Relating to the administration of the tax by the department of revenue by modifying provisions related to personal income, property, sales and use, motor fuel, and inheritance taxes, changing tax expenditure reviews, and including effective date and retroactive applicability provisions

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. Under current law, when issuing a refund for an erroneous property tax paid by a taxpayer, the taxpayer must have presented a claim of refund to the board of supervisors, or if appealed, a claim to the property assessment appeal or district court within two years of the final decision on the property taxes owed. Under the bill, a taxpayer is eligible to claim a refund for an erroneous tax if the taxpayer had previously appealed the claim for a refund of an erroneous tax to the director of revenue within two years of the director’s final decision. This provision takes effect upon enactment. 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. The bill makes changes to the collection of sales taxes on building materials, supplies, and equipment where an owner, contractor, subcontractor, or builder is also a retailer holding a sales and use tax permit. Under such circumstances, if a customer of the retailer purchases tangible personal property from the retailer, the bill provides that such property will not be subject to sales tax if the property will be subject to sales tax at resale at a later date or if the property will be subject to use tax at the time the retailer withdraws the property from inventory for use by the retailer in construction. The bill makes other related changes to enhance the readability of the provision. 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. 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 —— INHERITANCE TAX —— FUTURE CODE CHANGES DUE TO REPEAL. The bill changes numerous Code sections to reflect the 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 upon enactment and applies retroactively to the estates of decedents dying on or after January 1, 2025. DIVISION IX —— 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, 2025. DIVISION X —— 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, 2026, and applies to tax years beginning on or after that date. DIVISION XI —— TAX EXPENDITURE REVIEW. The bill specifies that the department administering a tax expenditure (tax credit) is not required to review the tax expenditure if the tax expenditure has been repealed or if a zero amount of the tax expenditure remains available to be awarded or claimed.11B (Code 2018).48 with the future repeal of the renewable chemical tax credit program. DIVISION XII —— LIMITATIONS ON SALES TAX EXEMPTIONS AND REFUNDS AND TRANSFERS TO THE ENERGY INFRASTRUCTURE FUND. The bill modifies the sales and use tax exemptions (exemptions) related to web search portal businesses and data center businesses (data centers). The division take effect upon enactment (effective date). Currently, the exemptions apply to the sale of computers and equipment for the maintenance and operation of a data center, the sale of backup power generation fuel, and the sale of electricity for use in the data center, without any limitations. The bill does not change the exemptions available for data centers that began operating prior to the effective date. The bill limits the exemptions for newly constructed data centers or additions upon existing property completed on or after the effective date, to the first years of operation, if the property is located entirely or partly within a city having a population of more than 30,000. The bill limits the exemptions for newly constructed data centers or additions upon existing property completed on or after the effective date, to the first years of operation, if the property is not located entirely or partly within a city having a population of more than 30,000. Currently, the exemptions apply from the date the initial investment occurs or the initiation of site preparation activities. The bill defines “initiation of site preparation activities”. The bill requires a data center to register with the department of revenue beginning January 31, 2026, and file an annual report with the department describing the backup power generation fuel and electricity used to obtain the exemption, and describe any other information the department of revenue may require. The bill requires a data center to present an exemption certificate, issued annually to the data center after filing the annual report, to the retailer selling the backup power generation fuel and the electricity to the data center. The bill provides that a business leasing space to operate a data center as a lessee is eligible to qualify for an exemption. A data center includes the lease of a business facility leased by an entity operating a data center at the location of the data center. The bill specifies the exemptions apply from the beginning date of the initial lease term.46A. DIVISION XIII —— ANIMAL CARE ORGANIZATION CHECKOFF. The bill provides that taxpayers filing individual income tax returns will be allowed to designate $1 or more on the return to be paid to the animal care organization fund (fund). The bill creates the fund in the state treasury under the control of the department of agriculture and land stewardship. The bill requires the department of revenue to annually remit moneys collected from the checkoff to the fund.12E, which allows no more than four checkoffs on the individual tax return form and provides for the automatic repeal of the two checkoffs receiving the least in contributions over a two-year period. Currently, there are two checkoffs that appear on the individual income tax return, the checkoff for the fish and game protection fund and the checkoff for the child abuse prevention program fund. Moneys in the fund shall be used by an animal care organization committee (committee) to provide grants to animal care organizations. The committee, which is created within and administered by the department of agriculture and land stewardship, shall consist of three members: one member appointed by the secretary of agriculture who is an animal warden, one member appointed by the secretary of agriculture from the executive director or the director’s designee of an animal rescue organization in this state, and a veterinarian appointed by the president of the Iowa veterinarian medical association. The bill defines “animal care organization” to mean an animal shelter operating pursuant to a certificate of registration or a renewed certification of operation issued by the department of agriculture and land stewardship under Code chapter 162 (animals in commercial establishments) that has adopted a no-kill policy, except when medically necessary. The bill defines “medically necessary”.