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Resolution Regarding Business Activity Taxes |
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Above Ground Petroleum Storage Tank Fund Created |
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Educational Institutions Eligible For University-Based Research Utilization Program Tax Credit |
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Franchise Tax Credit For Banks Organized As Limited Liability Companies |
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Utility Replacement Tax |
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Proposed Constitutional Amendment Requiring Voter Approval For Tax Increases |
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Tax Credits For Investments In Qualifying Businesses |
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Tax Credits For Investments Venture Capital Funds |
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Tax Credits For Investments In Community-Based Seed Capital Funds |
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Reinstating The Phase-out Of Taxes On Residential Utilities |
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Inheritance Tax Disclaimer |
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Additional Municipal Utility Exclusion From Exemption |
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Discharge Record of Veteran Confidential |
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Recapture Of Benefits Under The New Jobs And Income Program |
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Sales Tax Refund For Racks, Shelving, And Conveyor Equipment |
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Corporation Tax Credit For Certain Sales Tax Paid By Third Party Developer |
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Investment Tax Credit For Eligible Businesses |
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Repeal Of Eligible Development Businesses |
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Urban Revitalization Property Tax Exemption |
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Decoupling With 50% Bonus Depreciation |
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Decoupling With Section 179 Expensing |
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Decoupling With Provisions of Military Family Tax Relief Act of 2003 |
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Update Of References To The Internal Revenue Code—Research Activities Credit |
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Administrative Levy As Condemnation Of Funds And Recovery From Challenges To The Levy |
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Administrative Wage Assignment As Condemnation Of Funds And Challenges To The Assignment |
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A Retroactive Exemption For “Cigarette Buy-downs” And Similar Trade Discounts |
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Collected Hotel/Motel Taxes Are Trust Fund Taxes |
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Collected Local Option Taxes Are Trust Fund Taxes |
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Rents, Royalties, Copyright, And License Fees Redefined |
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Collected Sales And Use Taxes Are Trust Fund Taxes |
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Legislative Service Agency-New Organization, New Exemption |
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Additional Exemptions Applicable To Foundries |
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Wine-Reciprocal Shipping Privileges Exemption |
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Collected Environmental Protections Charges Are Trust Fund Taxes |
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Section 42 Property |
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Extension Of Appraisal Time |
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Collected Motor Fuel Taxes Are Trust Fund Taxes |
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Cigarette And Tobacco Products |
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Collected Cigarette And Tobacco Taxes Are Trust Fund Taxes |
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Collected Controlled Substance Taxes Are Trust Fund Taxes |
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Elimination Of Voter Registration Forms In Income Tax Returns And Booklets |
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School Local Option Tax Has Extensions Up To Ten Years |
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Revenue Purpose Statement |
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Appropriation For Property Tax Credits |
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Exempt Rental Of Construction Machinery And Equipment |
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Wind Energy Production Tax Credit |
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Wind Energy Conversion Property (Taxation) |
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Individual Income Tax Check-offs |
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State Tax Implementation Committee |
Prior Law
None
New Provisions
House Resolution 164 requested that the United States Congress expand the
physical presence standard for the imposition of state and local business activity
taxes. This resolution urged Congress to enact legislation recognizing a physical
presence standard for the imposition of state and local business activity taxes,
defining de minimis standards for measuring physical presence, and setting
reasonable limits on the attribution of nexus. The resolution also requested
legislation to update Public Law 86-272 to extend the current protections available
for the solicitation for sales of goods to the solicitation for sales of services
and intangibles and to apply these protections to all business activity taxes.
The resolution also stated that any congressional approval of sales tax streamlining without the simultaneous enactment of these business activity tax measures would have a harmful effect on American businesses and the economy.
This resolution basically encouraged Congress to pass H.R. 3220, the “Business Activity Tax Simplification Act of 2003,” which was introduced in Congress in October 2003. This bill would establish a physical presence standard for income tax and other business activity taxes imposed by states.
Section Amended
No Code section was amended.
Effective Date
None
HF 2302 - COUNTY ENDOWMENT FUND FROM GAMBLING RECEIPTS
Prior Law
None.
New Provisions
A County Endowment Fund is created under the control of the Department of
Revenue. One-half of one percent of the adjusted gross receipts from gambling
games authorized under Chapter 99F is deposited into this fund. At the end
of each fiscal year, moneys in the fund are transferred into separate accounts
and distributed to counties which do not have gambling licenses. The moneys
are transferred to an eligible county recipient, which is a qualified community
foundation or community affiliate organization located in each county as defined
in Section 15E.303. If a county does not have an eligible county recipient,
the money stays in the account until an eligible county recipient is established.
The eligible county recipient must distribute 75% of the moneys to charitable organizations in that county and shall retain 25% for establishing a permanent endowment fund.
Section Amended
Section 1 of House File 2302 creates new section 15E.311, Code 2003. Section
50 amends section 99F.11, Code Supplement 2003, subsection 3, paragraph d.
Section 56 amends section 421.17, Code Supplement 2003, by adding new subsection
28.
Effective Date
July 1, 2004.
HF 2401 - ABOVEGROUND PETROLEUM STORAGE TANK FUND CREATED
Prior Law
An Underground Petroleum Storage Tank Fund existed to alleviate the financial
burden of owners of property required to clean up the damage caused by leaking
petroleum underground storage tanks when such leakage was not the fault of
the landowner required to pay for it.
New Provisions
A similar fund is created to benefit owners of land on which leaking aboveground
petroleum storage tanks have caused damage.
Section Amended
Section 4 of House File 2401 amends chapter 455G by adding a new section 455G.23
which is repealed as of December 31, 2006.
Effective Date
Upon enactment (04-20-04)
HF 2431 - EDUCATIONAL INSTITUTIONS
ELIGIBLE FOR THE UNIVERSITY-BASED
RESEARCH UTILIZATION PROGRAM TAX CREDIT
Prior Law
A university-based research utilization program tax credit administered by
the Department of Economic Development is available for purposes of encouraging
the utilization of university-based research. A new or existing business that
utilizes a technology developed by an employee at a university under the control
of the Iowa Board of Regents may apply for the program. A tax credit equal
to 10% of the tax liability of the approved business is issued to the university
employee responsible for the technology used by the approved business.
New Provisions
A new or existing business that utilizes a technology developed by an employee
of an Iowa community college or an accredited private university located in
Iowa may also apply for the university-based research utilization program.
A tax credit equal to 10% of the tax liability of the approved business is
issued to the employee of the community college or accredited private university
located in Iowa who was responsible for the technology used by the approved
business.
Section Amended
House File 2431 amends section 262B.11, Code Supplement 2003.
Effective Date
July 1, 2004, for fiscal years beginning on or after that date
HF 2484 - FRANCHISE TAX CREDIT FOR BANKS ORGANIZED AS LIMITED LIABILITY COMPANIES
Prior Law
Financial institutions can be organized as either an S corporation or a C
corporation for federal income tax purposes. In both cases, the financial institutions
doing business in Iowa must file a franchise tax return for Iowa tax purposes.
For those financial institutions who file as an S corporation and have income
taxed directly to its shareholders, a franchise tax credit is allowed equal
to the shareholder’s pro-rata share of the Iowa franchise tax paid by the financial
institution.
New Provisions
Financial institutions may now be organized as a limited liability company
under chapter 524 of the Iowa Code. If the limited liability company is taxed
as a partnership for federal income tax purposes, the income is taxed directly
to its shareholders, and a franchise tax credit is allowed equal to the shareholder’s
pro-rata share of the Iowa franchise tax paid by the financial institution.
At this time, any financial institutions organized as a limited liability company are taxed as a C corporation for federal income tax purposes. Legislation is pending in the United States Congress which would allow financial organizations to be taxed as a partnership for federal income tax purposes. Therefore, until legislation is passed at the federal level, there will be no franchise tax credit for shareholders of limited liability companies.
Section Amended
Section 46 of House File 2484 amends section 422.11, Code 2003.
Effective Date
July 1, 2004, for financial institutions organized as limited liability companies
on or after that date.
HF 2541 - UTILITY REPLACEMENT TAX
Prior Law
Transmission line property did not qualify as a “Major addition”. A taxing
district could receive little if any replacement tax, even though a considerable
amount of new transmission line property was located in the taxing district,
because the new replacement tax was allocated over all other existing electric
property.
The department was required to certify gas and electric company valuations to the county auditors by August 31.
New Provisions
The definition of “Major addition” is expanded to include acquisition of electric
transmission operating property. This change permits the taxing district to
receive all of the replacement tax for transmission line additions in excess
of $1 million.
Gas and electric companies that paid more than $500,000 in replacement taxes in the previous year or estimates their replacement tax liability will vary by more than 10% from the previous year are required to report their estimated replacement tax liability for the current year to the department by October 1. Also, the companies are required to report midyear additions of operating property and associated estimated replacement taxes to the department by October 1. These changes will provide better projections of the taxable valuations for local government replacement tax budgeting purposes.
The date the department is required to certify gas and electric company valuations to the county auditors was changed from August 31 to October 31 to accommodate the changes made under “New Provisions”.
Sections Amended
Section 1 of House File 2541 amends section 437A.3, subsection 18, Code Supplement
2003; section 2 amends section 437A.15, subsection 3, paragraph e, Code Supplement
2003; section 3 amends section 437A.19, subsection 2, paragraph f, Code Supplement
2003; and section 4 provides an effective and retroactive applicability date.
Effective Date
April 20, 2004. Applies retroactively to January 1, 2004.
HF 2553 - IOWA EDUCATIONAL SAVINGS PLAN TRUST CHANGES
Prior Law
A deduction is allowed for individual income tax for contributions made to
the Iowa educational savings plan trust, commonly referred to as “College Savings
Iowa.” The plan is administered by the State Treasurer. Participants can claim
a deduction up to $2,290 per beneficiary for contributions made in 2004, and
this amount is adjusted for inflation. These contributions are intended to
cover future higher education costs of beneficiaries. The minimum contribution
per beneficiary per year is $50, and contributions could be made in cash, proceeds
of gifts or other endowments. The treasurer can only make payments to an institution
of higher learning. Participants who cancel an agreement were not entitled
to any investment income earned on their contributions, and were subject to
penalties upon cancellation.
New Provisions
Technical changes to the Iowa educational savings plan trust were made. The
treasurer can make payments directly to a participant or beneficiary, and partial
nonqualified distributions can be made to participants. The minimum contribution
of $50 per beneficiary, per year, has been eliminated. All contributions must
now be made in cash. A participant who cancels an agreement will receive the
entire account balance, including the investment income, without any penalties
for cancellation.
Section Amended
House File 2553 amends various sections to chapter 12D, Code 2003.
Effective Date
These provisions take effect upon enactment, which was April 15, 2004.
SJR 2010 - PROPOSED CONSTITUTIONAL AMENDMENT
REQUIRING VOTER APPROVAL
FOR TAX INCREASES
Prior Law
None
New Provisions
Senate Joint Resolution 2010 proposes a constitutional amendment to the Iowa
Constitution, Article XIII, “People’s Right to Vote on Tax or Fee Increases,”
which has been approved by the Iowa General Assembly. This amendment would
require voter approval of any state tax or fee increase adopted in a fiscal
year that would raise annual revenue in excess of 1% of the state’s general
fund revenues received in the preceding fiscal year. Increases would be submitted
to voters in a general election every two years before taking effect, and must
be approved by a majority of the voters. The ballot would list the largest
increase first, and include other increases in descending order. All increases
of any one tax or fee shall be included together and are regarded as one increase.
The amendment provides that a tax increase can be allowed without voter approval if three conditions are met: (1) the Governor declares an emergency tax increase for only one specified fiscal year; (2) the Governor specifies the nature of the emergency and requests a tax increase for an emergency expenditure; and (3) the increase is approved by a two-thirds vote of the legislature. The emergency tax increase could not be enacted more than four months before the fiscal year to which it applies.
The amendment would allow any citizen or taxpayer to bring suit in the Iowa Supreme Court to enforce compliance within two years of adoption of a tax or fee increase. The Iowa Supreme Court has original jurisdiction on this suit, and the Court would be required to invalidate any tax or fee increase that was not properly submitted for a vote. The Court must also order the revenue to be refunded or applied to future taxes in cases where the tax or fee increase was not properly submitted.
This amendment must be approved by both the House and Senate in another legislative session, and then be approved by the voters statewide in order for this amendment to take effect.
Section Amended
None
Effective Date
Requires approval by another General Assembly and the voters before taking
effect.
SF 443-A - TAX CREDITS FOR INVESTMENTS IN QUALIFYING BUSINESSES
Prior Law
Only investments made by individual income taxpayers or a revocable trust
qualify for an investment tax credit for an equity investment in a qualifying
business approved by the Iowa Capital Investment Board.
In order to qualify for the investment tax credit, the investor could not include a person which was a current or previous owner, member, or shareholder in a qualifying business.
New Provisions
Investments made by a partnership, limited liability company, S corporation,
all estates or trusts, corporations, financial institutions, credit unions
or insurance companies in a qualifying business approved by the Iowa Capital
Investment Board can qualify for an investment tax credit. Investments made
by individuals or a revocable trust still qualify for the investment tax credit.
In order to qualify for the investment credit, the investor can include a person that holds less than a 70% ownership interest as an owner, member, or shareholder of the qualifying business.
Section Amended
Section 1 of Senate File 443 amends section 15E.42, subsection 3, Code Supplement
2003. Section 2 amends section 15E.43, subsection 1, paragraphs a and b, Code
Supplement 2003. Section 3 amends section 15E.44, subsection 4, Code Supplement
2003.
Effective Date
Retroactive to January 1, 2004, for tax years beginning on or after that date.
SF 443-B - TAX CREDITS FOR INVESTMENTS IN VENTURE CAPITAL FUNDS
Prior Law
A taxpayer could not claim a tax credit for an equity investment in a venture
capital fund approved by the Iowa Capital Investment Board if the taxpayer
is a venture capital investment fund allocation manager for the Iowa fund of
funds or an investor that receives a tax credit for the same investment in
a community-based seed capital fund.
New Provisions
A taxpayer cannot also claim a tax credit for an equity investment in a venture
capital fund if the taxpayer receives a tax credit for the same investment
in a qualifying business.
Section Amended
Section 4 of Senate File 443 amends section 15E.51, subsection 4, Code Supplement
2003.
Effective Date
Retroactive to January 1, 2004, for tax years beginning on or after that date.
SF 443-C - TAX CREDITS FOR INVESTMENTS IN COMMUNITY-BASED SEED CAPITAL FUNDS
Prior Law
For an investment in a community-based seed capital fund to be approved by
the Iowa Capital Investment Board for a tax credit, the fund must have capital
commitments of at least $500,000, but not more than $3 million. The fund must
also have no fewer that ten individual investors, and the fund must invest
at least 33% of its invested capital in no fewer than two separate qualifying
businesses within thirty-six months after commencing the fund’s investment
activities.
New Provisions
For the community-based seed capital fund to be approved, the fund must have
capital commitments of at least $125,000, but not more than $3 million. However,
if the fund is a rural business investment company formed under the rural business
investment program of the federal Farm Security and Rural Investment Act of
2002, the fund can have capital commitments in excess of $3 million and still
be approved. The fund must have no fewer than five individual investors, and
the fund must invest at least 33% of its invested capital in one or more separate
qualifying businesses within thirty-six months after commencing the fund’s
investment activities
Section Amended
Section 5 of Senate File 443 amends section 15E.45, subsection 2, paragraphs
b and c, Code Supplement 2003. Section 6 amends section 15E.45, subsection
6, Code Supplement 2003.
Effective Date
Retroactive to January 1, 2002, for tax years beginning on or after that date.
SF 2026 - REINSTATING THE PHASEOUT OF TAXES ON RESIDENTIAL UTILITIES
Prior Law
Through an unusual combination of circumstances, the phaseout of state sales
and use taxes on residential utilities was removed from the Iowa statutes after
the rate of taxation was lowered from five to three percent.
New Provisions
The phaseout of state sales and use taxes on residential utilities (gas, electricity,
and fuel) is reenacted into law. The phaseout is not applicable to local option
taxes imposed under chapters 423B and 423E. The state rate of taxation is two
percent for the calendar year 2004, one percent for the calendar year 2005,
and zero percent on and after January 1, 2006.
Section Amended
Senate File 2026 amends Section 423.3, 2003 Iowa Acts, First Extraordinary
Session, chapter 2, section 96.
Effective Date
July 1, 2004.
SF 2167 - INHERITANCE TAX DISCLAIMER
Prior Law
Iowa Code section 633.704 provided for property, a power, or interest to be
disclaimed by a beneficiary and to pass as if the beneficiary had predeceased
the decedent, unless the decedent or transferor had provided otherwise. This
section also set forth the requirements for the disclaimer to be valid.
New Provisions
Iowa
Code section 633.704 was repealed with the addition of new sections 633.704A
through and including 633.704Q
to implement the "Iowa Uniform Disclaimer
of Property Interest Act". These new Code sections set forth specific
criteria for various types of disclaimers which may involve real property,
tangible property, future interests, trust interests, medical assistance, jointly
held property, and powers of appointment. This new act also provides that any
disclaimer that is valid under section 2518 of the Internal Revenue Code is
also valid for Iowa purposes.
Section Amended
Senate File 2167 repeals Iowa Code section 633.704 and inserts new sections
of the Iowa Code which are 633.704A through and including 633.704Q to implement
the “Iowa Uniform Disclaimer of Property Interest Act”.
Effective Date
Effective for disclaimers delivered or filed on or after July 1, 2004.
SF 2187 - ADDITIONAL MUNICIPAL UTLITIY EXCLUSION FROM EXEMPTION
Prior Law
Sales of goods and taxable services used by or in connection with the operation
of any municipally owned public utility engaged in selling gas, electricity,
heat, or pay television service to the general public were excluded from the
exemption in favor of sales to Iowa municipalities and thus were taxable.
New Provisions
Sales of goods and taxable services used by or in connection with the operation
of any municipally owned public utility engaged in selling communication services
to the general public are also excluded from exemption and thus are taxable.
Section Amended
Section 4 of Senate File 2187 amends Section 423.3, subsection 31, paragraph
a, as enacted by 2003 Iowa Acts, First extraordinary Session, chapter 2, section
96.
Effective Date
July 1, 2004.
SF 2270 - DISCHARGE RECORD OF VETERAN CONFIDENTIAL
Prior Law
The military service discharge record of a veteran recorded in the office
of the county recorder was a confidential record with certain exceptions. One
of the exceptions was that it could be made available to a person conducting
research who received approval from the commission of veteran affairs.
New Provisions
The record may be made available to the commission of veteran affairs. However,
the record can no longer be made available to a person conducting research
who has received approval from the commission of veteran affairs.
Sections Amended
Section 4 of Senate File 2270 amends section 331.608, subsection 6, paragraph
e, Code Supplement 2003, and section 5 amends section 331.608, subsection 6,
paragraph f, Code Supplement 2003, by striking the paragraph.
Effective Date
July 1, 2004.
SF 2290-A - RECAPTURE OF BENEFITS UNDER THE NEW JOBS AND INCOME PROGRAM
Prior Law
For eligible businesses approved under the New Jobs and Income Program (NJIP),
the business was subject to repayment of a portion of the investment tax credit
received under the program if job creation requirements were not met. For eligible
businesses approved under the Enterprise Zone (EZ) program and the New Capital
Investment Program (NCIP), the business was subject to repayment of a portion
of all tax incentives received under the program if job creation requirements
were not met.
New Provisions
For eligible businesses approved under the NJIP, the business is subject to
repayment of a portion of all tax incentives received under the program, not
just the investment tax credit, if job creation requirements are not met.
Section Amended
Section 1 of Senate File 2290 amends section 15.330, subsection 1, unnumbered
paragraph 1, Code 2003.
Effective Date
March 17, 2004, for NJIP projects approved by the Department of Economic Development
on or after that date.
SF 2290-B - SALES TAX REFUND FOR RACKS, SHELVING AND CONVEYOR EQUIPMENT
Prior Law
Eligible businesses approved under the New Jobs and Income Program (NJIP),
the Enterprise Zone Program (EZ) and the New Capital Investment Program (NCIP)
could not obtain a refund of sales or use tax paid on racks, shelving and conveyor
equipment used in a warehouse or distribution center.
New Provisions
Eligible businesses approved under NJIP, EZ or NCIP are entitled to refunds
of sales or use tax, but not local option tax, paid on racks, shelving and
conveyor equipment used in a warehouse or distribution center. These refund
requests are made directly to the Department of Revenue.
Eligible businesses under the NJIP and NCIP who lease racks, shelving and conveyor equipment from a third- party developer will receive a corporation income tax credit equal to the sales and use tax paid by the developer. The Department of Economic Development will issue a tax credit certificate to the eligible business after documentation is received from the developer regarding the amount of sales tax paid. Any credit in excess of the tax liability for the tax year may be carried forward for up to seven years, or the eligible business may elect to receive a refund for all or a portion of the unused credit.
The combined amount of refunds and tax credit certificates available for sales tax paid on racks, shelving and conveyor equipment shall not exceed $500,000 in a fiscal year. Requests for refunds and tax credit certificates will be processed in the order they are received. If refunds and tax credit certificates exceed $500,000 in a fiscal year, they will be considered in succeeding fiscal years.
Section Amended
Section 2 of Senate File 2290 amends section 15.331A, unnumbered paragraph
1, Code Supplement 2003. Section 3 creates new section 15.331C. Section 6 amends
section 15.385, Code Supplement 2003, by adding new subsection 1A.
Effective Date
March 17, 2004, for NJIP, EZ and NCIP projects approved by the Department
of Economic Development on or after that date.
SF 2290-C - CORPORATION TAX CREDIT FOR CERTAIN SALES TAX
PAID BY THIRD PARTY
DEVELOPER
Prior Law
None
New Provisions
For
eligible businesses approved under the New Jobs & Income Program (NJIP)
and the New Capital Investment Program (NCIP), a corporation income tax credit
can be claimed equal to the sales tax paid by a third-party developer relating
to gas, electricity, water or sewer utility services, goods, wares, or merchandise,
or on services rendered, furnished, or performed to or for a contractor of
subcontractor and used in the fulfillment of a written contract relating to
the construction or equipping of a facility of the eligible business. Sales
tax attributable to racks, shelving, and conveyor equipment to be used in a
warehouse or distribution facility can also be included.
Upon project completion, the third-party developer must provide documentation to the Department of Economic Development regarding the amount of sales tax paid. The sales tax attributable to racks, shelving and conveyor equipment must be identified separately. A tax credit certificate will be issued to the eligible business by the Department of Economic Development for the sales tax paid. A separate tax credit certificate will be issued for any sales tax attributable to racks, shelving and conveyor equipment.
Any credit in excess of the tax liability for the tax year may be carried forward for up to seven years, or the eligible business may elect to receive a refund for all or a portion of the unused credit.
This credit is not available to businesses approved under the Enterprise Zone program.
Section Amended
Section 3 of Senate File 2290 creates new section 15.331C. Section 6 amends
section 15.385, Code Supplement 2003, by adding new subsection 1A.
Effective Date
March 17, 2004, for NJIP and NCIP projects approved by the Department of Economic
Development on or after that date.
SF 2290-D - INVESTMENT TAX CREDIT FOR ELIGIBLE BUSINESSES
Prior Law
For
eligible businesses approved under the New Jobs & Income Program (NJIP),
the Enterprise Zone Program (EZ) and the New Capital Investment Program (NCIP),
leased property was not eligible for the investment tax credit for individual
income tax, corporation income tax, franchise tax and insurance premium tax.
New Provisions
Leased property is now eligible for the investment tax credit under certain
circumstances. The leased property must involve a new building or major renovation,
and cannot include an existing building. For NJIP and EZ programs, the applicants
must enter into, at minimum, a ten year lease. For the NCIP program, the applicant
must enter into, at minimum, a five year lease.
The investment tax credit is based on the annual base rent paid to a third-party developer for a period not to exceed ten years, provided that the rent payments for these ten years does not exceed the cost of the land and the third-party developer’s costs to build or renovate the building.
Any investment tax credit on leased property in excess of the tax liability for the current year can be carried forward for up to seven years or until depleted, whichever occurs first.
Section Amended
Section 4 of Senate File 2290 amends section 15.333, subsection 1, Code Supplement
2003. Section 5 amends section 15.333A, subsection 1, Code 2003. Section 7
amends section 15.385, subsection 3, paragraph b, Code Supplement 2003. Section
8 amends section 15.385, subsection 4, paragraph b, Code Supplement 2003.
Effective Date
March 17, 2004, for NJIP, NCIP and EZ projects approved by the Department
of Economic Development on or after that date.
SF 2290-E - REPEAL OF ELIGIBLE DEVELOPMENT BUSINESSES
Prior Law
Tax incentives were available to eligible development businesses approved
by the Department of Economic Development. Eligible development businesses
included developers that constructed, expanded or rehabilitated building space
in a part of a city or county in which there was a designated enterprise zone.
These incentives included an investment tax credit for new investment directly
related to the construction, expansion or rehabilitation of building space,
and a sales and use tax refund available for other eligible businesses operating
in an enterprise zone.
New Provisions
The eligible development business portion of the enterprise zone program was
repealed. The four businesses that were approved by the Department of Economic
Development under this program will continue to receive the tax incentives
to which they were entitled.
Section Amended
Section 9 of Senate File 2290 amends section 15E.195, Code 2003. Section 10
amends section 15E.196, subsection 7, Code Supplement 2003, by striking the
subsection. Section 11 repeals section 15E.193C, Code Supplement 2003.
Effective Date
March 17, 2004
SF 2291 - URBAN REVITALIZATION PROPERTY TAX EXEMPTION
Prior Law
Chapter 404 provided four property tax exemption schedules in section 404.3
and one in section 404.3A for improvements made to qualified real estate.
New Provisions
Two additional property tax exemption schedules are provided for improvements
made to abandoned property in section 404.3B.
Sections Amended
Section 1 of Senate File 2291 amends section 404.2, subsection 2, paragraph
h, Code 2003; section 2 amends section 404.3, Code 2003, by adding new subsection
4A; section 3 amends section 404.3, subsections 5 and 6, Code 2003; and section
4 adds new section 404.3B.
Effective Date
May 17, 2004. Applies to urban
revitalization property tax exemptions claimed and allowed on or after January
1, 2005.
SF 2296-A - DECOUPLING WITH 50% BONUS DEPRECIATION
Prior Law
Iowa did not couple with the 30% “bonus depreciation” provision allowable
for federal income tax purposes for assets placed in service after September
10, 2001 but before September 11, 2004. The primary reference to the Internal
Revenue Code was amended to January 1, 2003, but specific provisions were added
to decouple with the 30% federal “bonus depreciation.”
New Provisions
The Jobs and Growth Tax Relief Reconciliation Act of 2003 passed by Congress
in May 2003 provided for a 50% “bonus depreciation” in Section 168(k) of the
Internal Revenue Code for assets placed in service on or after May 5, 2003,
and before January 1, 2005. However, the primary reference in Iowa law to the
Internal Revenue Code of January 1, 2003 was not amended.
Therefore, the 50% “bonus depreciation” provision was not adopted for individual, corporation and franchise tax purposes. The MACRS (modified accelerated cost recovery system) method of depreciation without the “bonus depreciation” provision in Section 168(k) of the Internal Revenue Code must be used in computing depreciation for Iowa tax purposes for assets placed in service after September 10, 2001, and before January 1, 2005.
Section Amended
None
Effective Date
Retroactive to May 5, 2003, for tax years ending on or after that date.
SF 2296-B - DECOUPLING WITH SECTION 179 EXPENSING
Prior Law
The Jobs and Growth Tax Relief Reconciliation Act of 2003 passed by Congress
in May 2003 provided for an increase in the expensing allowance in section
179(b) of the Internal Revenue Code for assets placed in service on or January
1, 2003, and before January 1, 2006. Under this provision, taxpayer can immediately
deduct, rather than depreciate, $100,000 of the cost of qualified property
placed in service. Previously, the deduction was limited to $25,000. Also,
off-the shelf computer software is now considered qualifying property for purposes
of expensing under section 179(b). The primary reference to the Internal Revenue
Code in various statutes was amended through January 1, 2003, which did not
include the provisions of the Jobs and Growth Tax Relief Reconciliation Act
of 2003.
New Provisions
The primary reference in Iowa law to the Internal Revenue Code of January
1, 2003 was not amended.
Therefore, the increase in the Section 179 expensing allowance to $100,000 was not adopted for individual, corporation and franchise tax purposes. The expensing amount for Iowa tax purposes for Section 179 expense is $25,000 for assets placed in service on or after January 1, 2003, and before January 1, 2006. In addition, off-the-shelf computer software is not qualifying property for purposes of expensing under section 179(b) for Iowa tax purposes.
This adjustment will also result in a different basis of assets for Iowa tax purposes. Therefore, if a sale or disposition of “Section 179” property occurs and the Iowa Section 179 adjustment applied to this property in prior years, the amount of gain or loss on the sale or disposition of the asset reported on the federal return must be adjusted for Iowa purposes to account for the different basis.
Section Amended
None
Effective Date
Retroactive to January 1, 2003, for tax years ending on or after that date.
SF 2296-C - DECOUPLING WITH PROVISIONS OF MILITARY FAMILY TAX RELIEF ACT
OF 2003
Prior Law
The Military Family Tax Relief Act of 2003 passed by Congress in November
2003 targeted tax relief to members of the United States Armed Forces. The
primary reference to the Internal Revenue Code in various statutes was amended
through January 1, 2003, which did not include the provisions of the Military
Family Tax Relief Act of 2003.
Two similar provisions of the Military Family Tax Relief Act of 2003 were adopted for Iowa tax purposes in 2003. For tax years beginning on or after January 1, 2003, a deduction is allowed for individual income tax of up to $1,500 in overnight travel expenses of individuals in the national guard and military reserve who travel away from home more than one hundred miles for the performance of services for the guard or reserve. Also, the amount of death gratuity payment reported on the federal income tax return by a survivor of a deceased member of the armed forces is excluded for Iowa tax purposes for deaths occurring after September 10, 2001.
New Provisions
The primary reference in Iowa law to the Internal Revenue Code of January
1, 2003 was not amended.
Therefore, unless there was already an existing provision in Iowa law, the provisions of the Military Family Tax Relief Act of 2003 were not adopted for Iowa individual income tax purposes. The provisions that were not adopted are as follows:
1) The deduction for travel expenses of national guard and military reserve
members in excess of $1,500 is not allowed for Iowa tax purposes.
2) The exclusion of gain from the sale of a principal residence by military
and foreign service personnel if the individual has lived in the house for
at least two of the previous five years is not allowed for Iowa tax purposes.
3) There is no exclusion of amounts received by members of the Armed Forces
under military assistance programs for Iowa tax purposes.
4) Penalty-free withdrawals from Coverdell education savings accounts and qualified
tuition programs on account of attendance at the U.S. Service Academies is
not allowed for Iowa tax purposes.
Section Amended
None
Effective Date
Retroactive to January 1, 2003, for tax years ending on or after that date.
SF 2296-D - UPDATE OF REFERENCES TO THE INTERNAL REVENUE CODE
–RESEARCH
ACTIVITIES CREDIT
Prior Law
The references to the Internal Revenue Code in the various statutes for the
research activities credit were amended through January 1, 2003.
New Provisions
The references to the Internal Revenue Code in the various statutes for the
Iowa research activities credit are updated to January 1, 2004, so the federal
changes in the research activities credit are considered to have been adopted
for Iowa tax purposes.
Section Amended
Section 1 and section 2 of Senate File 2296 amend section 15.335, subsection
4 and section 15A.9, subsection 8, paragraph e, Code Supplement 2003. Section
17 amends section 422.10, subsection 3, Code Supplement 2003. Section 18 amends
section 422.33, subsection 5, paragraph “d”, Code Supplement 2003.
Effective Date
Retroactive to January 1, 2003,
for tax years beginning on or after that.
SF 2296-E - DEPARTMENT CAN APPEAL STATE BOARD DECISIONS
Prior Law
The Department was barred from appealing decisions by the State Board of Tax
Review. If a taxpayer received an unfavorable decision from the State Board
of Tax review, the taxpayer could appeal the unfavorable decision.
New Provisions
Iowa Code section 421.1(4) was amended to include a new paragraph which allows
the department or a taxpayer to appeal an unfavorable decision of the State
Board of Tax Review.
Section Amended
Section 3 of Senate File 2296, amends section 421.1, subsection 4,Code Supplement
2003.
Effective Date
Effective July 1, 2004
SF 2296-F - ADMINISTRATIVE LEVY AS CONDEMNATION OF FUNDS
AND RECOVERY FROM
CHALLENGES TO THE LEVY
Prior Law
Iowa Code section 421.17A did not expressly state that the levy was a condemnation
of funds. Nor did the statute state that actions and inactions by the department
were an election to pursue or not pursue other remedies.
Previously, Iowa Code section 421.17A(8) did not expressly state that challenges to an administrative levy was limited to restitution of only the amount wrongfully encumbered or collected by the department.
Iowa Code section 421.17A did not expressly state the limits of a challenge to an administrative levy concerning the validity of the tax.
New Provisions
Iowa Code section 421.17A was amended to provide that an administrative levy
be considered the statutory equivalent of the condemnation of funds under Iowa
Code chapter 642, which is condemnation of funds by garnishment. This section
was also amended to state remedies for an administrative levy are cumulative.
In addition, the new amendment states that any action or lack of action by
the department or the attorney general is not to be construed as an election
regarding remedies.
Iowa Code section 421.17A(8) was amended to provide that if a taxpayer challenges an administrative levy that has been executed, the taxpayer’s recovery is limited to the restitution of the wrongfully encumbered property or amount collected.
Iowa Code section 421.17A(8)(g) was amended to provide that an administrative levy is only executed upon the expiration of the statute of limitations to protest the tax. Consequently, a challenge to an administrative levy can only be used to challenge issues involving the levy and not the validity of the tax.
Section Amended
Section 5 of Senate File 2296 amends section 421.17A, subsection 2, paragraph
“a”, Code Supplement 2003. Section 10 of Senate File 2296 amends section 421.17A,
subsection 8, by adding new paragraphs “g” and “h”, Code Supplement 2003.
Effective Date
Effective for administrative levies imposed on or after July 1, 2004.
SF 2296-G - ADMINISTRATIVE WAGE ASSIGNMENT AS CONDEMNATION
OF FUNDS
AND CHALLENGES
TO THE ASSIGNMENT
Prior Law
Iowa Code section 421.17B did not expressly state that the levy was a condemnation
of funds. Nor did statutory provisions state that actions or inactions by the
department were an election to pursue or not pursue other remedies. In addition,
this statute specifically limited remedies to those set forth in Iowa Code
chapters 626 and 642 if the wage assignment was not successful.
Under prior law, challenges to an administrative wage assignment were subject to review under Iowa Code section 17A. In addition, remedies for such challenges were limited to equitable relief.
Iowa Code section 421.17B did not expressly state the limits of a challenge to an administrative wage assignment concerning the validity of the tax.
New Provisions
Iowa Code section 421.17B was amended to provide that an administrative levy
be considered the statutory equivalent of the condemnation of funds under Iowa
Code chapter 642, which is condemnation of funds by garnishment. This section
was also amended to state remedies for an administrative levy are cumulative.
In addition, the new amendment states that any action or lack of action by
the department or the attorney general is not to be construed as an election
regarding remedies.
An amendment was also made to the section regarding challenges of executed administrative wage assignments. The amendments provide that challenges to an administrative wage assignment, even challenges concerning the validity of the assignment, are not subject to review under Iowa Code chapter 17A. Remedies for such challenges are no longer limited to equitable relief. However, a cause of action for recovery against the department for a wrongful administrative wage assignment is limited to restitution of the amount that had been wrongfully encumbered or obtained by the department.
Iowa Code section 421.17B(8)(h) was amended to provide that an administrative wage assignment is only executed upon the expiration of the statute of limitations to protest the tax. Consequently, a challenge to an administrative wage assignment can only be used to challenge issues involving the wage assignment and not the validity of the tax.
Section Amended
Section 11 of Senate file 2296 amends section 421.17B, subsection 2, paragraph
a, Code Supplement 2003. Section 14 amends section 421.17B, subsection 8, paragraphs
a, b, c, and f, Code Supplement 2003. Section 15 amends section 421.17B, subsection
8, Code Supplement 2003.
Effective Date
Effective for administrative wage assignments filed on or after July 1, 2004.
SF 2296-H - A RETROACTIVE EXEMPTION FOR “CIGARETTE BUYDOWNS”
AND SIMILAR
TRADE DISCOUNTS
Prior Law
Trade discounts given or allowed by manufacturers, distributors, or wholesalers
to retailers, or by manufacturers or distributors to wholesalers, and payments
made by manufacturers, distributors, or wholesalers directly to retailers or
by manufacturers or distributors to wholesalers to reduce the sales price of
the manufacturer's, distributor's, or wholesaler's product or to promote the
sale or recognition of the manufacturer's, distributor's, or wholesaler's product
were not excluded from taxable gross receipts or from the taxable sales price
of a product. Trade discounts which are commonly known as “cigarette buydowns”
were among the trade discounts excluded from exemption.
New Provisions
The amount of any trade discount given or allowed by a manufacturer, distributor,
or wholesaler to a retailer or by a manufacturer or distributor to a wholesaler
and payments made a by manufacturer, distributor, or wholesaler directly to
a retailer or by a manufacturer or distributor to a wholesaler to reduce the
sales price of the manufacturer's, distributor's, or wholesaler's product or
to promote the sale or recognition of the manufacturer's, distributor's, or
wholesaler's product is not included in taxable gross receipts or in any taxable
sales price if excessive sales tax is not collected from the purchaser. This
paragraph does not apply to coupons issued by manufacturers, distributors,
or wholesalers to consumers.
Section Amended
Section 19 of Senate File 2296 amends section 422.42, subsection 6, Code 2003.
Section 22 of Senate File 2296 amends section 423.1, subsection 47, paragraph
b as enacted by 2003 Iowa Acts, First Extraordinary Session, chapter 2, section
94 by adding a new subparagraph.
Effective Date
Section 19 of Senate File 2296 is effective upon enactment (04-14-04), is
retroactive to January 1, 1997, but is void on and after July 1, 2004. Section
52 of the bill limits the amount of refunds resulting from the retroactive
effect of section 19 to $25,000 in the aggregate. Claims are prorated if more
than $25,000 is applied for. The combined effect of sections 52 and 53 is to
require that claims be filed by September 30, 2004 to be valid.
SF 2296-I - COLLECTED HOTEL/MOTEL TAXES ARE TRUST FUND TAXES
Prior Law
For the purposes of collections, Iowa statutory law was silent on the fact
that taxes, once collected, were to be held in trust for the State of Iowa.
This premise had to be argued by the department’s collection section on a case
by case basis.
New Provisions
Iowa Code section 422A.1 was amended to provide that all hotel/motel taxes
collected by anyone are to be held in trust for the State of Iowa and the local
jurisdictions imposing the taxes.
Section Amended
Section 20 of Senate File 2296, amends section 422A.1, Code Supplement 2003.
Effective Date
Effective July 1, 2004
SF 2296-J - COLLECTED LOCAL OPTION TAXES ARE TRUST FUND TAXES
Prior Law
For the purposes of collections, Iowa statutory law was silent on the fact
that taxes, once collected, were to be held in trust for the State of Iowa.
This premise had to be argued by the department’s collection section on a case
by case basis.
New Provisions
Iowa Code section 422B.9(3) was amended to provide that all local option taxes
collected by anyone are to be held in trust for the State of Iowa and the local
jurisdictions imposing the taxes.
Section Amended
Section 21 of Senate File 2296, amends section 422B.9(3). Subsection 3, paragraph
a, Code Supplement 2003.
Effective Date
Effective July 1, 2004
SF 2296-K - RENTS, ROYALTIES, COPYRIGHT, AND LICENSE FEES REDEFINED
Prior Law
Leasing or rental of tangible personal property was a taxable service. The
gross receipts from rents, royalties, copyright, and license fees resulting
from tangible personal property rental were defined as the gross receipts from
the performance of a taxable service. New chapter 423 of the Code (The Streamlined
Sales Tax Act) redefined leasing or rental of tangible personal property to
be the sale of tangible personal property and not the furnishing of a taxable
service. However, new chapter 423 was written in such a way that receipts from
rents, royalties, copyright, and license fees resulting from tangible personal
property rental continued to be defined as the receipts from the performance
of a taxable service and not as the receipts from the sale of tangible personal
property.
New Provisions
Define receipts from rents, royalties, copyright, and license fees associated
with the rental of tangible personal property to be part of the “sales price”
from the sale of tangible personal property and not part of the sales price
from the furnishing of a taxable service.
Section Amended
Section 23 of Senate File 2296 amends Section 423.1, subsection 47, as enacted
by 2003 Iowa Acts, First Extraordinary Session, chapter 2, section 94. Section
24 of Senate File 2296 amends Section 423.2, subsection 6, unnumbered paragraph
2, as enacted by 2003 Iowa Acts, First Extraordinary Session, chapter 2, section
95.
Effective Date
July 1, 2004.