Relating to event-driven contracts traded on dedicated contract markets by requiring a permit to conduct business in the state, imposing a tax on adjusted revenues or amounts traded, making adjustments to individual and corporate income taxes, providing for fees, and including contingent effective date, applicability, and retroactive applicability provisions

The bill limits event-driven contracts to those financial derivatives relating to sporting activities, lotteries, elections, legislative actions, and economic indicators. The bill prohibits a person from engaging in the business of serving as a prediction market at any place of business in this state or through delivery sales, unless the person obtains a permit through the department of revenue (department). The bill directs the department to administer the bill. The bill requires an application for a permit to be made to the department in an electronic format or made in any other manner prescribed by the department accompanied by any associated fees required for the permit and any supporting documentation required. The application shall include information that is reasonably necessary to identify the person applying for the permit and to administer and collect the taxes imposed under the bill. The bill establishes the initial fee to obtain a permit at $10 million. All permits expire June 30. The annual renewal permit fee is established at $100,000. The bill imposes a new tax on the adjusted revenues received each calendar year by a prediction market from any event-driven contracts authorized at the rate of percent. The bill defines “adjusted revenues”. The bill specifies all revenues generated from the fees and the new tax are credited to the general fund of the state. INDIVIDUAL AND CORPORATE INCOME TAXES. The starting point for determining either individual or corporate Iowa net income is federal taxable income. The bill specifies section 1256 of the Internal Revenue Code (IRC), with respect to event-driven contracts, does not apply in computing net income for purposes of state individual and corporate income taxes. The bill requires a taxpayer to recompute the gains and losses from event-driven contracts including any loss carried back for purposes of Iowa net income and then requires the taxpayer to add back the gain derived from trading on a prediction market if the trade involves an event-driven contract. If the taxpayer itemized deductions on the taxpayer’s federal return, the bill requires the taxpayer to subtract the total loss from each event-driven contract up to an amount equal to percent of the gains added back from event-driven contracts. The provisions apply retroactively to January 1, 2026, for tax years beginning on or after that date. The bill requires state income tax to be withheld on gains derived from an event-driven contract that is subject to federal taxation under section 1256 of the IRC and is in excess of $600.