HSB 278

If these two conditions are not satisfied, current law institutes the changes for tax years beginning on or after the January following the first fiscal year for which the two conditions do occur. By striking the “trigger”, the bill sets in motion numerous tax changes for tax years beginning on or after January 1, 2023, described below. INDIVIDUAL INCOME TAX.50% For a married couple filing a joint return, the taxable income amounts in each bracket above are doubled. Also, the taxable income amounts in each bracket above will be indexed to inflation and increased in future tax years, beginning in the tax year following the 2023 tax year. INDIVIDUAL INCOME TAX CALCULATION. Under current law, the starting point for computing the Iowa individual income tax is federal adjusted gross income before the net operating loss deduction, which is generally a taxpayer’s gross income minus several deductions. From that point, Iowa requires several adjustments and then provides taxpayers with a deduction for federal income taxes paid, and the option to deduct a standard deduction or itemized deductions. _____ adjustments taken at the federal level in computing tax, including a standard deduction or itemized deductions, and the qualified business income deduction allowed for certain income earned from a pass-through entity. Because the starting point changes to federal taxable income, and federal law does not provide for the filing status of married filing separately on a combined return, the bill repeals that filing status option for Iowa tax purposes. Because net operating loss is no longer calculated at the state level, the bill requires a taxpayer to add back any federal net operating loss deduction carried over from a taxable year beginning prior to the 2023 tax year, but allows taxpayers to deduct any remaining Iowa net operating loss from a prior taxable year. The bill repeals the individual alternative minimum tax (AMT), allows an individual to claim any remaining AMT credit against the individual’s regular tax liability for the 2023 tax year, and then repeals the AMT credit in the tax year following the 2023 tax year. The bill repeals most Iowa-specific deductions, exemptions, and adjustments currently available when computing net income and taxable income under Iowa law, including the Iowa optional standard deduction and all itemized deductions, and the ability to deduct federal income taxes, except for a one-year phase out in the 2023 tax year for taxes paid, or refunds received, that relate to a prior year. The bill maintains the add-back for income from securities that are federally exempt but not state-exempt, and for bonus depreciation amounts. The bill maintains the general pension exclusion and the deduction for income from federal securities. The bill maintains the deduction for contributions to the Iowa 529 plan, the Iowa ABLE plan, a first-time homebuyer savings account, and an individual development account. _____ awards, biodiesel production refunds, certain wages paid to individuals with disabilities or individuals previously convicted of a felony, certain organ donations, and Segal AmeriCorps education award payments.7(29) to make the deduction only applicable to taxpayers who are at least years old and who have net income below $100,000.7(21) to restrict the deduction to the sale of real property used in farming businesses by permitting the taxpayer to take the deduction if either of the following apply: the taxpayer materially participated in the farming business for at least years and held the real property for at least years; or the taxpayer sold the real property to a relative. The bill expands the definition of “relative” to include an entity in which a relative of the taxpayer has a legal or equitable interest in the entity as an owner, member, partner, or beneficiary. The bill provides a new deduction for any income of an employee resulting from the payment by an employer, whether paid to the employee or a lender, of principal or interest on the employee’s qualified education loan.13, to require that any amount of itemized deduction, standard deduction, personal exemption deduction, or qualified business income deduction that was allowed in computing federal taxable income shall be added back. CORPORATE INCOME TAX AND FRANCHISE TAX CALCULATION. Under current law, the starting point for calculating the corporate income tax and franchise tax is federal taxable income before the net operating loss deduction, because net operating loss is calculated at the state level. The bill repeals the separate calculation of net operating loss at the state level. _____ result, the bill requires taxpayers to add back any federal net operating loss deduction carried over from a taxable year beginning prior to the trigger year, but allows taxpayers to deduct any remaining Iowa net operating loss from a prior taxable year. The bill also repeals most Iowa-specific deductions, exemptions, and adjustments currently available when computing net income and taxable income under Iowa law. The bill maintains the add-back for income from securities that are federally exempt but not state exempt, and for bonus depreciation amounts. The bill maintains the deductions for income from federal securities, for foreign dividend and subpart F income, for certain wages paid to individuals with disabilities or individuals previously convicted of a felony, and for biodiesel production refunds. DIVISION II —— CHILD DEPENDENT AND DEVELOPMENT TAX CREDITS. Currently, an individual may claim percent of the federal child and dependent care credit provided in section of the Internal Revenue Code against the individual income tax if the individual’s net income is less than $45,000. Under the bill, an individual may claim percent of the federal child and dependent care credit provided in section of the Internal Revenue Code against the individual income tax if the individual’s net income is less than $90,000. The bill increases the income threshold determining the eligibility of a taxpayer for the early childhood development tax credit. The bill increases the eligibility threshold from a taxpayer whose net income is less than $45,000 per year to less than $90,000 per year. By increasing the eligibility threshold, taxpayers whose net income is less than $90,000 are now eligible to take the early childhood development tax credit equaling percent of the first $1,000 which the taxpayer has paid to others for early childhood development expenses for each dependent ages three through five. RETROACTIVE APPLICABILITY. _____ 2021. The division takes effect upon enactment. DIVISION III —— COVID-19 RELATED GRANTS —— TAXATION. The bill excludes from the calculation of Iowa individual and corporate income tax any qualifying COVID-19 grant issued to an individual or business by the economic development authority, the Iowa finance authority, or the department of agriculture and land stewardship. Under the bill, a “qualifying COVID-19 grant” includes any grant identified by the department of revenue by rule that was issued under a grant program administered by the economic development authority, Iowa finance authority, or the department of agriculture and land stewardship to provide financial assistance to individuals and businesses economically impacted by the COVID-19 pandemic. Under current law, financial assistance grants provided to small businesses by the economic development authority under the Iowa small business COVID-19 relief grant program are excluded from the calculation of Iowa individual and corporate income tax. The COVID-19 grant income tax exclusion provided in the bill is repealed on January 1, 2024, and does not apply to tax years beginning on or after that date. The division takes effect upon enactment and applies retroactively to March 23, 2020, for tax years ending on or after that date. DIVISION IV —— FEDERAL PAYCHECK PROTECTION PROGRAM. Under current law, for the tax year 2020 and later, Iowa law fully conforms with the federal treatment of forgiven paycheck protection program loans and excludes such amounts from net income and allows certain deductions for business expenses paid using those loans. _____ those loans. The bill fully conforms with federal law for those fiscal-year filers who previously were excluded from such conformity and allows such filers to take business expense deductions using federal paycheck protection program loan proceeds that were forgiven. DIVISION V —— SCHOOL TUITION ORGANIZATION TAX CREDIT. The bill changes the school tuition organization tax credit in two ways. First, the bill modifies the amount of a voluntary cash or noncash contribution that may be claimed as a tax credit during a tax year. Currently, percent of the amount of the voluntary cash or noncash contribution may be claimed as a tax credit, subject to the total aggregate amount of credits that may be claimed in one calendar year. For tax years beginning on or after January 1, 2022, the bill increases the amount of the contribution that may be claimed as a tax credit from percent to percent, for tax years beginning on or after January 1, 2023, but before January 1, 2024, the amount of the contribution that may be claimed as a tax credit increases from percent to percent, for tax years beginning on or after January 1, 2024, but before January 1, 2025, the amount of the contribution that may be claimed as a tax credit increases from percent to percent, and for tax years beginning on or after January 1, 2025, the amount of the contribution that may be claimed as a tax credit increases from percent to percent. _____ of allowable credits is set at $20 million. This division applies retroactively to tax years beginning on or after January 1, 2021. DIVISION VI —— TARGETED JOBS WITHHOLDING CREDIT. The bill extends by five years the deadline for entering into withholding agreements under the targeted jobs withholding credit pilot project from June 30, 2021, to June 30, 2026. DIVISION VII —— ECONOMIC EMERGENCY FUND —— EXCESS MONEYS. The bill provides that after the surplus existing in the general fund of the state at the conclusion of a fiscal year is appropriated to the cash reserve fund, the elimination of Iowa’s GAAP deficit, and the Iowa economic emergency fund as provided under current law, an amount equal to not more than five percent of the adjusted revenue estimate for the fiscal year is transferred to the general fund of the state and any remaining moneys are transferred to the taxpayer relief fund. This division takes effect July 1, 2022. DIVISION VIII —— TAXPAYER RELIEF FUND —— TAX CREDIT. The bill provides that if the amount in the taxpayer relief fund equals or exceeds $120 million, the entire balance of the taxpayer relief fund is transferred to the Iowa taxpayer relief tax credit fund to be used by the department of revenue to provide Iowa taxpayer relief tax credits in equal amounts to eligible taxpayers who filed individual income tax returns. This division takes effect upon enactment and applies retroactively to January 1, 2021, for tax years beginning on or after that date. DIVISION IX —— STATE INHERITANCE TAX. The bill proportionally reduces over a nine-year fiscal period the rates of tax applicable to the state inheritance tax, beginning for estates of decedents dying on or after July 1, 2021. The bill then repeals the state inheritance tax and the state qualified use inheritance tax effective July 1, 2030, for property of estates of decedents dying on or after July 1, 2030. _____ the event of the death of an individual on or after July 1, 2030. The bill directs the Code editor to remove Code chapters 450 (inheritance tax) and 450B (qualified use inheritance tax) from the Code effective July 1, 2040. DIVISION X —— HIGH QUALITY JOBS —— ELIGIBILITY REQUIREMENTS. To be eligible to receive incentives or assistance under the high quality jobs program, a business cannot be in the process of reducing operations in one community while simultaneously apply for assistance under the program. Under current law, a reduction in operations within months before or after a business submits an application to the high quality jobs program is presumed to be a reduction in operations while simultaneously applying for assistance under the program. Under the bill, the economic development authority (authority) cannot presume that a reduction in operations is a reduction while simultaneously applying for assistance under the program with regard to a business that submits an application on or before June 30, 2022, if the business demonstrates to the satisfaction of the authority that the reduction in operations occurred after March 1, 2020, and that it was a result of the COVID-19 pandemic. The authority must consider whether the benefit of the project proposed by the business outweighs any negative impact related to the reduction in operations. The business remains subject to all other eligibility requirements. This division of the bill is repealed July 1, 2022. DIVISION XI —— HOUSING TRUST FUND. Under current law, percent of the real estate transfer tax receipts paid by county recorders to the treasurer of state are transferred to the housing trust fund in any one fiscal year, subject to a $3 million cap; moneys in excess of the cap are deposited in the general fund of the state. The bill increases the cap to $7 million. DIVISION XII —— HIGH QUALITY JOBS PROGRAM —— DAY CARE CENTERS. _____ jobs program will include a licensed child care center for use by a business’s employees when determining the eligibility of the business to participate in the program. DIVISION XIII —— WORKFORCE HOUSING TAX CREDITS.119 sets an aggregate tax credit amount limit for certain economic development programs.356 shall not be allocated more than $25 million in tax credits, and of the tax credits allocated to this program, $10 million is reserved for allocation to qualified housing projects in small cities. This division increases the workforce housing tax credit allocations from $25 million to $30 million. Of the moneys allocated to workforce housing tax credits, the bill increases the tax credits reserved for qualified housing projects in small cities from $10 million to $15 million. DIVISION XIV —— DISASTER RECOVERY HOUSING ASSISTANCE PROGRAM AND FUND. TRANSFERS.49 (community housing and services for persons with disabilities revolving loan program fund) to the disaster recovery housing assistance fund created in the bill.5(1)(s), for deposit in the fund. The bill waives the prior written consent and approval of the director of the department of management to transfer the unobligated moneys.106A(1)(o), for deposit in the fund. The bill requires any transfer to be reported to the legislative fiscal committee of the legislative council on a monthly basis. DISASTER RECOVERY HOUSING ASSISTANCE PROGRAM —— FUND. The bill creates a disaster recovery housing assistance fund (fund) within the authority. The purpose of the fund is for the development and operation of a forgivable loan and grant program for homeowners and renters with disaster-affected homes, and for an eviction prevention program created in the bill. The bill prohibits the authority from using more than percent of the moneys in the fund on July of a fiscal year for purposes of administrative costs and other program support during the fiscal year. The bill directs the authority to establish and administer a disaster recovery assistance program (program) and to use the moneys in the fund to provide forgivable loans to eligible homeowners and grants to eligible renters with disaster-affected homes. “Disaster-affected home” is defined in the bill as a primary residence that is destroyed or damaged due to a natural disaster that occurs on or after the effective date of the division, and that is located in a county that due to the natural disaster is the subject of a state of disaster emergency proclamation by the governor that authorizes disaster recovery housing assistance; or a primary residence that is destroyed or damaged due to a natural disaster that occurred on or after March 12, 2019, but before the effective date of the division, and is located in a county that has been declared a major disaster by the president of the United States on or after March 12, 2019, but before the effective date of the division, and is located in a county where individuals are eligible for federal individual assistance. _____ more local program administrators to administer the program and moneys in the fund may be expended following a state of disaster emergency proclamation by the governor that authorizes disaster recovery housing assistance or the eviction prevention program.91 and whose territory includes at least one county that is the subject of the state of disaster emergency proclamation by the governor that authorizes disaster recovery housing assistance or the eviction prevention program; or a qualified local organization or governmental entity as determined by rule by the authority.20B. The disaster case manager may refer the homeowner or renter to the appropriate local program administrator. DISASTER RECOVERY HOUSING ASSISTANCE PROGRAM —— HOMEOWNERS. _____ homeowner’s disaster-affected home, the home cannot be proposed for buyout by the county or city in which the home is located, or the disaster-affected home is eligible for a buyout, but the homeowner is requesting a forgivable loan for the repair or rehabilitation of the homeowner’s disaster-affected home in lieu of a buyout; and the assistance does not duplicate benefits provided by other disaster assistance programs. If a homeowner is referred to an administrator by the homeowner’s case manager, the bill allows the authority to award a forgivable loan to the eligible homeowner for repair or rehabilitation of the disaster-affected home, or for down payment assistance on the purchase of replacement housing, and the cost of reasonable repairs to be performed on the replacement housing to render it decent, safe, sanitary, and in good repair. Replacement housing purchased by a homeowner cannot be located in a 100-year floodplain.703. “Replacement housing” is defined in the bill as housing purchased by a homeowner to replace a disaster-affected home that is destroyed or damaged beyond reasonable repair as determined by a local program administrator. The authority shall determine the interest rate for the forgivable loan. If a homeowner who has been awarded a forgivable loan sells a disaster-affected home or replacement housing for which the homeowner received the forgivable loan prior to the end of the loan term, the remaining principal on the forgivable loan shall be due and payable. DISASTER RECOVERY HOUSING ASSISTANCE PROGRAM —— RENTERS. _____ assistance does not duplicate benefits provided by any other disaster assistance program. DISASTER RECOVERY HOUSING ASSISTANCE PROGRAM —— REPORT. The bill requires the authority to annually submit a report to the general assembly detailing the disaster recovery housing assistance program. EVICTION PREVENTION PROGRAM. The bill requires the authority to establish and administer an eviction prevention program. Under the eviction prevention program, the authority awards grants from the disaster recovery housing assistance fund to eligible renters and eviction prevention partners. Grants may be awarded upon a state of disaster emergency proclamation by the governor that authorizes the eviction prevention program. The bill defines “eligible renter” to mean a renter whose income meets the qualifications of the program, who is at risk of eviction, and who resides in a county that is the subject of a state of disaster emergency proclamation by the governor that also authorizes the eviction prevention program. The bill defines “eviction prevention partner” to mean a qualified local organization or governmental entity as determined by rule by the authority. The bill requires grants awarded to eligible renters to be used for short-term financial rent assistance to keep eligible renters in the current residence of the renter. Grants awarded to eviction prevention partners are to be used to pay for rent or services provided to eligible renters for the purpose of preventing the eviction of eligible renters. DISASTER RECOVERY HOUSING ASSISTANCE PROGRAM —— RULES. The authority shall adopt rules pursuant to Code chapter 17A to implement and administer the program including establishing the maximum forgivable loan and grant amounts, the terms of forgivable loans, and income qualifications of eligible renters in the eviction prevention program. DIVISION XV —— BROWNFIELD REDEVELOPMENT PROGRAM. _____ (authority) cannot allocate more than $10 million in tax credits in a fiscal year to the brownfield redevelopment program (brownfields). The division increases the maximum allocation to $15 million. The division provides that tax credits that are not awarded or that are revoked (including revoked within the previous five years) under brownfields may be awarded during the next annual application period, and those tax credits do not count against the $15 million tax credit maximum. §9601 et seq. The division removes this exclusion.293A, redevelopment tax credits, is repealed on June 30, 2021. The division changes the repeal date to June 30, 2031, and the repeal date is effective upon enactment of the division.293B, related to the application, review, registration, and authorization of projects awarded tax credits under brownfields is repealed on June 30, 2021. The division changes the repeal date to June 30, 2031, and the repeal date is effective upon enactment of the division. DIVISION XVI —— HIGH QUALITY JOBS AND RENEWABLE CHEMICAL PRODUCTION TAX CREDITS. The division reduces the maximum amount of tax credits that the economic development authority (authority) may allocate to the high quality jobs program for the fiscal year beginning July 1, 2021, and for each fiscal year thereafter, from $105 million to $70 million. DIVISION XVII —— BONUS DEPRECIATION. Currently, when a business buys equipment and other capital assets, the business is allowed to deduct a portion of the cost of such property as depreciation over a certain period for federal and state individual or corporate income tax purposes. _____ are allowed to immediately deduct a higher portion of the cost of such property by claiming additional first-year depreciation (bonus depreciation). Iowa has recently adopted “rolling conformity” with federal tax law but did not conform with federal bonus depreciation provisions, meaning a taxpayer deducts the cost of the equipment or other capital assets by claiming depreciation over a longer time period for Iowa income tax purposes. The bill applies retroactively by conforming Iowa tax provisions with federal bonus depreciation provisions for equipment or other capital assets placed in service on or after January 1, 2021, for tax years beginning on or after that date.35(27). Currently, if a taxpayer does not claim “bonus depreciation”, Iowa does not conform with the federal limitation on business expenses. DIVISION XVIII —— ENERGY INFRASTRUCTURE REVOLVING LOAN PROGRAM.46, alternate energy revolving loan program, to prohibit the Iowa energy center from initiating any new loans after June 30, 2021. The division also requires that all loan payments received after June 30, 2021, be deposited, and any moneys remaining in the alternate energy revolving loan fund after June 30, 2021, be transferred, to the newly created energy infrastructure revolving loan fund. The division creates an energy infrastructure revolving fund (fund) in the office of the treasurer of state to be administered by the Iowa energy center (center). Moneys in the fund are to be used to provide financial assistance for the development and construction of energy infrastructure, including projects as described in the bill. “Energy infrastructure” and “financial assistance” are defined in the bill. _____ The center is required to establish and administer an energy infrastructure revolving loan program (program) to encourage the development of energy infrastructure within the state. An individual, business, rural electric cooperative, or municipal utility located and operating in this state is eligible for financial assistance under the program. With the approval of the center’s governing board, the authority must determine the amount and the terms of all financial assistance awarded to an individual, business, rural electric cooperative, or municipal utility under the program. All agreements and administrative authority are vested in the center’s governing board. The authority may use not more than percent of the moneys in the fund at the beginning of each fiscal year for purposes of administrative costs, marketing, technical assistance, and other program support. DIVISION XIX —— INVESTMENTS IN QUALIFYING BUSINESSES AND EQUITY INVESTMENTS IN INNOVATION FUNDS. Under current law, the authority must allocate $2 million to investments in qualifying businesses and $8 million to equity investments in innovation funds (equity investments). The division limits the authority’s tax credit allocations for investments in qualifying businesses and equity investments to a maximum aggregate of $10 million. The division requires the authority to determine on or before June of each fiscal year the amount of tax credits to be allocated to each. In addition, any amount of tax credits allocated and not awarded in that fiscal year must be reallocated to either investments in qualifying businesses or to equity investments for the next fiscal year, and those tax credits do not count towards the maximum aggregate of $10 million. This applies to tax credits allocated on or after the fiscal year beginning July 1, 2021, and for each fiscal year thereafter. _____ person’s spouse or dependent from a calendar year basis to a fiscal year basis. The maximum amount of tax credits that may be issued for equity investments in any one qualifying business is also modified from a calendar year to a fiscal year. This division of the bill is effective upon enactment. DIVISION XX —— RURAL ECONOMIC DEVELOPMENT. The bill provides for tax incentives for eligible businesses in rural communities. “Rural community” is defined in the bill. The tax incentives are based upon the number of jobs created or retained that pay at least 110 percent of the qualifying wage threshold and the amount of the qualifying investment. The tax incentives are based upon a schedule as detailed in the bill.335B. The bill directs the authority to adopt rules to administer the high quality jobs program. This division of the bill takes effect upon enactment. DIVISION XXI —— TELEHEALTH —— MENTAL HEALTH PARITY. The bill requires a health carrier to reimburse a health care professional or a facility for health care services for a mental health condition, illness, injury, or disease provided to a covered person via telehealth on the same basis and at the same rate as the health carrier would apply to the same health care services provided to the covered person by the health care professional or facility in person. “Health carrier” is defined in the bill. The bill amends the definition of “telehealth” to specify that the delivery of health care services via telehealth must include real-time interactive audio, video, or electronic media, regardless of the location of the health care professional or the covered person. _____ additional health care professional to be located in the same room as a covered person while health care service for a mental health condition, illness, injury, or disease are provided via telehealth by another health care professional to the covered person. This division of the bill is effective upon enactment and applies retroactively to health care services for a mental health condition, illness, injury, or disease provided to a covered person via telehealth on or after January 1, 2021. DIVISION XXII —— SEPTIC TANKS. The bill prohibits a county from requiring the payment of a penalty, fine, or fee due to a resident’s noncompliance with rules adopted by the county sanitarian regarding periodic septic tank pumping as part of routine maintenance. DIVISION XXIII —— EMERGENCY VOLUNTEER —— TAX CREDIT. The bill relates to the individual income tax credits available to volunteer fire fighters, volunteer emergency medical services personnel members, and reserve peace officers. The bill increases to $250 from $100 the maximum amount per individual of the income tax credits for services performed during the year. The tax credit increase applies retroactively to tax years beginning on or after January 1, 2021. DIVISION XXIV —— FOOD BANKS. The bill exempts from the sales tax the purchase price from the sale or rental of tangible personal property or specified digital products, or services furnished, to a nonprofit food bank if the property or services are to be used by the nonprofit food bank for a charitable purpose. “Nonprofit food bank” is defined in the bill.5. DIVISION XXV —— SPECIFIED DIGITAL PRODUCTS SALES AND USE TAX EXEMPTION —— MUNICIPAL UTILITIES AND RURAL ELECTRIC COOPERATIVES. _____ owned public utility engaged in selling gas, electricity, heat, pay television service, or communication service to the general public. The bill also exempts from the sales and use tax the sales price of specified digital products sold to and used in connection with the operation of a rural electric cooperative.1(55B). DIVISION XXVI —— CONSUMER LOANS. Currently, except for certain loans that are open-end credit transactions or loans secured by a certificate of title, a supervised financial organization or a mortgage lender may contract for and receive a finance charge on a consumer loan, calculated according to the actuarial method, not exceeding percent per year on the unpaid balance of the amount financed. §987(b), which is currently percent. DIVISION XXVII —— INDIVIDUAL INCOME TAX —— CHECKOFFS. Currently, there are four checkoffs available against the individual income tax —— the joint veterans trust fund and the volunteer fire fighter preparedness fund checkoff, the fish and game protection fund checkoff, the Iowa state fair foundation checkoff, and the child abuse prevention program fund checkoff. Under current law, when the same four income tax return checkoffs have been provided on the individual income tax return for two consecutive tax years, the two checkoffs that have received the least amount of contributions are repealed. _____ tax form is made beginning with the 2024 tax year.