Bills › 88th General Assembly
Exempting from the computation of the individual and corporate state income taxes broadband grants received by communications service providers, and including effective date and retroactive applicability provisions
Sponsored by the House Ways and Means Committee
Same legislation: HF 2023
Where it is now
- Done: IntroducedJanuary 16, 2020
- Done: SubcommitteeJanuary 21, 2020
- Done: House committeeFebruary 6, 2020
- Done: Passes the HouseMarch 5, 2020
- Stopped: Senate committeeDied when the General Assembly ended
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Died when the session ended The 2020 session adjourned on June 14, 2020, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?
What’s in it
AI summary Companies that provide internet services can avoid paying state income tax on certain government grants used to build high-speed internet infrastructure. This rule applies if the money is used to bring faster internet to specific areas that need it. People and businesses who already paid taxes on these grants in the past may be able to get refunds.1
Read the official explanation
The inclusion of this explanation does not constitute agreement with the explanation’s substance by the members of the general assembly. This bill relates to state taxation of broadband grants provided to a communications service provider.1. The bill defines “broadband infrastructure”, “communications service provider”, and “targeted service area”. The bill permits refunds of taxes, interest, or penalties arising from claims resulting from the enactment of the bill for broadband service grants that were taxable during the tax year beginning January 1, 2019, but before January 1, 2020, and requires such claims to be filed prior to October 1, 2020. The bill takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2019.
Senate subcommittee
Named March 11, 2020. It hasn’t reported yet.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill exempts federal, state, and local grants awarded to communication service providers from Iowa individual and corporate income taxes. It is projected to reduce net General Fund revenue by $0.1 million in fiscal year 2020, $1.7 million in fiscal year 2021, $1.5 million in fiscal year 2022, $1.5 million in fiscal year 2023, $1.4 million in fiscal year 2024, and $1.4 million in fiscal year 2025.3
Read the fiscal note
Description
House File 2575 exempts federal, state, and local grants awarded to communication service providers from Iowa individual and corporate income taxes. The change is effective retroactively to January 1, 2019. A refund of taxes paid on calendar year 2019 grants is allowed, provided that the refund claim is filed before October 1, 2020.
Background
The taxation status of government grants is established in federal Internal Revenue Code (IRC) section 118(b)(2). Iowa’s tax law couples with this IRC section, therefore a broadband grant that is taxable for federal tax purposes is also taxable for Iowa income tax purposes.
Assumptions
- Federal financing programs for broadband infrastructure totaled $620.0 million nationally in calendar year (CY) 2019, and that amount is assumed for future years. The Iowa share of the national annual total is assumed to equal 1.1% ($6.8 million).
- State broadband infrastructure grants are assumed to have equaled $1.3 million for CY 2019, $5.0 million for CY 2020, and are assumed to equal $15.0 million in CY 2021 and future years.
- Grants from local government sources are assumed to be minimal.
- Some grant situations will not result in Iowa income tax liability. An amount equal to 75.0% of the assumed grant total is assumed to be subject to Iowa individual or corporate income tax under current law.
- The combination of the four preceding assumptions results in $6.1 million in taxable grants during CY 2019, $8.9 million in CY 2020, and $16.4 million in CY 2020 and succeeding years. Of these amounts, 20.0% is assumed to be taxed as individual income and 80.0% as corporate income.
- The marginal individual income tax rate for tax year (TY) 2019 through TY 2022 is 8.53%, and 6.5% for TY 2023 and after.
- The average marginal corporate income tax rate is assumed to equal 11.5% for TY 2019 and TY 2020, and 9.0% for TY 2021 and after.
- The individual income tax reduction for TY 2019 grants is assumed to occur in FY 2020, with the same pattern for succeeding years.
- Fifty percent of the corporate income tax reduction for TY 2020 grants is assumed to occur in FY 2020 and 50.0% in FY 2021, with the same pattern for succeeding years.
- The tax refunds for CY 2019 grants are assumed to be all corporate income tax refunds and issued during FY 2021.
Fiscal Impact
Exempting federal, state, and local grants awarded to communication service providers from Iowa individual and corporate income taxes is projected to reduce net individual and corporate income tax by the amounts in the following table.
The annual revenue reductions are projected to continue at similar levels in future fiscal years.
Sources
- Department of Revenue
- National Telecommunications and Information Administration Broadband Funding Guide
- Office of the Chief Information Officer Broadband Grants
- Legislative Services Agency analysis
- Broadband Grant Award Tax Exemption · March 2, 2020
- Broadband Grant Award Tax Exemption · February 3, 2020
Iowa Code it changes
Lobbying
13 for · 0 against · 11 undecided · Who →
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88th General Assembly