Relating to the taxation under the state corporate income tax, franchise tax, and insurance companies tax of compensation paid by a publicly held corporation to its chief executive officer, and including applicability provisions

For purposes of calculating net income of a publicly held corporation under the Iowa corporate income tax, and under the franchise tax imposed on financial institutions, the bill disallows a deduction for amounts paid or accrued during a tax year as compensation of the chief executive officer, or the individual acting in such capacity. The bill additionally requires the publicly held corporation to add to net income the amounts paid or accrued during the tax year as compensation of the chief executive officer, or the individual acting in such capacity. Insurance companies and associations doing business in Iowa are not subject to the Iowa corporate income tax or the franchise tax, but are instead generally subject to a 1 percent gross premiums tax related to business done in Iowa on a calendar year basis. The bill provides that any such insurance company or association subject to the Iowa insurance premiums tax that is a publicly held corporation shall also be subject to a tax equal to 1 percent of the amount paid or accrued during each federal income tax year as compensation of the chief executive officer, or the individual acting in such capacity. “Federal income tax year” is defined in the bill to be the calendar year or fiscal year upon which an insurance company or association computes its federal income tax. If the entire federal taxable income of the insurance company or association is derived in Iowa, then the tax is imposed on the entire amount of the compensation, but if business is conducted inside and outside of Iowa, only a portion of the compensation is taxable in Iowa pursuant to allocation and apportionment rules required to be adopted by the director of revenue. The tax is due on or before the due date under the IRC for paying the federal income tax of the insurance company or association for the applicable federal income tax year that is the subject of the compensation tax. The bill allows the commissioner of insurance to suspend or revoke the license of any insurance company or association that fails to pay the compensation tax on or before the due date. The bill applies to tax years beginning on or after January 1, 2020.