Bills › 88th General Assembly
Where it is now
- Done: IntroducedFebruary 7, 2019
- Done: SubcommitteeFebruary 4, 2019
- Done: Senate committeeFebruary 7, 2019
- Done: Passes the SenateFebruary 18, 201948–0
- Done: House committeeFebruary 28, 2019
- Done: Passes the HouseMarch 11, 201987–7
- Done: To the GovernorMarch 13, 2019
- Done: Signed into lawMarch 15, 2019
SF 220 became law → The same legislation passed as SF 220, so this version was set aside. Go to SF 220 What’s a funnel?
What’s in it
This bill relates to the increased expensing allowance deduction (section 179 of the Internal Revenue Code) when computing net income by corporations, financial institutions, and partnerships and limited liability companies taxed as corporations. The bill expands the increased expensing allowance deduction on section 179 property available for individual state income tax purposes to include corporations, financial institutions, and partnerships and limited liability companies taxed as corporations.
Read the full explanation
_____ institution, partnership, and limited liability company, in tax year 2018, to qualify for the increased expensing allowance deduction on section 179 property for purposes of computing net income, but limits the maximum deduction and investment limitation to $70,000 and $280,000, respectively. Currently, for tax year 2018, the maximum expensing allowance deduction and investment limitations on section 179 property for such entities is limited to $25,000 and $200,000, respectively. The bill takes effect upon enactment, and applies retroactively to January 1, 2018, for tax years beginning on or after that date.
Senate subcommittee
Named February 4, 2019. Meeting: Tuesday, February 5 · 3:00 PM · Senate Lobbyist Lounge.
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Fiscal note
AI summary This bill increases the limit on certain business equipment deductions for corporations to match the levels set for individual taxpayers. It is estimated to reduce General Fund revenue by $620,000 in fiscal year 2019 and $430,000 in fiscal year 2020. The change is expected to result in a General Fund revenue increase of approximately $1.0 million over the next seven fiscal years.2
Read the fiscal note
Description
Senate File 220 expands the Internal Revenue Code Section 179 expensing cap and investment limit for corporations to the same level that was established for individual income taxpayers in SF 2417 (2018 Tax Modifications Act). The expansion would be effective in tax year (TY) 2018.
Background
In 2018, SF 2417 raised the Section 179 expansion cap and investment limit for individual taxpayers to $70,000/$280,000 for TY 2018 but did not change those parameters for corporations. The cap increase was not effective for corporations (S-corporations and C-corporations). This Bill expands the TY 2018 Section 179 cap and investment limit to $70,000/$280,000 from the current $25,000/$200,000 for corporations, including C-corporations, financial institutions, and S-corporations.
If the change is not enacted for TY 2018, the expenses that corporations are not allowed to deduct in TY 2018 will be deductible equally over the next seven tax years.
Assumptions
- Under current law, it is estimated that Section 179 deductions reported by C-corporations with positive Iowa tax liability would total $15.0 million for TY 2018.
- It is estimated that under the proposal, Section 179 deductions reported on Iowa corporation income tax returns would total about $30.0 million for TY 2018.
- The current effective marginal income tax rate is assumed to be 9.2%.
- Based on the timing of when the 2017 returns were filed, it is assumed that 48.0% of net changes from the higher Section 179 deductions allowed for TY 2018 would be realized in FY 2019 and 52.0% would be realized in FY 2020.
Fiscal Impact
The Section 179 expansion to corporate entities will reduce net General Fund revenue by an estimated $620,000 in FY 2019 and $430,000 in FY 2020. The change will result in a General Fund revenue increase over the next seven fiscal years totaling approximately $1.0 million. With the change effective for TY 2018 and with tax filing for that tax year currently underway, the change will result in amended returns and additional Department of Revenue administrative expenses.
Source
- Department of Revenue
- Final Fiscal Note - Corporation Section 179 Expensing · June 5, 2019 · $620,000
- Corporation Section 179 Expensing · February 18, 2019 · $620,000
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88th General Assembly