Relating to state taxation by modifying lottery and alcoholic beverages provisions under the purview of the department of revenue, changing the taxation of lump sum distributions of retirement income, increasing estimated tax thresholds, making appropriations, and including effective date and retroactive applicability provisions

This bill relates to the administration of state taxation, the lottery, and alcoholic beverages under the purview of the department of revenue. DIVISION I —— DISCLOSURE OF TAX INFORMATION. The bill specifies and updates the circumstances the department of revenue (department) may disclose state tax return and audit information to law enforcement. The division takes effect upon enactment. DIVISION II —— ANNUAL REPORTING. The bill strikes the requirement that the department annually report to the general assembly the areas of recurrent taxpayer noncompliance with the rules of the department including any recommendations relating to the noncompliance. DIVISION III —— PROPERTY TAX —— EXTENSIONS. Under current law, a claimant may ask the director of the department, the county treasurer, or the director of the department of health and human services for an extension to claim a reimbursement for rent constituting property taxes in case of sickness, absence, or disability. The bill strikes the director of the department from involvement in the extension request by the claimant. DIVISION IV —— FARM TENANCY INCOME TAX EXCLUSION. Currently, an eligible individual may exclude income received by the individual pursuant to a farm tenancy covering real property held by the individual for or more years, if the individual materially participated in a farming business for or more years. The bill allows the eligible individual to exclude such income under such circumstances, if the individual materially participated in a farming business for or more years in the aggregate.7(13). DIVISION V —— PASS-THROUGH ENTITIES.29.25. The division takes effect upon enactment and applies retroactively to January 1, 2024. DIVISION VI —— SALES TAX CHANGES. Under current law, a purchaser, user, and consumer of taxable property or services may be authorized to remit tax owed directly to the department instead of the tax being collected and paid by the seller. The bill specifies that in order to qualify for the direct pay tax permit such a taxpayer must accrue a tax liability of more than $8,000 on a monthly basis. Currently, such a taxpayer must accrue a tax liability of $4,000 on a semimonthly basis in order to qualify for the direct pay tax permit. Currently, if the department determines a sales tax return is incorrect, the department may determine the amount of tax due from information or knowledge the department is able to obtain, including using any mutually agreed upon valid and reliable sampling technique. The bill strikes the provision requiring the sampling technique be mutually agreed upon by the taxpayer and the department, and allows the department to use such a sampling technique without mutual agreement from the taxpayer. DIVISION VII —— MOTOR FUEL TAXES.3(3)(a)(2).33. The bill allows the department to amend the initial distribution percentage due to a mistake, or if there is a late report filed by a retail dealer to the department, or the distribution percentage is not accurate. The bill changes the due date of a biannual tax return relating to electric fuel tax due in January by one day, and modifies the biannual tax period by one day. The bill allows a person who uses electric fuel for a nontaxable purpose to provide an exemption certificate to the license holder selling or dispensing the fuel, if the certificate is produced by the department. DIVISION VIII —— VETERANS TRUST FUND AND LOTTERY. The bill strikes the requirement that the department report semiannually to the general assembly’s standing committees on government oversight regarding the operations of the lottery. The bill establishes new criteria triggering distributions from the veterans trust fund when the balance of the fund equals or exceeds $50 million.39(3). The bill establishes new setoff program procedures (debt collection) for a debtor’s lottery prize payment awarded as cash or cash equivalent.65. DIVISION IX —— ALCOHOLIC BEVERAGES. The bill defines “operating still” to mean a still that is registered with the federal alcohol and tobacco tax and trade bureau of the United States department of the treasury and is actively used to manufacture spirits.3(35).30(5) and allows a person holding a retail alcohol license to permit a customer to carry an open container of beer from the person’s licensed premises into another immediately adjacent licensed premises that is covered by a license or permit that authorizes the consumption of beer. Current law allows a person to carry an open container of wine under such circumstances but not beer. The bill allows a person who is the holder of a class “A” native distilled spirits license to be granted a class “C” retail alcohol license for the same premises licensed under the class “A” native distilled spirit license where the manufacturing of native distilled spirits occurs. The bill provides a native brewery may be granted a class “C” retail alcohol license or a special class “C” retail alcohol license for the premises licensed under a class “A” beer permit where the manufacturing of beer occurs. The bill provides that a native brewery may be granted not more than two class “C” retail alcohol licenses or granted two special class “C” alcohol licenses. Under the bill, a native brewery may be issued a class “C” retail alcohol license or a special class “C” alcohol license, regardless of whether the person is a manufacturer of native distilled spirits pursuant to a class “A” native distilled spirits license or a manufacturer of native wine pursuant to a class “A” wine permit. The bill allows a person who is the holder of a class “A” wine permit to be granted a class “C” retail alcohol license or a special class “C” retail native wine license for the same premises licensed under the class “A” wine permit where the manufacturing of native wine occurs. DIVISION X —— INHERITANCE TAX —— FUTURE CODE CHANGES DUE TO REPEAL. The bill changes numerous Code sections to reflect the future repeal of the inheritance tax beginning for the estates of decedents dying on or after January 1, 2025. However, other provisions of Code chapter 450 relating to the inheritance tax have not been repealed. The division takes effect January 1, 2025, and applies to the estates of decedents dying on or after that date. DIVISION XI —— 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. The bill provides that the taxation of a lump sum distribution from a retirement account is also exempt from state taxation by exempting the lump sum distribution for a person who is disabled, or years of age or older, or who is the surviving spouse of an individual or is a survivor having 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 XII —— 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 beginning on or after that date.