House File 1 - Introduced HOUSE FILE 1 BY BOSSMAN A BILL FOR An Act relating to the child and dependent care and early 1 childhood development tax credits, and including 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1171YH (2) 89 jm/jh

H.F. 1 Section 1. Section 422.12C, subsection 1, paragraphs f and 1 g, Code 2021, are amended to read as follows: 2 f. For a taxpayer with net income of forty thousand dollars 3 or more but less than forty-five ninety thousand dollars, 4 thirty percent. 5 g. For a taxpayer with net income of forty-five ninety 6 thousand dollars or more, zero percent. 7 Sec. 2. Section 422.12C, subsection 2, paragraph a, Code 8 2021, is amended to read as follows: 9 a. The taxes imposed under this subchapter , less the amounts 10 of nonrefundable credits allowed under this subchapter , may 11 be reduced by an early childhood development tax credit equal 12 to twenty-five percent of the first one thousand dollars 13 which the taxpayer has paid to others for each dependent, as 14 defined in the Internal Revenue Code, ages three through five 15 for early childhood development expenses. In determining the 16 amount of early childhood development expenses for the tax year 17 beginning in the 2006 calendar year only, such expenses paid 18 during November and December of the previous tax year shall 19 be considered paid in the tax year for which the tax credit 20 is claimed. This credit is available to a taxpayer whose net 21 income is less than forty-five ninety thousand dollars. If the 22 early childhood development tax credit is claimed for a tax 23 year, the taxpayer and the taxpayer’s spouse shall not claim 24 the child and dependent care credit under subsection 1 . 25 Sec. 3. APPLICABILITY. This Act applies to tax years 26 beginning on or after January 1, 2021. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 This bill increases the maximum Iowa net income threshold 31 level for purposes of calculating the Iowa child and dependent 32 care credit and the early childhood development tax credit 33 available against the individual income tax. 34 CHILD AND DEPENDENT CARE CREDIT. Currently, an individual 35 -1- LSB 1171YH (2) 89 jm/jh 1/ 2

H.F. 1 may claim 30 percent of the federal child and dependent care 1 credit provided in section 21 of the Internal Revenue Code 2 against the individual income tax if the individual’s net 3 income is less than $45,000. Under the bill, an individual may 4 claim 30 percent of the federal child and dependent care credit 5 provided in section 21 of the Internal Revenue Code against the 6 individual income tax if the individual’s net income is less 7 than $90,000. 8 EARLY CHILDHOOD DEVELOPMENT TAX CREDIT. The bill increases 9 the income threshold determining the eligibility of a taxpayer 10 for the early childhood development tax credit. The bill 11 increases the eligibility threshold from a taxpayer whose net 12 income is less than $45,000 per year to less than $90,000 per 13 year. By increasing the eligibility threshold, taxpayers whose 14 net income is less than $90,000 are now eligible to take the 15 early childhood development tax credit equaling 25 percent of 16 the first $1,000 which the taxpayer has paid to others for 17 early childhood development expenses for each dependent ages 18 three through five. 19 APPLICABILITY. The bill applies to tax years beginning on or 20 after January 1, 2021. 21 -2- LSB 1171YH (2) 89 jm/jh 2/ 2