - IntroducedA Bill ForAn Act 1concerning the apportionment of certain business
2income of an airline or a qualified air freight forwarder
3for purposes of Iowa corporate income tax, and including
4effective date and retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.33, subsection 2, paragraph a,
2subparagraph (2), Code 2018, is amended by adding the following
3new subparagraph divisions:
4 NEW SUBPARAGRAPH DIVISION. (0f) Notwithstanding
5subparagraph division (c), where income is derived by an
6airline from transportation operations, the part attributable
7to business within the state shall be in the proportion that
8the miles of the airline traveled in this state bears to the
9total miles of such airline traveled everywhere.
10 NEW SUBPARAGRAPH DIVISION. (00f) (i) Notwithstanding
11subparagraph division (c), where income is derived by a
12qualified air freight forwarder from transportation operations
13through an affiliated airline, such income shall be apportioned
14as follows:
15(A) For tax years beginning during the 2018 calendar
16year, seventy-five percent of such income shall be equitably
17apportioned as provided in subparagraph division (c), and
18of the remaining twenty-five percent of such income, the
19part attributable to business within the state shall be in
20the proportion that the miles of the qualified air freight
21forwarder’s affiliated airline traveled in this state bears to
22the total miles of the affiliated airline traveled everywhere.
23(B) For tax years beginning during the 2019 calendar year,
24fifty percent of such income shall be equitably apportioned as
25provided in subparagraph division (c), and of the remaining
26fifty percent of such income, the part attributable to business
27within the state shall be in the proportion that the miles
28of the qualified air freight forwarder’s affiliated airline
29traveled in this state bears to the total miles of the
30affiliated airline traveled everywhere.
31(C) For tax years beginning during the 2020 calendar
32year, twenty-five percent of such income shall be equitably
33apportioned as provided in subparagraph division (c), and
34of the remaining seventy-five percent of such income, the
35part attributable to business within the state shall be in
-1-1the proportion that the miles of the qualified air freight
2forwarder’s affiliated airline traveled in this state bears to
3the total miles of the affiliated airline traveled everywhere.
4(D) For tax years beginning on or after January 1, 2021,
5the part attributable to business within the state shall be
6in the proportion that the miles of the qualified air freight
7forwarder’s affiliated airline traveled in this state bears to
8the total miles of the affiliated airline traveled everywhere.
9(ii) For purposes of this subparagraph division (00f),
10“qualified air freight forwarder” means a taxpayer who meets all
11of the following requirements:
12(A) The taxpayer is primarily engaged in the facilitation of
13the transportation of property by air.
14(B) The taxpayer does not itself operate aircraft.
15(C) The taxpayer is in the same affiliated group as an
16airline.
17 Sec. 2. EFFECTIVE DATE. This Act, being deemed of immediate
18importance, takes effect upon enactment.
19 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies
20retroactively to January 1, 2018, for tax years beginning on
21or after that date.
22EXPLANATION
23The inclusion of this explanation does not constitute agreement with
24the explanation’s substance by the members of the general assembly.
25This bill relates to the apportionment of income of an
26airline and of a qualified air freight forwarder for purposes
27of the Iowa corporate income tax.
28A corporation doing business both within and without Iowa is
29required to apportion its business income among Iowa and the
30other states in which it does business. The amount of business
31income apportioned to Iowa is generally in the same percentage
32as the business’s gross sales made within Iowa if the business
33involves the manufacture or sale of goods and products, or in
34the same percentage as the business’s gross receipts earned
35within Iowa if the business involves something other than the
-2-1manufacture or sale of goods and products. However, airlines
2and other specified industries have special rules provided
3by administrative rule for apportioning the income of those
4industries.
5Under current law pursuant to 701 Iowa administrative code,
6rule 54.7(2), an airline deriving income from transportation
7operations is required to apportion its business income to
8Iowa in the same proportion that its mileage traveled in Iowa
9bears to its total mileage traveled everywhere. The bill
10specifies that an airline shall apportion this business income
11in the same manner described above as required under 701 Iowa
12administrative code, rule 54.7(2).
13The bill also provides rules for apportioning income derived
14by a qualified air freight forwarder from transportation
15operations through an affiliated airline. The bill defines
16“qualified air freight forwarder” to be a taxpayer that is
17primarily engaged in the facilitation of the transportation of
18property by air, and that does not itself operate aircraft but
19that is in the same affiliated group as an airline.
20The bill states that the qualified air freight forwarder
21income shall be apportioned to Iowa either under the current
22rules of the director of revenue (current statutory rules),
23or in the same proportion that the miles of the qualified air
24freight forwarder’s affiliated airline traveled in this state
25bears to the total miles of the affiliated airline traveled
26everywhere (affiliated airline mileage rules), depending on the
27tax year.
28For tax years beginning during the 2018 calendar year,
29qualified air freight forwarder income shall be apportioned 75
30percent under the current statutory rules, and 25 percent under
31the affiliated airline mileage rules. These apportionment
32percentages change to 50 percent and 50 percent for tax years
33beginning during the 2019 calendar year, respectively, and to
3425 percent and 75 percent for tax years beginning during the
352020 calendar year, respectively. For tax years beginning on
-3-1or after January 1, 2021, all business income derived by a
2qualified air freight forwarder from transportation operations
3through an affiliated airline shall be apportioned under the
4affiliated airline mileage rules.
5The bill takes effect upon enactment and applies
6retroactively to January 1, 2018, for tax years beginning on
7or after that date.
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2income of an airline or a qualified air freight forwarder
3for purposes of Iowa corporate income tax, and including
4effective date and retroactive applicability provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 422.33, subsection 2, paragraph a,
2subparagraph (2), Code 2018, is amended by adding the following
3new subparagraph divisions:
4 NEW SUBPARAGRAPH DIVISION. (0f) Notwithstanding
5subparagraph division (c), where income is derived by an
6airline from transportation operations, the part attributable
7to business within the state shall be in the proportion that
8the miles of the airline traveled in this state bears to the
9total miles of such airline traveled everywhere.
10 NEW SUBPARAGRAPH DIVISION. (00f) (i) Notwithstanding
11subparagraph division (c), where income is derived by a
12qualified air freight forwarder from transportation operations
13through an affiliated airline, such income shall be apportioned
14as follows:
15(A) For tax years beginning during the 2018 calendar
16year, seventy-five percent of such income shall be equitably
17apportioned as provided in subparagraph division (c), and
18of the remaining twenty-five percent of such income, the
19part attributable to business within the state shall be in
20the proportion that the miles of the qualified air freight
21forwarder’s affiliated airline traveled in this state bears to
22the total miles of the affiliated airline traveled everywhere.
23(B) For tax years beginning during the 2019 calendar year,
24fifty percent of such income shall be equitably apportioned as
25provided in subparagraph division (c), and of the remaining
26fifty percent of such income, the part attributable to business
27within the state shall be in the proportion that the miles
28of the qualified air freight forwarder’s affiliated airline
29traveled in this state bears to the total miles of the
30affiliated airline traveled everywhere.
31(C) For tax years beginning during the 2020 calendar
32year, twenty-five percent of such income shall be equitably
33apportioned as provided in subparagraph division (c), and
34of the remaining seventy-five percent of such income, the
35part attributable to business within the state shall be in
-1-1the proportion that the miles of the qualified air freight
2forwarder’s affiliated airline traveled in this state bears to
3the total miles of the affiliated airline traveled everywhere.
4(D) For tax years beginning on or after January 1, 2021,
5the part attributable to business within the state shall be
6in the proportion that the miles of the qualified air freight
7forwarder’s affiliated airline traveled in this state bears to
8the total miles of the affiliated airline traveled everywhere.
9(ii) For purposes of this subparagraph division (00f),
10“qualified air freight forwarder” means a taxpayer who meets all
11of the following requirements:
12(A) The taxpayer is primarily engaged in the facilitation of
13the transportation of property by air.
14(B) The taxpayer does not itself operate aircraft.
15(C) The taxpayer is in the same affiliated group as an
16airline.
17 Sec. 2. EFFECTIVE DATE. This Act, being deemed of immediate
18importance, takes effect upon enactment.
19 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies
20retroactively to January 1, 2018, for tax years beginning on
21or after that date.
22EXPLANATION
23The inclusion of this explanation does not constitute agreement with
24the explanation’s substance by the members of the general assembly.
25This bill relates to the apportionment of income of an
26airline and of a qualified air freight forwarder for purposes
27of the Iowa corporate income tax.
28A corporation doing business both within and without Iowa is
29required to apportion its business income among Iowa and the
30other states in which it does business. The amount of business
31income apportioned to Iowa is generally in the same percentage
32as the business’s gross sales made within Iowa if the business
33involves the manufacture or sale of goods and products, or in
34the same percentage as the business’s gross receipts earned
35within Iowa if the business involves something other than the
-2-1manufacture or sale of goods and products. However, airlines
2and other specified industries have special rules provided
3by administrative rule for apportioning the income of those
4industries.
5Under current law pursuant to 701 Iowa administrative code,
6rule 54.7(2), an airline deriving income from transportation
7operations is required to apportion its business income to
8Iowa in the same proportion that its mileage traveled in Iowa
9bears to its total mileage traveled everywhere. The bill
10specifies that an airline shall apportion this business income
11in the same manner described above as required under 701 Iowa
12administrative code, rule 54.7(2).
13The bill also provides rules for apportioning income derived
14by a qualified air freight forwarder from transportation
15operations through an affiliated airline. The bill defines
16“qualified air freight forwarder” to be a taxpayer that is
17primarily engaged in the facilitation of the transportation of
18property by air, and that does not itself operate aircraft but
19that is in the same affiliated group as an airline.
20The bill states that the qualified air freight forwarder
21income shall be apportioned to Iowa either under the current
22rules of the director of revenue (current statutory rules),
23or in the same proportion that the miles of the qualified air
24freight forwarder’s affiliated airline traveled in this state
25bears to the total miles of the affiliated airline traveled
26everywhere (affiliated airline mileage rules), depending on the
27tax year.
28For tax years beginning during the 2018 calendar year,
29qualified air freight forwarder income shall be apportioned 75
30percent under the current statutory rules, and 25 percent under
31the affiliated airline mileage rules. These apportionment
32percentages change to 50 percent and 50 percent for tax years
33beginning during the 2019 calendar year, respectively, and to
3425 percent and 75 percent for tax years beginning during the
352020 calendar year, respectively. For tax years beginning on
-3-1or after January 1, 2021, all business income derived by a
2qualified air freight forwarder from transportation operations
3through an affiliated airline shall be apportioned under the
4affiliated airline mileage rules.
5The bill takes effect upon enactment and applies
6retroactively to January 1, 2018, for tax years beginning on
7or after that date.
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