Creating the new resident and new graduate tax credits, available against the individual income tax, and including retroactive applicability provisions

This bill creates the new resident and new graduate tax credits, which are available against the individual income tax. The bill applies to tax years beginning on or after January 1, 2020. NEW RESIDENT TAX CREDIT. The bill defines “new resident” to mean an individual who became a resident of Iowa upon taking full-time employment in this state, who remains a resident of and employed full-time in this state while claiming the credit, and who has not been a resident of this state at any time during the previous 12-month period prior to establishing residency. The new resident tax credit authorized in the bill is available to a new resident for up to four consecutive tax years following the establishment of residency in this state. A new resident may begin to claim the credit during either the first or second tax year of residency. The amount of the credit is equal to 100 percent of the income tax imposed in a tax year for up to four consecutive tax years. An individual is eligible to claim the new resident tax credit one time in the individual’s lifetime for the tax year period described in the bill. An individual claiming the new resident tax credit may claim an exemption from withholding on the state W-4 form. Any new resident tax credit in excess of tax liability is not refundable. An individual is not eligible to claim the credit if the person is receiving public assistance after the first tax year the credit is claimed. The bill defines “public assistance” to mean the supplemental nutrition assistance program, the Medicaid program, or the family investment program. NEW GRADUATE TAX CREDIT.2, who is a resident of and employed in this state, and who is years of age or less during the first tax year when claiming the tax credit. The new graduate tax credit authorized in the bill is available to a new graduate for up to four consecutive tax years following graduation. A new graduate may begin to claim the credit during either the first or second tax year after graduation. The amount of the credit is equal to 100 percent of the income tax imposed in a tax year for up to four consecutive tax years. An individual is eligible to claim the new graduate tax credit one time in the individual’s lifetime for the tax year period described in the bill. An individual claiming the new graduate tax credit may claim an exemption from withholding on the state W-4 form. Any new graduate tax credit in excess of tax liability is not refundable. An individual is not eligible to claim the credit if the person is receiving public assistance after the first tax year the credit is claimed. The bill defines “public assistance” to mean the supplemental nutrition assistance program, the Medicaid program, or the family investment program. CONTINGENT FUTURE REPEAL —— CODE EDITOR DIRECTIVE —— APPLICABILITY AFTER REPEAL. The bill repeals the new resident tax credit and the new graduate tax credit January following the occurrence of the statewide average annual unemployment rate equaling or exceeding percent for three consecutive calendar years as calculated by the United States department of labor, bureau of labor statistics, beginning with calendar year 2021. The director of the department of workforce development or the director’s designee shall notify the Code editor when the annual statewide unemployment rate exceeds percent for three consecutive calendar years. If the Code editor receives notification under the bill, the Code editor is directed to remove the tax credits. A taxpayer claiming a tax credit prior to repeal under the bill is eligible to claim the credit after the repeal up to any remaining tax years the taxpayer would have been eligible to claim prior to the repeal, as long as the taxpayer remains eligible to claim the credit under the law prior to repeal. APPLICABILITY. The bill applies retroactively to tax years beginning on or after January 1, 2020.