Bills › 89th General Assembly
Where it is now
- Done: IntroducedJanuary 19, 2021
- Done: SubcommitteeJanuary 19, 2021
- Done: Senate committeeFebruary 24, 2021
- Skipped: Passes the SenateContinued as SF 456
- Next: House committee
- Next: Passes the House
- Next: To the Governor
- Next: Signed into law
Became SF 456 → Its progress continues under the new number. Go to SF 456 What’s a funnel?
What’s in it
This bill relates to the apportionment of income of an airline and of a qualified air freight forwarder for purposes of the Iowa corporate income tax. A corporation doing business both within and without Iowa is required to apportion its business income among Iowa and the other states in which it does business. The amount of business income apportioned to Iowa is generally in the same percentage as the business’s gross sales made within Iowa if the business involves the manufacture or sale of goods and products, or in the same percentage as the business’s gross receipts earned within Iowa if the business involves something other than the manufacture or sale of goods and products.
Read the full explanation
However, airlines and other specified industries have special rules provided by administrative rule for apportioning the income of those industries.7(2), an airline deriving income from transportation operations is required to apportion its business income to Iowa in the same proportion that its mileage traveled in Iowa bears to its total mileage traveled everywhere.7(2). The bill also provides rules for apportioning income derived by a qualified air freight forwarder from transportation operations through an affiliated airline. _____ primarily engaged in the facilitation of the transportation of property by air, and that does not itself operate aircraft but that is in the same affiliated group as an airline. The bill states that the qualified air freight forwarder income derived from transportation operations shall be apportioned to Iowa either under the current rules of the director of revenue (current statutory rules), or in the same proportion that the miles of the qualified air freight forwarder’s affiliated airline traveled in this state bears to the total miles of the affiliated airline traveled everywhere (affiliated airline mileage rules), based on increasing percentages as enumerated in the bill over a number of tax years. The bill applies retroactively to tax years beginning on or after January 1, 2021.
Senate subcommittee
Named January 19, 2021. On February 15, 2021 it recommended passage.
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 allows certain air freight forwarders to calculate their Iowa income tax based on the miles their affiliated airline flies in the state rather than their total sales. The change is projected to reduce net General Fund revenue by $0.1 million in fiscal year 2022 and $0.2 million in fiscal year 2023, with the reduction increasing by approximately $0.1 million each year until it reaches $1.1 million in fiscal year 2031. Once fully implemented, the new process is expected to reduce the income tax liability for these taxpayers by $1.1 million per year.2
Read the fiscal note
Description
Senate File 456 allows a taxpayer that is a qualified air freight forwarder to apportion the taxpayer’s income to Iowa based on the total miles the qualified air freight forwarder’s affiliated airline flies within Iowa as a percent of the affiliated airline’s miles flown everywhere. A phase-in process is provided to transition the taxpayer from the current income apportionment process to the new process. The phase-in begins with tax year (TY) 2021 and is fully transitioned in TY 2030.
“Qualified air freight forwarder” is defined in the Bill as a taxpayer that:
- Is primarily engaged in the transportation of property by air.
- Does not itself operate an airline.
- Is in the same affiliated group as an airline.
Background
Iowa generally determines the percentage of a company’s income that is subject to the Iowa corporate income tax as equal to the percentage of that company’s sales within Iowa compared to the company’s total sales. This is the method currently used to apportion the income of a freight airline.
By existing rule, the percentage of income of a passenger airline that is subject to Iowa income tax is equal to the percentage of miles the airline travels in Iowa compared to all miles the airline travels. This Bill codifies the passenger airline apportionment rule and also transitions freight airlines to the passenger airline method over a 10-year period.
Assumptions
The Department of Revenue produced the fiscal impact estimate for the Bill using tax return information from potential beneficiaries of the tax change. When fully implemented (TY 2030), the new income apportionment procedure is expected to reduce Iowa income tax liability for the taxpayers by $1.1 million per year.
Fiscal Impact
The income apportionment change contained in the Bill is projected to reduce net General Fund revenue by $0.1 million in FY 2022 and $0.2 million in FY 2023, with the revenue reduction increasing each year by approximately $0.1 million until reaching $1.1 million in FY 2031.
Source
- Department of Revenue
- Income Tax Apportionment, Air Freight · March 1, 2021
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89th General Assembly
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Tried before
This idea has been filed in an earlier General Assembly. None got through a chamber.
- SSB 1039 SSB 103988th General Assembly · Introduced · nearly identicalDidn’t advance
Similar bills this General Assembly
- SSB 1210 Concerning the apportionment of certain business income of an airline or a qualified air f…91st General Assembly · Subcommittee recommends passageNearly identical
- HSB 70 HSB 7090th General Assembly · Subcommittee recommends passageNearly identical
Matched by wording or an identical title.