HSB 543

Upon the elimination of the EEF, remaining EEF moneys are transferred to the taxpayer relief fund and then remainder of the excess, if any, to the GF. DIVISION II —— INDIVIDUAL INCOME TAXES —— FUTURE TAX RATES —— ALTERNATE TAX RATES. _____ FUTURE INDIVIDUAL INCOME TAX RATES. The bill strikes the graduated individual income tax rates that go into effect in tax years 2024 and 2025, and establishes new individual income tax flat rates beginning in tax years on or after January 1, 2024.65 percent.50 percent.90 percent goes into effect for tax years beginning on or after January 1, 2026.21(5) due to removing income tax brackets and establishing the individual income tax flat rate commencing with tax years beginning on or after January 1, 2024. ALTERNATE INDIVIDUAL INCOME TAX RATES. The bill repeals the alternate individual income tax rates.5(2) and (3), and is used to calculate income tax owed. EFFECTIVE DATE AND APPLICABILITY. The division takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2024. DIVISION III —— PENALTY FOR OVERWITHHOLDING. The bill requires a withholding agent to adjust the rate of withholding for each payee (taxpayer) to the individual income tax rate applicable to the payee within days of a change to the individual income tax rate.16(1). _____ the payee within days of a change to the individual income tax rate is required to pay a penalty of $100 for each payee’s withholding that is not adjusted per payroll period. The overwithholding penalty does not apply if the overwithholding resulted because a payee has requested additional withholding above the individual income tax rate; the withholding agent is overwithholding to correct erroneous underwithholding; or the withholding agent makes a clerical or mathematical error in the amount of withholding that is within percent or $20 of the correct amount, whichever is greater. The overwithholding penalty imposed pursuant to the bill is not subject to waiver. The division takes effect upon enactment. DIVISION IV —— ESTIMATED TAX THRESHOLD. Under the bill, a taxpayer filing a return is required to make estimated tax payments if Iowa income tax liability can reasonably be expected to exceed $1,000 or more. Under current law, such a taxpayer filing a return is required to make estimated tax payments if Iowa income tax liability can reasonably be expected to exceed $200 or more. The division takes effect January 1, 2025, and applies to tax years on or after that date. DIVISION V —— LUMP SUM DISTRIBUTION OF RETIREMENT INCOME. Under current law, commencing with tax years beginning on or after January 1, 2023, retirement income is not subject to Iowa individual income tax.5(8) at a rate of percent of the federal tax rate imposed on the amount of the lump sum distribution. _____ an insurable interest in an individual who would have qualified for the exemption for the tax year.5(2) and (3). The division takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2024. DIVISION VI —— CHILD CARE FACILITY PROPERTY TAX ASSESSMENT LIMITATION. This division of the bill relates to assessment limitations for property taxation purposes for commercial child care facilities, and includes applicability and effective date provisions.21(5) determines the amount of actual value of commercial property that is subject to property tax. The amount is the sum of the residential assessment limitation to the portion of the property’s value that does not exceed $150,000 plus percent of the property’s value in excess of $150,000. The bill division excludes property that is primarily used as a child care facility from the calculation of the actual value of the property. The bill instead specifies that for assessment years beginning on or after January 1, 2024, the amount of actual value used as child care facilities that is subject to tax is equal to the product of the assessment limitation percentage applicable to residential property multiplied by the actual value of the property provided that the property owner has applied for the assessment limitation and the county board of supervisors has allowed such an assessment limitation. The division establishes application procedures, approval procedures, and recordkeeping procedures for the assessment limitation. _____ care facility assessment limitation. The division applies retroactively to assessment years beginning on or after January 1, 2024, and applies to payments to local governments for fiscal years beginning on or after July 1, 2025. The division takes effect upon enactment. DIVISION VII —— UNEMPLOYMENT BENEFITS. The bill modifies the definition of “taxable wages” by eliminating the wages paid to an employee from another state from the calculation of wages upon which an employer is required to contribute to the unemployment compensation fund (fund) when the other state extends a like comity (reciprocity) to Iowa for employment purposes.1A(36).33 percent of the statewide average weekly wage used during the previous calendar year which is then multiplied by and rounded to the nearest $100 to determine maximum weekly benefit amounts.1A(36). The calculation of the unemployment contribution rate each year is a dynamic calculation dependent upon the calculation of the current reserve ratio, the benefit ratio rank, and the contribution rate table in effect for the rate year. The bill changes the current reserve ratio calculation, the number of benefit ratio ranks, the contribution rates, and the contribution rate table. _____ The current reserve ratio (calculation of available benefit amount in fund) determines the contribution rate table in effect for the rate year following the computation date.7(2)(d)(1) by basing the calculation of the ratio on the preceding year rather than the previous five calendar quarters, and strikes the requirement that $150 million be added on the reserve ratio computation date to the total funds available for benefits. The bill also strikes the computation of the highest cost-benefit ratio and removes the ratio from the computation of the current reserve ratio. The bill modifies the contribution rate table by reducing the number of possible rate tables that could be in effect for the rate year from eight contribution rate tables to four contribution rate tables. Under the bill and current law, only one contribution rate table may be in effect per rate year. In reducing the number of possible contribution rates tables from eight to four, the bill also changes the numbered contribution rate designations to lettered contribution rate designations. Under current law, there are benefit ratio ranks in the contribution table. The benefit ratio is a calculation based upon the average number of unemployment benefits charged to an employer over previous calendar quarters. The higher the benefits charged to an employer, the higher the benefit ratio rank the employer receives. The bill reduces the number of benefit ratio ranks from to 9.76 percent of total taxable wages.76 percent of total taxable wages.0 percent.40 percent. As a result of the bill, each employer will be assigned one of the nine new benefit ratio ranks that corresponds with one of the four new lettered contribution rate designations in effect for the rate year to determine the contribution rate for the year.