Bill Text: IA HF2489 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act relating to state and local revenue and finance by modifying the income taxes, the sales and use taxes and local option sales tax, the hotel and motel excise tax, the automobile rental excise tax, the Iowa educational savings plan trust, and the disabilities expenses savings plan trust, making penalties applicable, and including immediate effective date and retroactive and other applicability provisions. (Formerly HSB 671.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2018-05-05 - Withdrawn. H.J. 992. [HF2489 Detail]
Download: Iowa-2017-HF2489-Introduced.html
House File 2489 - Introduced HOUSE FILE BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 671) A BILL FOR 1 An Act relating to state and local revenue and finance by 2 modifying the income taxes, the sales and use taxes and 3 local option sales tax, the hotel and motel excise tax, the 4 automobile rental excise tax, the Iowa educational savings 5 plan trust, and the disabilities expenses savings plan 6 trust, making penalties applicable, and including immediate 7 effective date and retroactive and other applicability 8 provisions. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5613HV (5) 87 mm/jh PAG LIN 1 1 DIVISION I 1 2 INCOME TAX CHANGES BEGINNING IN TAX YEAR 2018 1 3 Section 1. Section 422.7, Code 2018, is amended by adding 1 4 the following new subsections: 1 5 NEW SUBSECTION. 51. a. Notwithstanding any other provision 1 6 of law to the contrary, the increased expensing allowance under 1 7 section 179 of the Internal Revenue Code, as amended by Pub. 1 8 L. No. 115=97, {13101, applies in computing net income for 1 9 state tax purposes for tax years beginning on or after January 1 10 1, 2018, subject to the limitations in this subsection. 1 11 b. If the taxpayer has taken the increased expensing 1 12 allowance under section 179 of the Internal Revenue Code, 1 13 as amended by Pub. L. No. 115=97, {13101, for purposes of 1 14 computing federal adjusted gross income for tax years beginning 1 15 on or after January 1, 2018, then the taxpayer shall make the 1 16 following adjustments to federal adjusted gross income when 1 17 computing net income for state tax purposes for the same tax 1 18 year: 1 19 (1) Add the total amount of expense deduction taken on 1 20 section 179 property allowable for federal tax purposes under 1 21 section 179 of the Internal Revenue Code, as amended by Pub. 1 22 L. No. 115=97, {13101. 1 23 (2) (a) For tax years beginning on or after January 1, 1 24 2018, but before January 1, 2020, subtract the amount of 1 25 expense deduction on section 179 property allowable for federal 1 26 tax purposes under section 179 of the Internal Revenue Code, 1 27 as amended by Pub. L. No. 115=97, {13101, not to exceed one 1 28 hundred thousand dollars. The subtraction in this subparagraph 1 29 division shall be reduced, but not below zero, by the amount by 1 30 which the total cost of section 179 property placed in service 1 31 by the taxpayer during the tax year exceeds four hundred 1 32 thousand dollars. 1 33 (b) For tax years beginning on or after January 1, 2020, 1 34 subtract the amount of expense deduction on section 179 1 35 property allowable for federal tax purposes under section 179 2 1 of the Internal Revenue Code, as amended by Pub. L. No. 115=97, 2 2 {13101, not to exceed two hundred fifty thousand dollars. The 2 3 subtraction in this subparagraph division shall be reduced, 2 4 but not below zero, by the amount by which the total cost of 2 5 section 179 property placed in service by the taxpayer during 2 6 the tax year exceeds one million dollars. 2 7 (3) Any other adjustments to gains or losses necessary to 2 8 reflect adjustments made in subparagraphs (1) and (2). 2 9 c. The director shall adopt rules pursuant to chapter 17A 2 10 to administer this subsection. 2 11 NEW SUBSECTION. 52. a. For tax years beginning on or 2 12 after January 1, 2018, a taxpayer may elect to take advantage 2 13 of this subsection in lieu of subsection 51, but only if the 2 14 taxpayer's total expensing allowance deduction for federal tax 2 15 purposes under section 179 of the Internal Revenue Code, as 2 16 amended by Pub. L. No. 115=97, {13101, that is allocated to 2 17 the taxpayer from one or more partnerships, S corporations, or 2 18 limited liability companies electing to have the income taxed 2 19 directly to the individual exceeds one hundred thousand dollars 2 20 for a tax year beginning on or after January 1, 2018, but 2 21 before January 1, 2020, or exceeds two hundred fifty thousand 2 22 dollars for a tax year beginning on or after January 1, 2020, 2 23 and would, except as provided in this subsection, be limited 2 24 for purposes of computing net income for state tax purposes 2 25 pursuant to subsection 51. 2 26 b. A taxpayer who elects to take advantage of this 2 27 subsection shall make the following adjustments to federal 2 28 adjusted gross income when computing net income for state tax 2 29 purposes: 2 30 (1) Add the total amount of section 179 expense 2 31 deduction allocated to the taxpayer from all partnerships, S 2 32 corporations, or limited liability companies electing to have 2 33 the income taxed directly to the individual, to the extent the 2 34 allocated amount was allowed as a deduction to the taxpayer 2 35 for federal tax purposes for the tax year under section 179 of 3 1 the Internal Revenue Code, as amended by Pub. L. No. 115=97, 3 2 {13101. 3 3 (2) From the amount added in subparagraph (1), do the 3 4 following: 3 5 (a) For tax years beginning on or after January 1, 2018, 3 6 but before January 1, 2020, subtract the first one hundred 3 7 thousand dollars of expensing allowance deduction on section 3 8 179 property. 3 9 (b) For tax years beginning on or after January 1, 2020, 3 10 subtract the first two hundred fifty thousand dollars of 3 11 expensing allowance deduction on section 179 property. 3 12 (3) The remaining amount, equal to the difference between 3 13 the amount added in subparagraph (1), and the amount subtracted 3 14 in subparagraph (2), may be deducted by the taxpayer but such 3 15 deduction shall be amortized equally over five tax years 3 16 beginning in the following tax year. 3 17 (4) Any other adjustments to gains or losses necessary to 3 18 reflect adjustments made in subparagraphs (1) through (3). 3 19 c. A taxpayer who elects to take advantage of this 3 20 subsection shall not take the increased expensing allowance 3 21 under section 179 of the Internal Revenue Code, as amended by 3 22 Pub. L. No. 115=97, {13101, for any section 179 property placed 3 23 in service by the taxpayer in computing adjusted gross income 3 24 for state tax purposes. If the taxpayer has taken any such 3 25 deduction for purposes of computing federal adjusted gross 3 26 income, the taxpayer shall make the following adjustments to 3 27 federal adjusted gross income when computing net income for 3 28 state tax purposes: 3 29 (1) Add the total amount of expense deduction for federal 3 30 tax purposes taken on section 179 property placed in service by 3 31 the taxpayer under section 179 of the Internal Revenue Code, as 3 32 amended by Pub. L. No. 115=97, {13101. 3 33 (2) Subtract the amount of depreciation allowable on such 3 34 property under the modified accelerated cost recovery system 3 35 described in section 168 of the Internal Revenue Code, without 4 1 regard to section 168(k) of the Internal Revenue Code. The 4 2 taxpayer shall continue to take depreciation on the applicable 4 3 property in future tax years to the extent allowed under the 4 4 modified accelerated cost recovery system described in section 4 5 168 of the Internal Revenue Code, without regard to section 4 6 168(k) of the Internal Revenue Code. 4 7 (3) Any other adjustments to gains or losses necessary to 4 8 reflect the adjustments made in subparagraphs (1) and (2). 4 9 d. The election made under this subsection is for one tax 4 10 year and the taxpayer may elect or not elect to take advantage 4 11 of this subsection in any subsequent tax year. However, not 4 12 electing to take advantage of this subsection in a subsequent 4 13 tax year shall not affect the taxpayer's ability to claim the 4 14 tax deduction under paragraph "b", subparagraph (3), that 4 15 originated from a previous tax year. 4 16 e. The director shall adopt rules pursuant to chapter 17A 4 17 to administer this subsection. 4 18 Sec. 2. Section 422.9, subsection 2, paragraph h, Code 2018, 4 19 is amended to read as follows: 4 20 h. For purposes of calculating the deductions in this 4 21 subsection that are authorized under the Internal Revenue Code, 4 22 and to the extent that any of such deductions is determined by 4 23 an individual's federal adjusted gross income, the individual's 4 24 federal adjusted gross income is computed in accordance with 4 25 section 422.7, subsections 39, 39A, 39B, 51, 52, and 53. 4 26 Sec. 3. TAX=FREE IRA DISTRIBUTIONS TO CERTAIN PUBLIC 4 27 CHARITIES FOR INDIVIDUALS SEVENTY AND ONE=HALF YEARS OF AGE 4 28 OR OLDER. Notwithstanding any other provision of law to the 4 29 contrary, for tax years beginning during the 2018 calendar 4 30 year, the exclusion from federal adjusted gross income for 4 31 certain qualified charitable distributions from an individual 4 32 retirement plan provided in section 408(d)(8) of the Internal 4 33 Revenue Code, as amended by Pub. L. No. 114=113, division Q, 4 34 {112, applies in computing net income for state tax purposes. 4 35 Sec. 4. STATE SALES AND USE TAX DEDUCTION. 5 1 Notwithstanding any other provision of law to the contrary, for 5 2 tax years beginning during the 2018 calendar year, a taxpayer 5 3 who elects to itemize deductions for state tax purposes under 5 4 section 422.9, subsection 2, is allowed to take the deduction 5 5 for state sales and use tax in lieu of the deduction for state 5 6 and local income taxes under section 164(b)(5) of the Internal 5 7 Revenue Code, as amended by Pub. L. No. 114=113, division Q, 5 8 {106, in computing taxable income for state tax purposes, but 5 9 only if the taxpayer elected to deduct state sales and use 5 10 taxes in lieu of state and local income taxes for federal tax 5 11 purposes for the same tax year. 5 12 Sec. 5. EARNED INCOME TAX CREDIT FOR 2018. 5 13 Notwithstanding the definition of "Internal Revenue Code" 5 14 in section 422.3, for tax years beginning during the 2018 5 15 calendar year, any reference to the term "Internal Revenue 5 16 Code" in section 422.12B shall mean the Internal Revenue Code 5 17 of 1954, prior to the date of its redesignation as the Internal 5 18 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 5 19 the Internal Revenue Code of 1986 as amended and in effect on 5 20 January 1, 2016, but shall not be construed to include any 5 21 amendment to the Internal Revenue Code enacted after January 1, 5 22 2016, including any amendment with retroactive applicability 5 23 or effectiveness. 5 24 Sec. 6. ACCOUNTING METHOD AND OTHER MISCELLANEOUS 5 25 COUPLING PROVISIONS FOR TAX YEAR 2018. Notwithstanding any 5 26 other provision of law to the contrary, amendments to the 5 27 Internal Revenue Code enacted in Pub. L. No. 115=97, {13102, 5 28 {13221, {13504, {13541, {13543, {13611, and {13613, apply in 5 29 calculating federal adjusted gross income or federal taxable 5 30 income, as applicable, for state tax purposes for purposes of 5 31 chapter 422 for tax years beginning during the 2018 calendar 5 32 year to the extent those amendments affect the calculation of 5 33 federal adjusted gross income or federal taxable income, as 5 34 applicable, for federal tax purposes for tax years beginning 5 35 during the 2018 calendar year. 6 1 Sec. 7. TEACHER EXPENSE DEDUCTION. Notwithstanding any 6 2 other provision of law to the contrary, for tax years beginning 6 3 during the 2018 calendar year, a taxpayer is allowed to take 6 4 the deduction for certain expenses of elementary and secondary 6 5 school teachers allowed under section 62(a)(2)(D) of the 6 6 Internal Revenue Code, as amended by Pub. L. No. 114=113, 6 7 division Q, {104, in computing net income for state tax 6 8 purposes. 6 9 Sec. 8. EFFECTIVE DATE. This division of this Act, being 6 10 deemed of immediate importance, takes effect upon enactment. 6 11 Sec. 9. RETROACTIVE APPLICABILITY. 6 12 1. Except as provided in subsection 2, this division of this 6 13 Act applies retroactively to January 1, 2018, for tax years 6 14 beginning on or after that date, but before January 1, 2019. 6 15 2. The sections of this division of this Act enacting 6 16 section 422.7, subsections 51 and 52, and amending section 6 17 422.9, subsection 2, paragraph "h", apply retroactively to 6 18 January 1, 2018, for tax years beginning on or after that date. 6 19 DIVISION II 6 20 INDIVIDUAL INCOME TAX CHANGES BEGINNING IN TAX YEAR 2019 6 21 Sec. 10. Section 422.4, subsection 2, paragraph b, Code 6 22 2018, is amended to read as follows: 6 23 b. "Cumulative standard deduction factor" means the product 6 24 of the annual standard deduction factor for the19892020 6 25 calendar year and all annual standard deduction factors for 6 26 subsequent calendar years as determined pursuant to this 6 27 subsection. The cumulative standard deduction factor applies 6 28 to all tax years beginning on or after January 1 of the 6 29 calendar year for which the latest annual standard deduction 6 30 factor has been determined. 6 31 Sec. 11. Section 422.4, Code 2018, is amended by adding the 6 32 following new subsection: 6 33 NEW SUBSECTION. 9A. "Internal Revenue Code" means the 6 34 Internal Revenue Code of 1954, prior to the date of its 6 35 redesignation as the Internal Revenue Code of 1986 by the Tax 7 1 Reform Act of 1986, or means the Internal Revenue Code of 1986 7 2 as amended and in effect on January 1, 2018. This definition 7 3 shall not be construed to include any amendment to the 7 4 Internal Revenue Code enacted after the date specified in the 7 5 preceding sentence, including any amendment with retroactive 7 6 applicability or effectiveness. 7 7 Sec. 12. Section 422.4, subsection 16, Code 2018, is amended 7 8 to read as follows: 7 9 16. The words "taxable income" mean the net income as 7 10 defined in section 422.7 minus the deductions allowed by 7 11 section 422.9, in the case of individuals; in the case of 7 12 estates or trusts, the words "taxable income" mean the taxable 7 13 income(without a deduction for personal exemption)as 7 14 computed for federal income tax purposes under the Internal 7 15 Revenue Code, but with the following adjustmentsspecified in 7 16 section 422.7 plus the Iowa income tax deducted in computing 7 17 the federal taxable income and minus federal income taxes as 7 18 provided in section 422.9.: 7 19 a. Add back the personal exemption deduction taken in 7 20 computing federal taxable income. 7 21 b. Make the adjustments specified in section 422.7. 7 22 c. Add back Iowa income tax deducted in computing federal 7 23 taxable income. 7 24 d. Subtract federal income taxes as provided in section 7 25 422.9. 7 26 e. Add back seventy=five percent of the qualified business 7 27 income deduction under section 199A of the Internal Revenue 7 28 Code, as amended by Pub. L. No. 115=141, division T, {101, 7 29 taken in calculating federal taxable income. 7 30 Sec. 13. Section 422.5, subsection 1, Code 2018, is amended 7 31 to read as follows: 7 32 1. a. A tax is imposed upon every resident and nonresident 7 33 of the state which tax shall be levied, collected, and paid 7 34 annually upon and with respect to the entire taxable income 7 35 as defined in this division at rates asfollows:provided in 8 1 section 422.5A. 8 2a. On all taxable income from zero through one thousand 8 3 dollars, thirty=six hundredths of one percent.8 4b. On all taxable income exceeding one thousand dollars but 8 5 not exceeding two thousand dollars, seventy=two hundredths of 8 6 one percent.8 7c. On all taxable income exceeding two thousand dollars 8 8 but not exceeding four thousand dollars, two and forty=three 8 9 hundredths percent.8 10d. On all taxable income exceeding four thousand dollars but 8 11 not exceeding nine thousand dollars, four and one=half percent.8 12e. On all taxable income exceeding nine thousand dollars 8 13 but not exceeding fifteen thousand dollars, six and twelve 8 14 hundredths percent.8 15f. On all taxable income exceeding fifteen thousand dollars 8 16 but not exceeding twenty thousand dollars, six and forty=eight 8 17 hundredths percent.8 18g. On all taxable income exceeding twenty thousand dollars 8 19 but not exceeding thirty thousand dollars, six and eight=tenths 8 20 percent.8 21h. On all taxable income exceeding thirty thousand dollars 8 22 but not exceeding forty=five thousand dollars, seven and 8 23 ninety=two hundredths percent.8 24i. On all taxable income exceeding forty=five thousand 8 25 dollars, eight and ninety=eight hundredths percent.8 26j.b. (1) The tax imposed upon the taxable income of a 8 27 nonresident shall be computed by reducing the amount determined 8 28 pursuant toparagraphs "a" through "i"paragraph "a" by the 8 29 amounts of nonrefundable credits under this division and by 8 30 multiplying this resulting amount by a fraction of which the 8 31 nonresident's net income allocated to Iowa, as determined in 8 32 section 422.8, subsection 2, paragraph "a", is the numerator and 8 33 the nonresident's total net income computed under section 422.7 8 34 is the denominator. This provision also applies to individuals 8 35 who are residents of Iowa for less than the entire tax year. 9 1 (2) (a) The tax imposed upon the taxable income of a 9 2 resident shareholder in an S corporation or of an estate 9 3 or trust with a situs in Iowa that is a shareholder in an S 9 4 corporation, which S corporation has in effect for the tax 9 5 year an election under subchapter S of the Internal Revenue 9 6 Code and carries on business within and without the state, 9 7 may be computed by reducing the amount determined pursuant 9 8 toparagraphs "a" through "i"paragraph "a" by the amounts of 9 9 nonrefundable credits under this division and by multiplying 9 10 this resulting amount by a fraction of which the resident's 9 11 or estate's or trust's net income allocated to Iowa, as 9 12 determined in section 422.8, subsection 2, paragraph "b", is 9 13 the numerator and the resident's or estate's or trust's total 9 14 net income computed under section 422.7 is the denominator. If 9 15 a resident shareholder, or an estate or trust with a situs in 9 16 Iowa that is a shareholder, has elected to take advantage of 9 17 this subparagraph (2), and for the next tax year elects not to 9 18 take advantage of this subparagraph, the resident or estate or 9 19 trust shareholder shall not reelect to take advantage of this 9 20 subparagraph for the three tax years immediately following the 9 21 first tax year for which the shareholder elected not to take 9 22 advantage of this subparagraph, unless the director consents to 9 23 the reelection. This subparagraph also applies to individuals 9 24 who are residents of Iowa for less than the entire tax year. 9 25 (b) This subparagraph (2) shall not affect the amount of 9 26 the taxpayer's checkoffs under this division, the credits from 9 27 tax provided under this division, and the allocation of these 9 28 credits between spouses if the taxpayers filed separate returns 9 29 or separately on combined returns. 9 30 Sec. 14. Section 422.5, subsection 2, paragraph a, Code 9 31 2018, is amended to read as follows: 9 32 a. There is imposed upon every resident and nonresident of 9 33 this state, including estates and trusts, the greater of the 9 34 tax determined in subsection 1, paragraphs "a" through "j",or 9 35 the state alternative minimum tax equal to seventy=five percent 10 1 of the maximum state individual income tax rate for the tax 10 2 year, rounded to the nearest one=tenth of one percent, times 10 3 the state alternative minimum taxable income of the taxpayer as 10 4 computed under this subsection. 10 5 Sec. 15. NEW SECTION. 422.5A Tax rates. 10 6 The tax imposed in section 422.5 shall be calculated at 10 7 the following rates for tax years beginning in the following 10 8 calendar years: 10 9 2019 2020 and 10 10 subsequent 10 11 calendar years 10 12 1. On all taxable income from 10 13 0 through $1,000: 0.34% 0.32% 10 14 2. On all taxable income 10 15 exceeding $1,000 but not exceeding 10 16 $2,000: 0.68% 0.65% 10 17 3. On all taxable income 10 18 exceeding $2,000 but not exceeding 10 19 $4,000: 2.31% 2.20% 10 20 4. On all taxable income 10 21 exceeding $4,000 but not exceeding 10 22 $9,000: 4.28% 4.10% 10 23 5. On all taxable income 10 24 exceeding $9,000 but not exceeding 10 25 $15,000: 5.94% 5.60% 10 26 6. On all taxable income 10 27 exceeding $15,000 but not exceeding 10 28 $20,000: 6.29% 6.10% 10 29 7. On all taxable income 10 30 exceeding $20,000 but not exceeding 10 31 $30,000: 6.60% 6.58% 10 32 8. On all taxable income 10 33 exceeding $30,000 but not exceeding 10 34 $45,000: 7.84% 7.82% 10 35 9. On all taxable income 11 1 exceeding $45,000: 8.89% 8.89% 11 2 Sec. 16. Section 422.5, subsection 6, Code 2018, is amended 11 3 to read as follows: 11 4 6. Upon determination of the latest cumulative inflation 11 5 factor, the director shall multiply each dollar amount set 11 6 forth insubsection 1, paragraphs "a" through "i"section 11 7 422.5A by this cumulative inflation factor, shall round 11 8 off the resulting product to the nearest one dollar, and 11 9 shall incorporate the result into the income tax forms and 11 10 instructions for each tax year. 11 11 Sec. 17. Section 422.7, subsection 39A, unnumbered 11 12 paragraph 1, Code 2018, is amended to read as follows: 11 13 The additional first=year depreciation allowance authorized 11 14 in section 168(k) of the Internal Revenue Code, as enacted by 11 15 Pub. L. No. 110=185, {103, Pub. L. No. 111=5, {1201, Pub. L. 11 16 No. 111=240, {2022, Pub. L. No. 111=312, {401, Pub. L. No. 11 17 112=240, {331,andPub. L. No. 113=295, {125, Pub. L. No. 11 18 114=113, division Q, {143, and Pub. L. No. 115=97, {13201, does 11 19 not apply in computing net income for state tax purposes. If 11 20 the taxpayer has taken the additional first=year depreciation 11 21 allowance for purposes of computing federal adjusted gross 11 22 income, then the taxpayer shall make the following adjustments 11 23 to federal adjusted gross income when computing net income for 11 24 state tax purposes: 11 25 Sec. 18. Section 422.7, Code 2018, is amended by adding the 11 26 following new subsection: 11 27 NEW SUBSECTION. 59. a. The rules for nonrecognition 11 28 of gain or loss from exchanges of real property held for 11 29 productive use or investment and not held primarily for sale, 11 30 as provided in section 1031 of the Internal Revenue Code, apply 11 31 for state income tax purposes with regard to exchanges of real 11 32 property. 11 33 b. (1) The rules for nonrecognition of gain or loss 11 34 from exchanges of property other than real property held for 11 35 productive use or investment as provided in section 1031 of the 12 1 Internal Revenue Code, as amended up to and including December 12 2 21, 2017, apply for state income tax purposes, notwithstanding 12 3 any other provision of law to the contrary. If the taxpayer's 12 4 federal adjusted gross income includes gain or loss from 12 5 property, other than real property described in paragraph "a", 12 6 and the taxpayer elects to have this paragraph apply, the 12 7 following adjustments shall be made: 12 8 (a) (i) Subtract the total amount of gain related to the 12 9 sale or exchange of the property as properly reported for 12 10 federal tax purposes under the Internal Revenue Code. 12 11 (ii) Add back any gain related to the sale or exchange 12 12 of the property to the extent such gain does not qualify for 12 13 deferral under section 1031 of the Internal Revenue Code, as 12 14 amended up to and including December 21, 2017, which gain 12 15 shall be calculated using the taxpayer's adjusted basis in the 12 16 property for state tax purposes. 12 17 (b) (i) Add the total amount of loss related to the sale or 12 18 exchange of the property as properly reported for federal tax 12 19 purposes under the Internal Revenue Code. 12 20 (ii) Subtract any loss related to the sale or exchange 12 21 of the property to the extent such loss does not qualify for 12 22 deferral under section 1031 of the Internal Revenue Code, as 12 23 amended up to and including December 21, 2017, which loss 12 24 shall be calculated using the taxpayer's adjusted basis in the 12 25 property for state tax purposes. 12 26 (c) Any other adjustments to gains, losses, deductions, or 12 27 tax basis for the property given up or received in the sale or 12 28 exchange pursuant to rules adopted by the director. 12 29 (2) The director shall adopt rules pursuant to chapter 17A 12 30 to administer this paragraph. 12 31 Sec. 19. Section 422.8, subsection 2, paragraph a, Code 12 32 2018, is amended to read as follows: 12 33 a. Nonresident's net income allocated to Iowa is the net 12 34 income, or portion of net income, which is derived from a 12 35 business, trade, profession, or occupation carried on within 13 1 this state or income from any property, trust, estate, or 13 2 other source within Iowa. However, income derived from a 13 3 business, trade, profession, or occupation carried on within 13 4 this state and income from any property, trust, estate, or 13 5 other source within Iowa shall not include distributions from 13 6 pensions, including defined benefit or defined contribution 13 7 plans, annuities, individual retirement accounts, and deferred 13 8 compensation plans or any earnings attributable thereto so long 13 9 as the distribution is directly related to an individual's 13 10 documented retirement and received while the individual is a 13 11 nonresident of this state. If a business, trade, profession, 13 12 or occupation is carried on partly within and partly without 13 13 the state, only the portion of the net income which is fairly 13 14 and equitably attributable to that part of the business, 13 15 trade, profession, or occupation carried on within the state 13 16 is allocated to Iowa for purposes of section 422.5, subsection 13 17 1, paragraph"j""b", and section 422.13 and income from any 13 18 property, trust, estate, or other source partly within and 13 19 partly without the state is allocated to Iowa in the same 13 20 manner, except that annuities, interest on bank deposits and 13 21 interest=bearing obligations, and dividends are allocated 13 22 to Iowa only to the extent to which they are derived from a 13 23 business, trade, profession, or occupation carried on within 13 24 the state. Net income described in section 29C.24, subsection 13 25 3, paragraph "a", subparagraph (3), and paragraph "b", 13 26 subparagraph (2), shall not be allocated and apportioned to the 13 27 state, as provided in section 29C.24. 13 28 Sec. 20. Section 422.9, unnumbered paragraph 1, Code 2018, 13 29 is amended to read as follows: 13 30 In computing taxable income of individuals, there shall be 13 31 deducted from net income the larger of thefollowingamounts: 13 32computed under subsection 1 or 2, plus the amount computed 13 33 under subsection 2A. 13 34 Sec. 21. Section 422.9, subsection 1, Code 2018, is amended 13 35 to read as follows: 14 1 1. An optional standard deduction, after deduction of 14 2 federal income tax, equal toonethree thousandtwo hundred 14 3 thirtydollars for a married person who files separately or 14 4 a single person or equal tothreeseven thousandthirtyfive 14 5 hundred dollars for a husband and wife who file a joint return, 14 6 a surviving spouse, or a head of household. The optional 14 7 standard deduction shall not exceed the amount remaining after 14 8 deduction of the federal income tax. The amount of federal 14 9 income tax deducted shall be computed as provided in subsection 14 10 2, paragraph "b". 14 11 Sec. 22. Section 422.9, Code 2018, is amended by adding the 14 12 following new subsection: 14 13 NEW SUBSECTION. 2A. a. Twenty=five percent of the amount 14 14 deductible by the taxpayer for federal income tax purposes 14 15 under section 199A of the Internal Revenue Code, as amended by 14 16 Pub. L. No. 115=141, division T, {101. 14 17 b. Notwithstanding paragraph "a", and section 422.4, 14 18 subsection 16, paragraph "e", for an entity electing or required 14 19 to file a composite return under section 422.13, subsection 5, 14 20 the deduction allowed under this subsection for purposes of 14 21 the composite return shall be an amount equal to twenty=five 14 22 percent of the deduction that would be allowable for federal 14 23 income tax purposes under section 199A of the Internal Revenue 14 24 Code, as amended by Pub. L. No. 115=141, division T, {101 by an 14 25 individual taxpayer reporting the same items of income and loss 14 26 that are included in the composite return. 14 27 Sec. 23. Section 422.9, subsection 2, paragraph i, Code 14 28 2018, is amended to read as follows: 14 29 i. The deduction for state sales and use taxes is allowable 14 30 only if the taxpayer elected to deduct the state sales and use 14 31 taxes in lieu of state income taxes under section 164 of the 14 32 Internal Revenue Code. A deduction for state sales and use 14 33 taxes is not allowed if the taxpayer has taken the deduction 14 34 for state income taxes or claimed the standard deduction under 14 35 section 63 of the Internal Revenue Code. This paragraph 15 1 applies to taxable years beginning afterDecember 31, 2003, and 15 2 before January 1, 2008, and to taxable years beginning after 15 3 December 31, 2009, and before January 1, 2015December 31, 15 4 2018. 15 5 Sec. 24. Section 422.9, subsection 2, Code 2018, is amended 15 6 by adding the following new paragraph: 15 7 NEW PARAGRAPH. l. The limitation on the deduction of 15 8 certain taxes in section 164(b)(6) of the Internal Revenue 15 9 Code does not apply in computing taxable income for state tax 15 10 purposes. A taxpayer is allowed to deduct taxes in computing 15 11 taxable income as otherwise provided in this subsection without 15 12 regard to section 164(b)(6), as enacted by Pub. L. No. 115=97, 15 13 {11042. 15 14 Sec. 25. Section 422.9, subsection 3, paragraph d, Code 15 15 2018, is amended to read as follows: 15 16 d. Notwithstanding paragraph "a", for a taxpayer who is 15 17 engaged in the trade or business of farming as defined in 15 18 section 263A(e)(4) of the Internal Revenue Code and has a loss 15 19 from farming as defined in section172(b)(1)(F)172(b)(1)(B) of 15 20 the Internal Revenue Code including modifications prescribed by 15 21 rule by the director, the Iowa loss from the trade or business 15 22 of farming is a net operating loss which may be carried back 15 23 five taxable years prior to the taxable year of the loss. 15 24 Sec. 26. Section 422.9, subsection 5, Code 2018, is amended 15 25 to read as follows: 15 26 5. A taxpayer affected by section 422.8 shall, if the 15 27 optional standard deduction is not used,be permitted to deduct 15 28 only such portion of the total referred to insubsection 15 29subsections 2aboveand 2A as is fairly and equitably allocable 15 30 to Iowa under the rules prescribed by the director. 15 31 Sec. 27. Section 422.9, subsections 6 and 7, Code 2018, are 15 32 amended by striking the subsections. 15 33 Sec. 28. Section 422.11B, Code 2018, is amended to read as 15 34 follows: 15 35 422.11B Minimum tax credit. 16 1 1. a. There is allowed as a credit against the tax 16 2 determined in section 422.5, subsection 1,paragraphs "a" 16 3 through "j"for a tax year an amount equal to the minimum tax 16 4 credit for that tax year. 16 5 b. The minimum tax credit for a tax year is the excess, 16 6 if any, of the net minimum tax imposed for all prior tax 16 7 years beginning on or after January 1, 1987, over the amount 16 8 allowable as a credit under this section for those prior tax 16 9 years. 16 10 2. a. The allowable credit under subsection 1 for a tax 16 11 year shall not exceed the excess, if any, of the tax determined 16 12 in section 422.5, subsection 1,paragraphs "a" through "j"over 16 13 the state alternative minimum tax as determined in section 16 14 422.5, subsection 2. 16 15 b. The net minimum tax for a tax year is the excess, if any, 16 16 of the tax determined in section 422.5, subsection 2, for the 16 17 tax year over the tax determined in section 422.5, subsection 16 18 1,paragraphs "a" through "j"for the tax year. 16 19 Sec. 29. Section 422.21, subsection 5, Code 2018, is amended 16 20 to read as follows: 16 21 5. a. The director shall determine for the 1989 and each 16 22 subsequent calendar year the annual and cumulative inflation 16 23 factors for each calendar year to be applied to tax years 16 24 beginning on or after January 1 of that calendar year. The 16 25 director shall compute the new dollar amounts as specified to 16 26 be adjusted in section 422.5 by the latest cumulative inflation 16 27 factor and round off the result to the nearest one dollar. 16 28 The annual and cumulative inflation factors determined by the 16 29 director are not rules as defined in section 17A.2, subsection 16 30 11. 16 31 b. The director shall determine for the19902020 16 32 calendar year and each subsequent calendar year the annual 16 33 and cumulative standard deduction factors to be applied to 16 34 tax years beginning on or after January 1 of that calendar 16 35 year. The director shall compute the new dollar amounts of 17 1 the standard deductions specified in section 422.9, subsection 17 2 1, by the latest cumulative standard deduction factor and 17 3 round off the result to the nearest ten dollars. The annual 17 4 and cumulative standard deduction factors determined by the 17 5 director are not rules as defined in section 17A.2, subsection 17 6 11. 17 7 Sec. 30. EFFECTIVE DATE. This division of this Act takes 17 8 effect January 1, 2019. 17 9 Sec. 31. APPLICABILITY. This division of this Act applies 17 10 to tax years beginning on or after January 1, 2019. 17 11 DIVISION III 17 12 CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST AND IOWA ABLE 17 13 SAVINGS PLAN TRUST 17 14 Sec. 32. Section 12D.1, Code 2018, is amended to read as 17 15 follows: 17 16 12D.1 Purpose and definitions. 17 17 1. The general assembly finds that the general welfare and 17 18 well=being of the state are directly related to educational 17 19 levels and skills of the citizens of the state, and that a 17 20 vital and valid public purpose is served by the creation and 17 21 implementation of programs which encourage and make possible 17 22 the attainment ofhigherformal education by the greatest 17 23 number of citizens of the state. Thestate has limited 17 24 resources to provide additional programs for higher education 17 25 funding and the continued operation and maintenance of the 17 26 state's public institutions of higher education and thegeneral 17 27 welfare of the citizens of the state will be enhanced by 17 28 establishing a program which allows citizens of the state to 17 29 invest money in a public trust for future application to the 17 30 payment ofhigher education costsqualified education expenses. 17 31 The creation of the means of encouragement for citizens to 17 32 invest in such a program represents the carrying out of a 17 33 vital and valid public purpose. In order to make available 17 34 to the citizens of the state an opportunity to fund future 17 35higherformal education needs, it is necessary that a public 18 1 trust be established in which moneys may be invested for future 18 2 educational use. 18 3 2. As used in this chapter, unless the context otherwise 18 4 requires: 18 5 a. "Account balance limit" means the maximum allowable 18 6 aggregate balance of accounts established for the same 18 7 beneficiary. Account earnings, if any, are included in the 18 8 account balance limit. 18 9 b. "Administrative fund" means the administrative fund 18 10 established under section 12D.4. 18 11 c. "Beneficiary" means the individual designated by a 18 12 participation agreement to benefit from advance payments of 18 13higher education costsqualified education expenses on behalf 18 14 of the beneficiary. 18 15 d. "Benefits" means the payment ofhigher education costs 18 16qualified education expenses on behalf of a beneficiary by the 18 17 trust during the beneficiary's attendance atan institution of 18 18 higher educationa qualified educational institution. 18 19e. "Higher education costs" means the same as "qualified 18 20 higher education expenses" as defined insection 529(e)(3) of 18 21 the Internal Revenue Code.18 22f.e. "Institution of higher education" means an institution 18 23 described in section 481 of the federal Higher Education Act of 18 24 1965, 20 U.S.C. {1088, which is eligible to participate in the 18 25 United States department of education's student aid programs. 18 26g.f. "Internal Revenue Code" means the same as defined 18 27 insection 12I.1. 18 28h.g. "Iowa educational savings plan trust" or "trust" means 18 29 the trust created under section 12D.2. 18 30i.h. "Participant" means an individual, individual's legal 18 31 representative, trust, estate, or an organization described 18 32 in section 501(c)(3) of the Internal Revenue Code and exempt 18 33 from taxation under section 501(a) of the Internal Revenue 18 34 Code, that has entered into a participation agreement under 18 35 this chapter for the advance payment ofhigher education costs 19 1qualified education expenses on behalf of a beneficiary. 19 2j.i. "Participation agreement" means an agreement between 19 3 a participant and the trust entered into under this chapter. 19 4k.j. "Program fund" means the program fund established 19 5 under section 12D.4. 19 6 k. "Qualified education expenses" means the same as 19 7 "qualified higher education expenses" as defined in section 19 8 529(e)(3) of the Internal Revenue Code, as amended by Pub. L. 19 9 No. 115=97, and shall include elementary and secondary school 19 10 expenses for tuition described in section 529(c)(7) of the 19 11 Internal Revenue Code, subject to the limitations imposed by 19 12 section 529(e)(3)(A) of the Internal Revenue Code. 19 13 l. "Qualified educational institution" means an institution 19 14 of higher education, or any elementary or secondary public, 19 15 private, or religious school described in section 529(c)(7) of 19 16 the Internal Revenue Code. 19 17l.m."Tuition and fees""Tuition" means the quarter,or19 18 semester, or annual charges imposed to attendan institution 19 19 of higher educationa qualified educational institution and 19 20 required as a condition of enrollment or attendance. 19 21 Sec. 33. Section 12D.2, subsections 2, 5, 9, and 14, Code 19 22 2018, are amended to read as follows: 19 23 2. Enter into agreements with anyinstitution of higher 19 24 educationqualified educational institution, the state, or any 19 25 federal or other state agency, or other entity as required to 19 26 implement this chapter. 19 27 5. Carry out studies and projections so the treasurer of 19 28 state may advise participants regarding present and estimated 19 29 futurehigher education costsqualified education expenses 19 30 and levels of financial participation in the trust required 19 31 in order to enable participants to achieve their educational 19 32 funding objectives. 19 33 9. Make payments toinstitutions of higher education 19 34qualified educational institutions, participants, or 19 35 beneficiaries, pursuant to participation agreements on behalf 20 1 of beneficiaries. 20 2 14. Establish, impose, and collect administrative fees 20 3 and charges in connection with transactions of the trust, and 20 4 provide for reasonable service charges, including penalties for 20 5 cancellations and late payments with respect to participation 20 6 agreements. 20 7 Sec. 34. Section 12D.3, subsections 1 and 2, Code 2018, are 20 8 amended to read as follows: 20 9 1.a.Each participation agreement may require a 20 10 participant to agree to invest a specific amount of money in 20 11 the trust for a specific period of time for the benefit of a 20 12 specific beneficiary. A participant shall not be required to 20 13 make an annual contribution on behalf of a beneficiary. The 20 14 maximum contribution that may be deducted for Iowa income tax 20 15 purposes shall not exceed two thousand dollars per beneficiary 20 16 per year adjusted annually to reflect increases in the consumer 20 17 price index. The treasurer of state shall set an account 20 18 balance limit to maintain compliance with section 529 of the 20 19 Internal Revenue Code. A contribution shall not be permitted 20 20 to the extent it causes the aggregate balance of all accounts 20 21 established for the same beneficiary under the trust to exceed 20 22 the applicable account balance limit. 20 23b. Participation agreements may be amended to provide for 20 24 adjusted levels of payments based upon changed circumstances or 20 25 changes in educational plans.20 26 2. The execution of a participation agreement by the trust 20 27 shall not guarantee in any way thathigher education costs 20 28qualified education expenses will be equal to projections 20 29 and estimates provided by the trust or that the beneficiary 20 30 named in any participation agreement will attain any of the 20 31 following: 20 32 a. Be admitted toan institution of higher educationa 20 33 qualified educational institution. 20 34 b. If admitted, be determined a resident for tuition 20 35 purposes by theinstitution of higher educationqualified 21 1 educational institution. 21 2 c. Be allowed to continue attendance at theinstitution of 21 3 higher educationqualified educational institution following 21 4 admission. 21 5 d. Graduate from theinstitution of higher education 21 6qualified educational institution. 21 7 Sec. 35. Section 12D.3, Code 2018, is amended by adding the 21 8 following new subsection: 21 9 NEW SUBSECTION. 5. A participant may designate a successor 21 10 in accordance with rules adopted by the treasurer of state. 21 11 The designated successor shall succeed to the ownership of the 21 12 account in the event of the death of the participant. In the 21 13 event a participant dies and has not designated a successor to 21 14 the account, the following criteria shall apply: 21 15 a. The beneficiary of the account, if eighteen years of 21 16 age or older, shall become the owner of the account as well as 21 17 remain the beneficiary upon filing the appropriate forms in 21 18 accordance with rules adopted by the treasurer of state. 21 19 b. If the beneficiary of the account is under the age of 21 20 eighteen, account ownership shall be transferred to the first 21 21 surviving parent or other legal guardian of the beneficiary to 21 22 file the appropriate forms in accordance with rules adopted by 21 23 the treasurer of state. 21 24 Sec. 36. Section 12D.4, Code 2018, is amended to read as 21 25 follows: 21 26 12D.4 Program and administrative funds ==== investment and 21 27 payments. 21 28 1. a. The treasurer of state shall segregate moneys 21 29 received by the trust into two funds: the program fund and the 21 30 administrative fund. 21 31 b. All moneys paid by participants in connection with 21 32 participation agreements shall be deposited as received into 21 33 separate accounts within the program fund. 21 34 c. Contributions to the trust made by participants may only 21 35 be made in the form of cash. 22 1 d. A participant or beneficiaryshall not provide investment 22 2 direction regarding program contributions or earnings held by 22 3 the trustmay, directly or indirectly, direct the investment of 22 4 any contributions to the trust or any earnings thereon no more 22 5 than two times in a calendar year. 22 6 e. The amount of cash distributions from the trust and all 22 7 other qualified state tuition programs under section 529 of 22 8 the Internal Revenue Code to a beneficiary during any taxable 22 9 year shall, in the aggregate, include no more than ten thousand 22 10 dollars in expenses for tuition in connection with enrollment 22 11 at an elementary or secondary public, private, or religious 22 12 school incurred during the taxable year. 22 13 2. Moneys accrued by participants in the program fund of 22 14 the trust may be used for payments to anyinstitution of higher 22 15 educationqualified educational institution. Payments can be 22 16 made to the qualified educational institution, the participant, 22 17 or the beneficiary. 22 18 Sec. 37. Section 12D.6, subsection 1, paragraph a, Code 22 19 2018, is amended to read as follows: 22 20 a. A participant retains ownership of all payments made 22 21 under a participation agreement up to the date of utilization 22 22 for payment ofhigher education costsqualified education 22 23 expenses for the beneficiary. 22 24 Sec. 38. Section 12D.6, subsections 2, 3, and 5, Code 2018, 22 25 are amended to read as follows: 22 26 2. In the event the program is terminated prior to payment 22 27 ofhigher education costsqualified education expenses for the 22 28 beneficiary, the participant is entitled to a refund of the 22 29 participant's account balance. 22 30 3. Theinstitution of higher educationqualified 22 31 educational institution shall obtain ownership of the payments 22 32 made for thehigher education costsqualified education 22 33 expenses paid to the institution at the time each payment is 22 34 made to the institution. 22 35 5. A participant may transfer ownership rights to another 23 1eligible individual, including a gift of the ownership rights 23 2 to a minor beneficiaryparticipant, or may transfer funds to 23 3 another plan under the trust or to an ABLE account as permitted 23 4 under section 529(c)(3)(C) of the Internal Revenue Code. 23 5 The transfer shall be made and the property distributed in 23 6 accordance with rules adopted by the treasurer of state or with 23 7 the terms of the participation agreement. 23 8 Sec. 39. Section 12D.7, Code 2018, is amended to read as 23 9 follows: 23 10 12D.7 Effect of payments on determination of need and 23 11 eligibility for student financial aid. 23 12 A student loan program, student grant program, or other 23 13 program administered by any agency of the state, except as 23 14 may be otherwise provided by federal law or the provisions 23 15 of any specific grant applicable to that law, shall not take 23 16 into account and shall not consider amounts available for 23 17 the payment ofhigher education costsqualified education 23 18 expenses pursuant to the Iowa educational savings plan trust in 23 19 determining need and eligibility for student aid. 23 20 Sec. 40. Section 12D.9, subsection 1, paragraph a, Code 23 21 2018, is amended to read as follows: 23 22 a. Pursuant to section 12D.3, subsection 1, paragraph "a", 23 23 a participant may make contributions to an account which is 23 24 established for the purpose of meeting the qualifiedhigher23 25 education expenses of the designated beneficiary of the 23 26 account. 23 27 Sec. 41. Section 422.7, subsection 32, paragraph c, Code 23 28 2018, is amended by striking the paragraph and inserting in 23 29 lieu thereof the following: 23 30 c. (1) Add, to the extent previously deducted as a 23 31 contribution to the trust, the amount resulting from a 23 32 withdrawal or transfer made by the taxpayer from the Iowa 23 33 educational savings plan trust for purposes other than any of 23 34 the following: 23 35 (a) The payment of qualified higher education expenses. 24 1 (b) The payment of tuition to an elementary or secondary 24 2 school if the tuition amounts are qualified education expenses. 24 3 (c) A change in beneficiaries under, or transfer to another 24 4 account within, the Iowa educational savings plan trust, or a 24 5 transfer to the Iowa ABLE savings plan trust, provided such 24 6 change or transfer is permitted under section 12D.6, subsection 24 7 5. 24 8 (2) For purposes of this paragraph: 24 9 (a) "Elementary or secondary school" means an elementary 24 10 or secondary school in this state which is accredited under 24 11 section 256.11, and adheres to the provisions of the federal 24 12 Civil Rights Act of 1964 and chapter 216. 24 13 (b) "Qualified education expenses" and "tuition" all mean the 24 14 same as defined in section 12D.1, subsection 2. 24 15 (c) (i) "Qualified higher education expenses" means the same 24 16 as defined in section 529(e)(3) of the Internal Revenue Code. 24 17 (ii) For purposes of this subparagraph division (c), 24 18 "Internal Revenue Code" means the Internal Revenue Code of 24 19 1954, prior to the date of its redesignation as the Internal 24 20 Revenue Code of 1986 by the Tax Reform Act of 1986, or means 24 21 the Internal Revenue Code of 1986 as amended and in effect on 24 22 January 1, 2018. This definition shall not be construed to 24 23 include any amendment to the Internal Revenue Code enacted 24 24 after the date specified in the preceding sentence, including 24 25 any amendment with retroactive applicability or effectiveness. 24 26 Sec. 42. Section 422.7, subsection 34, Code 2018, is amended 24 27 to read as follows: 24 28 34. a. (1) Subtract the amount contributed during the tax 24 29 year on behalf of a designated beneficiary that is a resident 24 30 of this state to the Iowa ABLE savings plan trust or to the 24 31 qualified ABLE program with which the state has contracted 24 32 pursuant to section 12I.10, not to exceed the maximum 24 33 contribution level established in section 12I.3, subsection 1, 24 34 paragraph "d", or section 12I.10, subsection 2, paragraph "a", 24 35 as applicable. 25 1 (2) This paragraph "a" shall not apply to any amount 25 2 of contribution that represents a transfer from the Iowa 25 3 educational savings plan trust created in chapter 12D that 25 4 meets the requirements of subsection 32, paragraph "c", 25 5 subparagraph (1), subparagraph division (c), and that was 25 6 previously deducted as a contribution to the Iowa educational 25 7 savings plan trust. 25 8 b. Add the amount resulting from the cancellation of a 25 9 participation agreement refunded to the taxpayer as an account 25 10 owner in the Iowa ABLE savings plan trust or the qualified 25 11 ABLE program with which the state has contracted pursuant to 25 12 section 12I.10 to the extent previously deducted pursuant 25 13 to this subsection by the taxpayer or any other person as a 25 14 contribution to the trust or qualified ABLE program, or to the 25 15 extent the amount was previously deducted by the taxpayer or 25 16 any other person pursuant to subsection 32, paragraph "a", and 25 17 qualified as a transfer under paragraph "a", subparagraph (2), 25 18 of this subsection. 25 19 c. Add the amount resulting from a withdrawal made by a 25 20 taxpayer from the Iowa ABLE savings plan trust or the qualified 25 21 ABLE program with which the state has contracted pursuant to 25 22 section 12I.10 for purposes other than the payment of qualified 25 23 disability expenses to the extent previously deducted pursuant 25 24 to this subsection by the taxpayer or any other person as a 25 25 contribution to the trust or qualified ABLE program, or to the 25 26 extent the amount was previously deducted by the taxpayer or 25 27 any other person pursuant to subsection 32, paragraph "a", and 25 28 qualified as a transfer under paragraph "a", subparagraph (2), 25 29 of this subsection. 25 30 Sec. 43. Section 627.6, Code 2018, is amended by adding the 25 31 following new subsection: 25 32 NEW SUBSECTION. 17. The debtor's interest, whether as 25 33 participant or beneficiary, in contributions and assets, 25 34 including the accumulated earnings and market increases in 25 35 value, held in an account in the Iowa educational savings plan 26 1 trust organized under chapter 12D. 26 2 Sec. 44. EFFECTIVE DATE. This division of this Act, being 26 3 deemed of immediate importance, takes effect upon enactment. 26 4 Sec. 45. RETROACTIVE APPLICABILITY. 26 5 1. Except as provided in subsection 2, this division of this 26 6 Act applies retroactively to January 1, 2018, for withdrawals 26 7 from the Iowa educational savings plan trust made on or after 26 8 that date. 26 9 2. The sections of this division of this Act amending 26 10 section 422.7 apply retroactively to January 1, 2018, for tax 26 11 years beginning on or after that date, and for withdrawals from 26 12 the Iowa educational savings plan trust made on or after that 26 13 date. 26 14 DIVISION IV 26 15 SALES AND USE TAXES 26 16 Sec. 46. Section 15J.4, subsection 3, paragraph f, Code 26 17 2018, is amended to read as follows: 26 18 f. The total aggregate amount of state sales tax revenues 26 19 and state hotel and motel tax revenues that may be approved by 26 20 the board for remittance to all municipalities and that may 26 21 be transferred to the state reinvestment district fund under 26 22 section423.2, subsection 11,423.2A orsection423A.6, and 26 23 remitted to all municipalities having a reinvestment district 26 24 under this chapter shall not exceed one hundred million 26 25 dollars. 26 26 Sec. 47. Section 15J.5, subsection 1, paragraph a, Code 26 27 2018, is amended to read as follows: 26 28 a. The department shall calculate quarterly the amount of 26 29 new state sales tax revenues for each district established in 26 30 the state to be deposited in the state reinvestment district 26 31 fund created in section 15J.6, pursuant to section423.2, 26 32 subsection 11, paragraph "b"423.2A, subsection 2, subject to 26 33 remittance limitations established by the board pursuant to 26 34 section 15J.4, subsection 3. 26 35 Sec. 48. Section 15J.6, subsection 1, Code 2018, is amended 27 1 to read as follows: 27 2 1. A state reinvestment district fund is established in the 27 3 state treasury under the control of the department consisting 27 4 of the new state sales tax revenues collected within each 27 5 district and deposited in the fund pursuant to section423.2, 27 6 subsection 11, paragraph "b"423.2A, subsection 2, and the 27 7 new state hotel and motel tax revenues collected within each 27 8 district and deposited in the fund pursuant to section 423A.6. 27 9 Moneys deposited in the fund are appropriated to the department 27 10 for the purposes of this section. Moneys in the fund shall 27 11 only be used for the purposes of this section. 27 12 Sec. 49. Section 418.11, subsection 1, Code 2018, is amended 27 13 to read as follows: 27 14 1. The department of revenue shall calculate quarterly the 27 15 amount of increased sales tax revenues for each governmental 27 16 entity approved to use sales tax increment revenues and the 27 17 amount of such revenues to be transferred to the sales tax 27 18 increment fund pursuant to section423.2, subsection 11, 27 19 paragraph "b"423.2A, subsection 2. 27 20 Sec. 50. Section 418.12, subsection 1, Code 2018, is amended 27 21 to read as follows: 27 22 1. A sales tax increment fund is established as a separate 27 23 and distinct fund in the state treasury under the control of 27 24 the department of revenue consisting of the amount of the 27 25 increased state sales and services tax revenues collected by 27 26 the department of revenue within each applicable area specified 27 27 in section 418.11, subsection 3, and deposited in the fund 27 28 pursuant to section423.2, subsection 11, paragraph "b"423.2A, 27 29 subsection 2. Moneys deposited in the fund are appropriated 27 30 to the department of revenue for the purposes of this section. 27 31 Moneys in the fund shall only be used for the purposes of this 27 32 section. 27 33 Sec. 51. Section 421.26, Code 2018, is amended to read as 27 34 follows: 27 35 421.26 Personal liability for tax due. 28 1 If a licensee or other person under section 452A.65, a 28 2 retailer or purchaser under chapter 423A, 423B, or 423E, or 28 3sectionsections 423.14, 423.14A, 423.29, 423.31, 423.32, or 28 4 423.33,or a retailer or purchaser under section 423.32,or 28 5 a user under section 423.34, or a permit holder or licensee 28 6 under section 453A.13, 453A.16, or 453A.44 fails to pay a tax 28 7 under those sections when due, an officer of a corporation 28 8 or association, notwithstanding section 489.304, a member or 28 9 manager of a limited liability company, or a partner of a 28 10 partnership, having control or supervision of or the authority 28 11 for remitting the tax payments and having a substantial legal 28 12 or equitable interest in the ownership of the corporation, 28 13 association, limited liability company, or partnership, who has 28 14 intentionally failed to pay the tax is personally liable for 28 15 the payment of the tax, interest, and penalty due and unpaid. 28 16 However, this section shall not apply to taxes on accounts 28 17 receivable. The dissolution of a corporation, association, 28 18 limited liability company, or partnership shall not discharge a 28 19 person's liability for failure to remit the tax due. 28 20 Sec. 52. Section 423.1, Code 2018, is amended by adding the 28 21 following new subsection: 28 22 NEW SUBSECTION. 22A. "Information services" means every 28 23 activity, process, or function by which a seller accumulates, 28 24 prepares, organizes, conveys, analyzes, or delivers data, 28 25 facts, knowledge, procedures, information, and other similar 28 26 services to a purchaser through any tangible, intangible, 28 27 or electronic medium. Information accumulated, prepared, 28 28 or organized for a purchaser is an information service even 28 29 though it may incorporate preexisting components of data or 28 30 other information. "Information services" includes but is not 28 31 limited to database files, research information, genealogical 28 32 information, and other similar services. 28 33 Sec. 53. Section 423.1, subsection 24, paragraph a, Code 28 34 2018, is amended to read as follows: 28 35 a. "Lease or rental" means any transfer of possession 29 1 or control of, or access to, tangible personal property or 29 2 specified digital products for a fixed or indeterminate term 29 3 for consideration. A "lease or rental" may include future 29 4 options to purchase or extend. 29 5 Sec. 54. Section 423.1, subsection 37, Code 2018, is amended 29 6 to read as follows: 29 7 37. "Place of business" means any warehouse, store, 29 8 place, office, building, or structure wheregoods, wares, or 29 9 merchandisetangible personal property, specified digital 29 10 products, or services are offered for sale at retail or where 29 11 any taxable amusement is conducted, or each office where gas, 29 12 water, heat, communication, or electric services are offered 29 13 for sale at retail. When a retailer or amusement operator 29 14 sells merchandise by means of vending machines or operates 29 15 music or amusement devices by coin=operated machines at more 29 16 than one location within the state, the office, building, or 29 17 place where the books, papers, and records of the taxpayer are 29 18 kept shall be deemed to be the taxpayer's place of business. 29 19 Sec. 55. Section 423.1, Code 2018, is amended by adding the 29 20 following new subsection: 29 21 NEW SUBSECTION. 36A. "Personal property" includes but is 29 22 not limited to tangible personal property and specified digital 29 23 products. 29 24 Sec. 56. Section 423.1, subsection 43, paragraph a, 29 25 subparagraph (3), Code 2018, is amended to read as follows: 29 26 (3) Taking possession or making first use ofdigital goods 29 27specified digital products, whichever comes first. 29 28 Sec. 57. Section 423.1, subsection 47, Code 2018, is amended 29 29 to read as follows: 29 30 47. "Retailer" means and includes every person engaged 29 31 in the business of selling tangible personal property, 29 32 specified digital products, or taxable services at retail, or 29 33 the furnishing of gas, electricity, water, or communication 29 34 service, and tickets or admissions to places of amusement 29 35 and athletic events or operating amusement devices or other 30 1 forms of commercial amusement from which revenues are derived. 30 2 However, when in the opinion of the director it is necessary 30 3 for the efficient administration of this chapter to regard 30 4 any salespersons, representatives, truckers, peddlers, or 30 5 canvassers as agents of the dealers, distributors, supervisors, 30 6 employers, or persons under whom they operate or from whom 30 7 they obtain tangible personal property, services, or specified 30 8 digital products sold by them irrespective of whether or not 30 9 they are making sales on their own behalf or on behalf of such 30 10 dealers, distributors, supervisors, employers, or persons, 30 11 the director may so regard them, and may regard such dealers, 30 12 distributors, supervisors, employers, or persons as retailers 30 13 for the purposes of this chapter. "Retailer" includes a seller 30 14 obligated to collect sales or use tax, including any person 30 15 obligated to collect sales and use tax pursuant to section 30 16 423.14A. 30 17 Sec. 58. Section 423.1, subsection 48, paragraph a, Code 30 18 2018, is amended to read as follows: 30 19 a. "Retailer maintaining a place of business in this state" 30 20 or any like term includes any of the following: 30 21 (1) A retailer having or maintaining within this state, 30 22 directly or by a subsidiary, an office, distribution house, 30 23 sales house, warehouse, or other place of business, or any 30 24 representative operating within this state under the authority 30 25 of the retailer or its subsidiary, irrespective of whether that 30 26 place of business or representative is located here permanently 30 27 or temporarily, or whether the retailer or subsidiary is 30 28 admitted to do business within this state pursuant to chapter 30 29 490. 30 30 (2) A person obligated to collect sales and use tax pursuant 30 31 to section 423.14A. 30 32 Sec. 59. Section 423.1, subsection 48, paragraph b, 30 33 subparagraph (1), unnumbered paragraph 1, Code 2018, is amended 30 34 to read as follows: 30 35 A retailer shall be presumed to be maintaining a place of 31 1 business in this state, as defined infor purposes of paragraph 31 2 "a", subparagraph (1), if any person that has substantial nexus 31 3 in this state, other than a person acting in its capacity as a 31 4 common carrier, does any of the following: 31 5 Sec. 60. Section 423.1, subsection 48, paragraph b, 31 6 subparagraph (1), subparagraph division (b), Code 2018, is 31 7 amended to read as follows: 31 8 (b) Maintains an office, distribution facility, warehouse, 31 9 storage place, or similar place of business in this state to 31 10 facilitate the delivery of personal property or services sold 31 11 by the retailer to the retailer's customers. 31 12 Sec. 61. Section 423.1, subsection 50, Code 2018, is amended 31 13 to read as follows: 31 14 50. "Sales" or "sale" means any transfer, exchange, or 31 15 barter, conditional or otherwise, in any manner or by any means 31 16 whatsoever, for consideration, including but not limited to any 31 17 such transfer, exchange, or barter on a subscription basis. 31 18 Sec. 62. Section 423.1, Code 2018, is amended by adding the 31 19 following new subsection: 31 20 NEW SUBSECTION. 55A. "Sold at retail in the state" and 31 21 other references to sales "in the state" or "in this state" 31 22 includes but is not limited to sales sourced to this state 31 23 under this chapter. 31 24 Sec. 63. Section 423.1, Code 2018, is amended by adding the 31 25 following new subsection: 31 26 NEW SUBSECTION. 55B. a. "Specified digital products" means 31 27 electronically transferred digital audio=visual works, digital 31 28 audio works, digital books, or other digital products. 31 29 b. For purposes of this subsection: 31 30 (1) "Digital audio=visual works" means a series of related 31 31 images which, when shown in succession, impart an impression of 31 32 motion, together with accompanying sounds, if any. 31 33 (2) "Digital audio works" means works that result from 31 34 the fixation of a series of musical, spoken, or other sounds, 31 35 including but not limited to ringtones. For purposes of this 32 1 subparagraph, "ringtones" means digitized sound files that are 32 2 downloaded onto a device and that may be used to alert the 32 3 customer with respect to a communication. 32 4 (3) "Digital books" means works that are generally 32 5 recognized in the ordinary and usual sense as books. 32 6 (4) "Electronically transferred" means obtained or accessed 32 7 by the purchaser by means other than tangible storage media, 32 8 including but not limited to a specified digital product 32 9 purchased through a computer software application, commonly 32 10 referred to as an in=app purchase, or through another specified 32 11 digital product, or through any other means. 32 12 (5) "Other digital products" means greeting cards, images, 32 13 video or electronic games or entertainment, news or information 32 14 products, and computer software applications. 32 15 Sec. 64. Section 423.1, Code 2018, is amended by adding the 32 16 following new subsection: 32 17 NEW SUBSECTION. 57A. "Subscription" means any arrangement 32 18 in which a person has the right or ability to access, 32 19 receive, use, obtain, purchase, or otherwise acquire tangible 32 20 personal property, specified digital products, or services 32 21 on a permanent or less than permanent basis, regardless of 32 22 whether the person actually accesses, receives, uses, obtains, 32 23 purchases, or otherwise acquires such tangible personal 32 24 property, specified digital product, or service. 32 25 Sec. 65. Section 423.1, subsections 62, 63, and 64, Code 32 26 2018, are amended to read as follows: 32 27 62. "Use" means and includes the exercise by any person of 32 28 any right or power over or access to tangible personal property 32 29 or a specified digital product incident to the ownership of 32 30 that property, or any right or power over or access to the 32 31 product or result of a service. A retailer's or building 32 32 contractor's sale of manufactured housing for use in this 32 33 state, whether in the form of tangible personal property or 32 34 of realty, is a use of that property for the purposes of this 32 35 chapter. 33 1 63. "Use tax" means the tax levied under subchapter III of 33 2 this chapterfor which the retailer collects and remits tax to 33 3 the department. 33 4 64. "User" means the immediate recipient of the personal 33 5 property or services who is entitled to exercise a rightofor 33 6 power over or access to the personal property, or the product 33 7 or result of such services. 33 8 Sec. 66. Section 423.2, subsection 1, paragraph a, 33 9 subparagraph (1), Code 2018, is amended to read as follows: 33 10 (1) Sales of engraving,photography, retouching,printing, 33 11 and binding services. 33 12 Sec. 67. Section 423.2, subsection 6, Code 2018, is amended 33 13 to read as follows: 33 14 6.a.The sales price of any of the following enumerated 33 15 services is subject to the tax imposed by subsection 5: 33 16 a.alterationAlteration and garment repair; armored. 33 17 b. Armored car; vehicle. 33 18 c. Vehicle repair; battery. 33 19 d. Battery, tire, and allied; investment. 33 20 e. Investment counseling; service. 33 21 f. Service charges of all financial institutions; barber. 33 22 For the purposes of this paragraph, "financial institutions" 33 23 means all national banks, federally chartered savings and loan 33 24 associations, federally chartered savings banks, federally 33 25 chartered credit unions, banks organized under chapter 524, 33 26 credit unions organized under chapter 533, and all banks, 33 27 savings banks, credit unions, and savings and loan associations 33 28 chartered or otherwise created under the laws of any state and 33 29 doing business in Iowa. 33 30 g. Barber and beauty; boat. 33 31 h. Boat repair; vehicle. 33 32 i. Vehicle wash and wax; campgrounds; carpentry; roof. 33 33 j. Campgrounds. 33 34 k. Carpentry. 33 35 l. Roof, shingle, and glass repair; dance. 34 1 m. Dance schools and dance studios; dating. 34 2 n. Dating services; dry. 34 3 o. Dry cleaning, pressing, dyeing, and laundering excluding 34 4 the use of self=pay washers and dryers; electrical. 34 5 p. Electrical and electronic repair and installation; 34 6 excavating. 34 7 q. Excavating and grading; farm. 34 8 r. Farm implement repair of all kinds; flying. 34 9 s. Flying service; furniture. 34 10 t. Furniture, rug, carpet, and upholstery repair and 34 11 cleaning; fur. 34 12 u. Fur storage and repair; golf. 34 13 v. Golf and country clubs and all commercial recreation; 34 14 gun. 34 15 w. Gun and camera repair; house. 34 16 x. House and building moving; household. 34 17 y. Household appliance, television, and radio repair; 34 18 janitorial. 34 19 z. Janitorial and building maintenance or cleaning; jewelry. 34 20 aa. Jewelry and watch repair; lawn. 34 21 ab. Lawn care, landscaping, and tree trimming and removal;. 34 22 ac. Personal transportation service, including but not 34 23 limited to taxis, driver service, ride sharing service, rides 34 24 for hire, and limousine service, including driver; machine. 34 25 ad. Machine operator; machine. 34 26 ae. Machine repair of all kinds; motor. 34 27 af. Motor repair; motorcycle. 34 28 ag. Motorcycle, scooter, and bicycle repair; oilers. 34 29 ah. Oilers and lubricators; office. 34 30 ai. Office and business machine repair; painting. 34 31 aj. Painting, papering, and interior decorating; parking. 34 32 ak. Parking facilities; pay. 34 33 al. Pay television; pet, including but not limited to 34 34 streaming video, video on=demand, and pay=per=view. 34 35 am. Pet grooming; pipe. 35 1 an. Pipe fitting and plumbing; wood. 35 2 ao. Wood preparation; executive. 35 3 ap. Executive search agencies; private. 35 4 aq. Private employment agencies, excluding services for 35 5 placing a person in employment where the principal place of 35 6 employment of that person is to be located outside of the 35 7 state; reflexology; security. 35 8 ar. Reflexology. 35 9 as. Security and detective services, excluding private 35 10 security and detective services furnished by a peace officer 35 11 with the knowledge and consent of the chief executive officer 35 12 of the peace officer's law enforcement agency; sewage. 35 13 at. Sewage services for nonresidential commercial 35 14 operations; sewing. 35 15 au. Sewing and stitching; shoe. 35 16 av. Shoe repair and shoeshine; sign. 35 17 aw. Sign construction and installation; storage. 35 18 ax. Storage of household goods, mini=storage, and 35 19 warehousing of raw agricultural products; swimming. 35 20 ay. Swimming pool cleaning and maintenance; tanning. 35 21 az. Tanning beds or salons; taxidermy. 35 22 ba. Taxidermy services; telephone. 35 23 bb. Telephone answering service; test. 35 24 bc. Test laboratories, including mobile testing laboratories 35 25 and field testing by testing laboratories, and excluding tests 35 26 on humans or animals and excluding environmental testing 35 27 services; termite. 35 28 bd. Termite, bug, roach, and pest eradicators; tin. 35 29 be. Tin and sheet metal repair; transportation. 35 30 bf. Transportation service consisting of the rental of 35 31 recreational vehicles or recreational boats, or the rental of 35 32 vehicles subject to registration which are registered for a 35 33 gross weight of thirteen tons or less for a period of sixty 35 34 days or less, or the rental of aircraft for a period of sixty 35 35 days or less;. 36 1 bg. Turkish baths, massage, and reducing salons, excluding 36 2 services provided by massage therapists licensed under chapter 36 3 152C; water. 36 4 bh. Water conditioning and softening; weighing; welding; 36 5 well. 36 6 bi. Weighing. 36 7 bj. Welding. 36 8 bk. Well drilling; wrapping. 36 9 bl. Wrapping, packing, and packaging of merchandise other 36 10 than processed meat, fish, fowl, and vegetables; wrecking. 36 11 bm. Wrecking service; wrecker. 36 12 bn. Wrecker and towing. 36 13b. For the purposes of this subsection, "financial 36 14 institutions" means all national banks, federally chartered 36 15 savings and loan associations, federally chartered savings 36 16 banks, federally chartered credit unions, banks organized under 36 17 chapter 524, credit unions organized under chapter 533, and 36 18 all banks, savings banks, credit unions, and savings and loan 36 19 associations chartered or otherwise created under the laws of 36 20 any state and doing business in Iowa.36 21 bo. Photography. 36 22 bp. Retouching. 36 23 bq. Storage of tangible or electronic files, documents, or 36 24 other records. 36 25 br. Information services. 36 26 bs. Services arising from or related to installing, 36 27 maintaining, servicing, repairing, operating, upgrading, or 36 28 enhancing specified digital products. 36 29 bt. Video game services and tournaments. 36 30 bu. Software as a service. 36 31 Sec. 68. Section 423.2, subsection 8, Code 2018, is amended 36 32 by adding the following new paragraph: 36 33 NEW PARAGRAPH. d. A transaction that otherwise meets 36 34 the definition of "bundled transaction" as defined in this 36 35 subsection is not a bundled transaction if it is any of the 37 1 following: 37 2 (1) The retail sale of tangible personal property and a 37 3 service where the tangible personal property is essential 37 4 to the use of the service, and is provided exclusively in 37 5 connection with the service, and the true object of the 37 6 transaction is the service. 37 7 (2) The retail sale of services where one service is 37 8 provided that is essential to the use or receipt of a second 37 9 service and the first service is provided exclusively in 37 10 connection with the second service and the true object of the 37 11 transaction is the second service. 37 12 (3) (a) A transaction that includes taxable products and 37 13 nontaxable products and the purchase price or sales price of 37 14 the taxable products is de minimis. 37 15 (b) For purposes of this subparagraph, "de minimis" means 37 16 the seller's purchase or sales price of the taxable products 37 17 is ten percent or less of the total purchase price or sales 37 18 price of the bundled products. Sellers shall use either the 37 19 purchase price or the sale price of the products to determine 37 20 if the taxable products are de minimis. Sellers may not use 37 21 a combination of the purchase price and sales price of the 37 22 products to determine if the taxable products are de minimis. 37 23 (4) The retail sale of exempt tangible personal property and 37 24 taxable tangible personal property where all of the following 37 25 apply: 37 26 (a) The transaction includes food and food ingredients, 37 27 drugs, durable medical equipment, mobility enhancing equipment, 37 28 prosthetic devices, or medical supplies. 37 29 (b) The seller's purchase price or sales price of the 37 30 taxable tangible personal property is fifty percent or less 37 31 of the total purchase price or sales price of the bundled 37 32 tangible personal property. Sellers may not use a combination 37 33 of the purchase price and sales price of the tangible personal 37 34 property when making the fifty percent determination for a 37 35 transaction. 38 1 Sec. 69. Section 423.2, Code 2018, is amended by adding the 38 2 following new subsection: 38 3 NEW SUBSECTION. 9A. a. A tax of six percent is imposed on 38 4 the sales price of specified digital products sold at retail 38 5 in the state. The tax applies whether the purchaser obtains 38 6 permanent use or less than permanent use of the specified 38 7 digital product, whether the sale is conditioned or not 38 8 conditioned upon continued payment from the purchaser, and 38 9 whether the sale is on a subscription basis or is not on a 38 10 subscription basis. 38 11 b. The sale of a digital code that may be used to obtain 38 12 or access a specified digital product shall be taxed in the 38 13 same manner as the specified digital product. For purposes 38 14 of this paragraph, "digital code" means a method that permits 38 15 a purchaser to obtain or access at a later date a specified 38 16 digital product. 38 17 Sec. 70. Section 423.2, subsections 10, 11, and 12, Code 38 18 2018, are amended by striking the subsections. 38 19 Sec. 71. NEW SECTION. 423.2A Deposit and transfer of 38 20 revenues. 38 21 1. a. All revenues arising under the operation of the 38 22 provisions of this subchapter II shall be deposited into the 38 23 general fund of the state. 38 24 b. Subsequent to the deposit into the general fund of 38 25 the state, the director shall credit an amount equal to the 38 26 product of the sales tax rate imposed in section 423.2 times 38 27 the sales price of the tangible personal property or services 38 28 furnished to purchasers at a baseball and softball complex that 38 29 has received an award under section 15F.207 and that meets 38 30 the qualifications of section 423.4, subsection 10, into the 38 31 baseball and softball complex sales tax rebate fund created 38 32 under section 423.4, subsection 10, paragraph "e". The director 38 33 shall credit the moneys beginning the first day of the quarter 38 34 following July 1, 2016. This paragraph is repealed thirty 38 35 days following the date on which five million dollars in total 39 1 rebates have been provided under section 423.4, subsection 10. 39 2 2. Subsequent to the deposit into the general fund of the 39 3 state pursuant to subsection 1, the department shall do the 39 4 following in the order prescribed: 39 5 a. Transfer the revenues collected under chapter 423B. 39 6 b. Transfer from the remaining revenues the amounts required 39 7 under Article VII, section 10, of the Constitution of the State 39 8 of Iowa to the natural resources and outdoor recreation trust 39 9 fund created in section 461.31, if applicable. 39 10 c. Transfer one=sixth of the remaining revenues to the 39 11 secure an advanced vision for education fund created in section 39 12 423F.2. This paragraph "c" is repealed December 31, 2029. 39 13 d. Transfer to the baseball and softball complex sales tax 39 14 rebate fund that portion of the sales tax receipts described 39 15 in subsection 1, paragraph "b", remaining after the transfers 39 16 required under paragraphs "a", "b", and "c" of this subsection 39 17 2. This paragraph is repealed thirty days following the date 39 18 on which five million dollars in total rebates have been 39 19 provided under section 423.4, subsection 10. 39 20 e. Beginning the first day of the calendar quarter 39 21 beginning on the reinvestment district's commencement date, 39 22 subject to remittance limitations established by the economic 39 23 development authority board pursuant to section 15J.4, 39 24 subsection 3, transfer to a district account created in the 39 25 state reinvestment district fund for each reinvestment district 39 26 established under chapter 15J, the amount of new state sales 39 27 tax revenue, determined in section 15J.5, subsection 1, 39 28 paragraph "b", in the district, that remains after the prior 39 29 transfers required under this subsection 2. Such transfers 39 30 shall cease pursuant to section 15J.8. 39 31 f. Subject to the limitation on the calculation and 39 32 deposit of sales tax increment revenues in section 418.12, 39 33 beginning the first day of the quarter following adoption 39 34 of the resolution pursuant to section 418.4, subsection 3, 39 35 paragraph "d", transfer to the account created in the sales tax 40 1 increment fund for each governmental entity approved to use 40 2 sales tax increment revenues under chapter 418, that portion 40 3 of the increase in sales tax revenue, determined in section 40 4 418.11, subsection 2, paragraph "d", in the applicable area of 40 5 the governmental entity, that remains after the other transfers 40 6 required under this subsection 2. 40 7 g. Beginning the first day of the quarter following July 40 8 1, 2014, transfer to the raceway facility tax rebate fund 40 9 created in section 423.4, subsection 11, paragraph "e", that 40 10 portion of the sales tax receipts collected and remitted upon 40 11 sales of tangible personal property or services furnished by 40 12 retailers at a raceway facility meeting the qualifications of 40 13 section 423.4, subsection 11, that remains after the transfers 40 14 required in paragraphs "a" through "f" of this subsection 40 15 2. This subparagraph is repealed June 30, 2025, or thirty 40 16 days following the date on which an amount of total rebates 40 17 specified in section 423.4, subsection 11, paragraph "c", 40 18 subparagraph (4), subparagraph division (a) or (b), whichever 40 19 is applicable, has been provided or thirty days following the 40 20 date on which rebates cease as provided in section 423.4, 40 21 subsection 11, paragraph "c", subparagraph (5), whichever is 40 22 earliest. 40 23 3. Of the amount of sales tax revenue actually transferred 40 24 per quarter pursuant to subsection 2, paragraphs "e" and "f", 40 25 the department shall retain an amount equal to the actual cost 40 26 of administering the transfers under subsection 2, paragraphs 40 27 "e" and "f", or twenty=five thousand dollars, whichever is 40 28 less. The amount retained by the department pursuant to this 40 29 subsection shall be divided pro rata each quarter between 40 30 the amounts that would have been transferred pursuant to 40 31 subsection 2, paragraphs "e" and "f", without the deduction 40 32 made by operation of this subsection. Revenues retained by 40 33 the department pursuant to this subsection shall be considered 40 34 repayment receipts as defined in section 8.2. 40 35 Sec. 72. Section 423.3, subsections 1 and 17, Code 2018, are 41 1 amended to read as follows: 41 2 1. The sales price from sales of tangible personal property, 41 3 specified digital products, and services furnished which this 41 4 state is prohibited from taxing under the Constitution or laws 41 5 of the United States or under the Constitution of this state. 41 6 17. The sales price of allgoods, wares, or merchandise, 41 7tangible personal property, specified digital products, or 41 8 services, used for educational purposes sold to any private 41 9 nonprofit educational institution in this state. For the 41 10 purpose of this subsection, "educational institution" means an 41 11 institution which primarily functions as a school, college, 41 12 or university with students, faculty, and an established 41 13 curriculum. The faculty of an educational institution must be 41 14 associated with the institution and the curriculum must include 41 15 basic courses which are offered every year. "Educational 41 16 institution" includes an institution primarily functioning as 41 17 a library. 41 18 Sec. 73. Section 423.3, subsection 18, unnumbered paragraph 41 19 1, Code 2018, is amended to read as follows: 41 20 The sales price of tangible personal property or specified 41 21 digital products sold, or of services furnished, to the 41 22 following nonprofit corporations: 41 23 Sec. 74. Section 423.3, subsections 20, 21, 22, 23, 26, 27, 41 24 28, and 31, Code 2018, are amended to read as follows: 41 25 20. The sales price of tangible personal property or 41 26 specified digital products sold, or of services furnished, to 41 27 nonprofit legal aid organizations. 41 28 21. The sales price ofgoods, wares, or merchandise, 41 29tangible personal property, of specified digital products, 41 30 or of services, used for educational, scientific, historic 41 31 preservation, or aesthetic purpose sold to a nonprofit private 41 32 museum. 41 33 22. The sales price from sales ofgoods, wares, or 41 34 merchandise,tangible personal property, of specified digital 41 35 products, or from services furnished, to a nonprofit private 42 1 art center to be used in the operation of the art center. 42 2 23. The sales price of tangible personal property or 42 3 specified digital products sold, or of services furnished, by a 42 4 fair organized under chapter 174. 42 5 26. The sales price of tangible personal property or 42 6 specified digital products sold, or of services furnished, to a 42 7 statewide nonprofit organ procurement organization, as defined 42 8 in section 142C.2. 42 9 27. The sales price of tangible personal property or 42 10 specified digital products sold, or of services furnished, to a 42 11 nonprofit hospital licensed pursuant to chapter 135B to be used 42 12 in the operation of the hospital. 42 13 28. The sales price of tangible personal property or 42 14 specified digital products sold, or of services furnished, to 42 15 a freestanding nonprofit hospice facility which operates a 42 16 hospice program as defined in 42 C.F.R. ch. IV, {418.3, which 42 17 property or services are to be used in the hospice program. 42 18 31.a.The sales price ofgoods, wares, or merchandise 42 19tangible personal property or specified digital products sold 42 20 to and of services furnished, and used for public purposes 42 21 sold to a tax=certifying or tax=levying body of the state or 42 22 a governmental subdivision of the state, including regional 42 23 transit systems, as defined in section 324A.1, the state board 42 24 of regents, department of human services, state department of 42 25 transportation, any municipally owned solid waste facility 42 26 which sells all or part of its processed waste as fuel to a 42 27 municipally owned public utility, and all divisions, boards, 42 28 commissions, agencies, or instrumentalities of state, federal, 42 29 county, or municipal government which have no earnings going to 42 30 the benefit of an equity investor or stockholder, except any 42 31 of the following: 42 32(1)a. The sales price ofgoods, wares, or merchandise 42 33tangible personal property or specified digital products sold 42 34 to, or of services furnished, and used by or in connection with 42 35 the operation of any municipally owned public utility engaged 43 1 in selling gas, electricity, heat, pay television service, or 43 2 communication service to the general public. 43 3(2)b. The sales price of furnishing of sewage services to 43 4 a county or municipality on behalf of nonresidential commercial 43 5 operations. 43 6(3)c. The furnishing of solid waste collection and 43 7 disposal service to a county or municipality on behalf of 43 8 nonresidential commercial operations located within the county 43 9 or municipality. 43 10b. The exemption provided by this subsection shall also 43 11 apply to all such sales of goods, wares, or merchandise or of 43 12 services furnished and subject to use tax.43 13 Sec. 75. Section 423.3, subsection 32, unnumbered paragraph 43 14 1, Code 2018, is amended to read as follows: 43 15 The sales price of tangible personal property or specified 43 16 digital products sold, or of services furnished, by a county or 43 17 city. This exemption does not apply to any of the following: 43 18 Sec. 76. Section 423.3, subsection 36, unnumbered paragraph 43 19 1, Code 2018, is amended to read as follows: 43 20 The sales price from sales of tangible personal property 43 21 or specified digital products or of the sale or furnishing of 43 22 electrical energy, natural or artificial gas, or communication 43 23 service to another state or political subdivision of another 43 24 state if the other state provides a similar reciprocal 43 25 exemption for this state and political subdivision of this 43 26 state. 43 27 Sec. 77. Section 423.3, subsection 39, paragraph a, 43 28 subparagraphs (1) and (2), Code 2018, are amended to read as 43 29 follows: 43 30 (1) Sales of tangible personal property or specified 43 31 digital products, or the furnishing of services, of a 43 32 nonrecurring nature, by the owner, if the seller, at the time 43 33 of the sale, is not engaged for profit in the business of 43 34 selling tangible personal property, specified digital products, 43 35 or services taxed under section 423.2. 44 1 (2) The sale of all or substantially all of the tangible 44 2 personal property, or specified digital products, or services 44 3 held or used by a seller in the course of the seller's trade or 44 4 business for which the seller is required to hold a sales tax 44 5 permit when the seller sells or otherwise transfers the trade 44 6 or business to another person who shall engage in a similar 44 7 trade or business. 44 8 Sec. 78. Section 423.3, subsection 63, Code 2018, is amended 44 9 to read as follows: 44 10 63. The sales price from the sale of tangible personal 44 11 property, specified digital products, or services which will be 44 12 given as prizes to players in games of skill, games of chance, 44 13 raffles, and bingo games as defined in chapter 99B. 44 14 Sec. 79. Section 423.3, subsections 65, 66, and 67, Code 44 15 2018, are amended by striking the subsections. 44 16 Sec. 80. Section 423.3, subsection 78, paragraph a, 44 17 unnumbered paragraph 1, Code 2018, is amended to read as 44 18 follows: 44 19 The sales price fromsales or rentalthe sale of tangible 44 20 personal property, specified digital products, or services 44 21 rendered by any entity where the profits from thesales or 44 22 rentalsale of the tangible personal property, specified 44 23 digital products, or services rendered, are used by or donated 44 24 to a nonprofit entity that is exempt from federal income 44 25 taxation pursuant to section 501(c)(3) of the Internal Revenue 44 26 Code, a government entity, or a nonprofit private educational 44 27 institution, and where the entire proceeds from thesales, 44 28 rental,sale or services are expended for any of the following 44 29 purposes: 44 30 Sec. 81. Section 423.3, subsection 79, Code 2018, is amended 44 31 to read as follows: 44 32 79. The sales price from the saleor rentalof tangible 44 33 personal property or specified digital products, or from 44 34 services furnished, to a recognized community action agency as 44 35 provided in section 216A.93 to be used for the purposes of the 45 1 agency. 45 2 Sec. 82. Section 423.3, Code 2018, is amended by adding the 45 3 following new subsections: 45 4 NEW SUBSECTION. 103. a. The sales price of specified 45 5 digital products sold, and of enumerated services described in 45 6 section 423.2, subsection 6, paragraphs "bq", "br", "bs", and 45 7 "bu" furnished, to a commercial enterprise for use exclusively 45 8 by the commercial enterprise. The use of a specified digital 45 9 product or service fails to qualify as a use exclusively by the 45 10 commercial enterprise if its use for noncommercial purposes is 45 11 more than de minimis. 45 12 b. For purposes of this subsection: 45 13 (1) "Commercial enterprise" means the same as defined in 45 14 section 423.3, subsection 47, paragraph "d", subparagraph (1). 45 15 (2) "De minimis" and "noncommercial purposes" shall be 45 16 defined by the director by rule. 45 17 NEW SUBSECTION. 104. The sales price of specified digital 45 18 products sold to a non=end user. For purposes of this 45 19 subsection, "non=end user" means a person who receives by 45 20 contract a specified digital product for further commercial 45 21 broadcast, rebroadcast, transmission, retransmission, 45 22 licensing, relicensing, distribution, redistribution, or 45 23 exhibition of the product, in whole or in part, to another 45 24 person. 45 25 Sec. 83. Section 423.4, subsection 3, unnumbered paragraph 45 26 1, Code 2018, is amended to read as follows: 45 27 A relief agency may apply to the director for refund of the 45 28 amount of sales or use tax imposed and paid upon sales to it 45 29 of anygoods, wares, merchandise,tangible personal property 45 30 or specified digital products, or services furnished, used for 45 31 free distribution to the poor and needy. 45 32 Sec. 84. Section 423.4, subsection 3, paragraph a, 45 33 subparagraph (1), Code 2018, is amended to read as follows: 45 34 (1) On forms furnished by the department, and filed within 45 35 the time as the director shall provide by rule, the relief 46 1 agency shall report to the department the total amount or 46 2 amounts, valued in money, expended directly or indirectly 46 3 forgoods, wares, merchandise,tangible personal property or 46 4 specified digital products, or services furnished, used for 46 5 free distribution to the poor and needy. 46 6 Sec. 85. Section 423.4, subsection 10, paragraph e, Code 46 7 2018, is amended to read as follows: 46 8 e. There is established within the state treasury under the 46 9 control of the department a baseball and softball complex sales 46 10 tax rebate fund consisting of the amount of state sales tax 46 11 revenues transferred pursuant to section423.2, subsection 11, 46 12 paragraph "b", subparagraph (4)423.2A, subsection 2, paragraph 46 13 "d". An account is created within the fund for each baseball 46 14 and softball complex receiving an award under section 15F.207 46 15 and meeting the qualifications of this subsection. Moneys 46 16 in the fund shall only be used to provide rebates of state 46 17 sales tax pursuant to this subsection, and only the state sales 46 18 tax revenues in the baseball and softball complex rebate fund 46 19 are subject to rebate under this subsection. The amount of 46 20 rebates paid from each baseball and softball complex's account 46 21 within the fund shall not exceed the amount of the award under 46 22 section 15F.207, and not more than five million dollars in 46 23 total rebates shall be paid from the fund. Any moneys in the 46 24 fund which represent state sales tax revenue for which the time 46 25 period in paragraph "c" for receiving a rebate has expired, 46 26 or which otherwise represent state sales tax revenue that has 46 27 become ineligible for rebate pursuant to this subsection, shall 46 28 immediately revert to the general fund of this state. 46 29 Sec. 86. Section 423.4, subsection 11, paragraph b, 46 30 subparagraph (1), Code 2018, is amended to read as follows: 46 31 (1) Sales tax imposed and collected by retailers upon 46 32 sales of tangible personal property or services furnished to 46 33 purchasers at the raceway facility. Notwithstanding the state 46 34 sales tax imposed in section 423.2, a sales tax rebate issued 46 35 pursuant to this subparagraph shall not exceed the amounts 47 1 transferred to the raceway facility tax rebate fund pursuant to 47 2 section423.2, subsection 11, paragraph "b", subparagraph (7) 47 3423.2A, subsection 2, paragraph "g". 47 4 Sec. 87. Section 423.4, subsection 11, paragraph b, 47 5 subparagraph (2), subparagraph division (c), Code 2018, is 47 6 amended to read as follows: 47 7 (c) Notwithstanding the state sales tax imposed in section 47 8 423.2, a sales tax rebate issued pursuant to this subparagraph 47 9 shall not exceed the amounts remaining after the transfers 47 10 required under section423.2, subsection 11, paragraph "b", 47 11 subparagraphs (1) through (6)423.2A, subsection 2, paragraphs 47 12 "a" through "f", have been made from the total amount of sales 47 13 tax for which the rebate is requested. 47 14 Sec. 88. Section 423.4, subsection 11, paragraph e, Code 47 15 2018, is amended to read as follows: 47 16 e. There is established within the state treasury under 47 17 the control of the department a raceway facility tax rebate 47 18 fund consisting of the amount of state sales tax revenues 47 19 transferred pursuant to section423.2, subsection 11, paragraph 47 20 "b", subparagraph (7)423.2A, subsection 2, paragraph "g". An 47 21 account is created within the fund for each raceway facility 47 22 meeting the qualifications of this subsection. Moneys in the 47 23 fund shall only be used to provide rebates of state sales tax 47 24 pursuant to paragraph "b", subparagraph (1). The total amount 47 25 of rebates paid from the fund shall not exceed the amount 47 26 specified in paragraph "c", subparagraph (4), subparagraph 47 27 division (a) or (b), whichever is applicable. Any moneys in 47 28 the fund which represent state sales tax revenue for which the 47 29 time period in paragraph "c" for receiving a rebate has expired, 47 30 or which otherwise represent state sales tax revenue that has 47 31 become ineligible for rebate pursuant to this subsection shall 47 32 immediately revert to the general fund of the state. 47 33 Sec. 89. Section 423.5, subsection 1, paragraph a, Code 47 34 2018, is amended to read as follows: 47 35 a. The use in this state of tangible personal property 48 1 as defined in section 423.1, including aircraft subject to 48 2 registration under section 328.20, purchased for use in this 48 3 state. For the purposes of this subchapter, the furnishing 48 4 or use of the following services is also treated as the use 48 5 of tangible personal property: optional service or warranty 48 6 contracts, except residential service contracts regulated under 48 7 chapter 523C, vulcanizing, recapping, or retreading services, 48 8 engraving,photography, retouching,printing, or binding 48 9 services, and communication service when furnished or delivered 48 10 to consumers or users within this state. 48 11 Sec. 90. Section 423.5, subsection 1, paragraph d, Code 48 12 2018, is amended to read as follows: 48 13 d. Purchases of tangible personal property or specified 48 14 digital products made from the government of the United States 48 15 or any of its agencies by ultimate consumers shall be subject 48 16 to the tax imposed by this section. Services purchased from 48 17 the same source or sources shall be subject to the service 48 18 tax imposed by this subchapter and apply to the user of the 48 19 services. 48 20 Sec. 91. Section 423.5, subsection 1, Code 2018, is amended 48 21 by adding the following new paragraph: 48 22 NEW PARAGRAPH. f. (1) The use in this state of specified 48 23 digital products. The tax applies whether the purchaser 48 24 obtains permanent use or less than permanent use of the 48 25 specified digital product, whether the use is conditioned or 48 26 not conditioned upon continued payment from the purchaser, 48 27 and whether the use is on a subscription basis or is not on a 48 28 subscription basis. 48 29 (2) The use of a digital code that may be used to obtain 48 30 or access a specified digital product shall be taxed in the 48 31 same manner as the specified digital product. For purposes of 48 32 this subparagraph, "digital code" means the same as defined in 48 33 section 423.2, subsection 9A. 48 34 Sec. 92. Section 423.5, subsection 3, Code 2018, is amended 48 35 to read as follows: 49 1 3. For the purpose of the proper administration of the use 49 2 tax and to prevent its evasion, evidence that tangible personal 49 3 propertywasor specified digital products were sold by any 49 4 person for delivery in this state shall be prima facie evidence 49 5 that such tangible personal propertywasor specified digital 49 6 products were sold for use in this state. 49 7 Sec. 93. Section 423.5, subsection 4, Code 2018, is amended 49 8 by striking the subsection. 49 9 Sec. 94. Section 423.6, unnumbered paragraph 1, Code 2018, 49 10 is amended to read as follows: 49 11 The use in this state of the following tangible personal 49 12 property, specified digital products, and services is exempted 49 13 from the tax imposed by this subchapter: 49 14 Sec. 95. Section 423.6, subsections 1, 2, 4, and 6, Code 49 15 2018, are amended to read as follows: 49 16 1. Tangible personal property, specified digital products, 49 17 and enumerated services, the sales price from the sale of which 49 18 are required to be included in the measure of the sales tax, if 49 19 that tax has been paid to the department or the retailer. This 49 20 exemption does not include vehicles subject to registration or 49 21 subject only to the issuance of a certificate of title. 49 22 2. The sale of tangible personal property, specified 49 23 digital products, or the furnishing of services in the regular 49 24 course of business. 49 25 4. All articles of tangible personal property and all 49 26 specified digital products brought into the state of Iowa by a 49 27 nonresident individual for the individual's use or enjoyment 49 28 while within the state. 49 29 6. Tangible personal property, specified digital products, 49 30 or services the sales price of which is exempt from the sales 49 31 tax under section 423.3, except section 423.3, subsections 39 49 32 and 73, as it relates to the sale, but not the lease or rental, 49 33 of vehicles subject only to the issuance of a certificate of 49 34 title and as it relates to aircraft subject to registration 49 35 under section 328.20. 50 1 Sec. 96. Section 423.14, subsection 2, paragraphs b and c, 50 2 Code 2018, are amended to read as follows: 50 3 b. The tax upon the use of all tangible personal property 50 4 and specified digital products other than that enumerated in 50 5 paragraph "a", which is sold by a seller who is a retailer 50 6maintaining a place of business in this state, or by such other 50 7 retailer or agent as the director shall authorize pursuant to 50 8 section 423.30or its agent that is not otherwise required 50 9 to collect sales tax under the provisions of this chapter, 50 10 shall be collected by the retailer or agent and remitted to the 50 11 department, pursuant to the provisions of paragraph "e", and 50 12 sections 423.24, 423.29, 423.30, 423.32, and 423.33. 50 13 c. The tax upon the use of all tangible personal property 50 14 and specified digital products not paid pursuant to paragraphs 50 15 "a" and "b" shall be paid to the department directly by any 50 16 person using the property within this state, pursuant to the 50 17 provisions of section 423.34. 50 18 Sec. 97. NEW SECTION. 423.14A Persons required to collect 50 19 sales and use tax ==== supplemental conditions, requirements, and 50 20 responsibilities. 50 21 1. For purposes of this section, "Iowa sales" means sales 50 22 of tangible personal property, services, or specified digital 50 23 products sourced to this state pursuant to section 423.15, 50 24 423.16, 423.17, 423.19, or 423.20, or that are otherwise sold 50 25 in this state or for delivery into this state. 50 26 2. In addition to and not in lieu of any application of 50 27 this chapter to sellers who are retailers and sellers who are 50 28 retailers maintaining a place of business in this state, any 50 29 person described in subsection 3, or the person's agents, 50 30 shall be considered a retailer in this state and a retailer 50 31 maintaining a place of business in this state for purposes of 50 32 this chapter on or after January 1, 2019, and shall be subject 50 33 to all requirements of this chapter imposed on retailers and 50 34 retailers maintaining a place of business in this state, 50 35 including but not limited to the requirement to collect and 51 1 remit sales and use taxes pursuant to sections 423.14 and 51 2 423.29, and local option taxes under chapter 423B. 51 3 3. a. A retailer that has gross revenue from Iowa sales 51 4 equal to or exceeding one hundred thousand dollars for the 51 5 immediately preceding calendar year or the current calendar 51 6 year. 51 7 b. A retailer that makes Iowa sales in two hundred or more 51 8 separate transactions for the immediately preceding calendar 51 9 year or the current calendar year. 51 10 c. (1) A retailer that owns, licenses, or uses software 51 11 or data files that are installed or stored on property used 51 12 in this state. For purposes of this subparagraph, "software 51 13 or data files" include but are not limited to software that is 51 14 affirmatively downloaded by a user, software that is downloaded 51 15 as a result of the use of a website, preloaded software, and 51 16 cookies. 51 17 (2) A retailer that uses in=state software to make Iowa 51 18 sales. For purposes of this subparagraph, "in=state software" 51 19 means computer software that is stored on property located in 51 20 this state or that is distributed within this state for the 51 21 purpose of facilitating a sale by the retailer. 51 22 (3) A retailer that provides, or enters into an agreement 51 23 with another person to provide, a content distribution network 51 24 in this state to facilitate, accelerate, or enhance the 51 25 delivery of the retailer's internet site to purchasers. For 51 26 purposes of this subparagraph, "content distribution network" 51 27 means a system of distributed servers that deliver internet 51 28 sites and other internet content to a user based on the 51 29 geographic location of the user, the origin of the internet 51 30 site or internet content, and a content delivery server. 51 31 (4) This paragraph "c" shall not apply to a retailer that 51 32 has gross revenue from Iowa sales of less than one hundred 51 33 thousand dollars for the immediately preceding calendar year 51 34 or the current calendar year. 51 35 d. (1) A retailer that makes Iowa sales through a 52 1 marketplace provider. This subparagraph shall not apply to a 52 2 retailer that has gross revenue from Iowa sales of less than 52 3 ten thousand dollars for the immediately preceding calendar 52 4 year or the current calendar year. 52 5 (2) A marketplace provider that makes or facilitates Iowa 52 6 sales for one or more retailers equal to or exceeding one 52 7 hundred thousand dollars, or in two hundred or more separate 52 8 transactions, for the immediately preceding calendar year or 52 9 the current calendar year. 52 10 (3) Retailers and marketplace providers subject to this 52 11 paragraph may enter into agreements regarding the fulfillment 52 12 of the requirements of this chapter. 52 13 (4) A marketplace provider shall collect sales and use tax 52 14 on the entire sales price or purchase price paid by a purchaser 52 15 on each Iowa sale made or facilitated by the marketplace 52 16 provider that is subject to sales and use tax, regardless of 52 17 the amount of the sales price or purchase price that will 52 18 ultimately accrue to or benefit the marketplace provider, 52 19 another retailer, or any other person. This sales and use tax 52 20 collection responsibility of a marketplace provider applies but 52 21 shall not be limited to sales facilitated through a computer 52 22 software application, commonly referred to as in=app purchases, 52 23 or through a specified digital product. 52 24 (5) If a retail sale subject to the sales and use tax 52 25 involves both a marketplace provider and another retailer 52 26 that is required to collect and remit sales and use tax, 52 27 the marketplace provider and any other retailer involved in 52 28 the transaction shall be jointly and severally liable for 52 29 collecting and remitting sales and use tax under this chapter. 52 30 (6) (a) For purposes of this paragraph, "marketplace 52 31 provider" means a person who facilitates a retail sale by 52 32 satisfying subparagraph divisions (i) and (ii) as follows: 52 33 (i) The person directly or indirectly does any of the 52 34 following: 52 35 (A) Lists, makes available, or advertises tangible personal 53 1 property, services, or specified digital products for sale by a 53 2 retailer in any forum. 53 3 (B) Transmits or otherwise communicates an offer or 53 4 acceptance of a retail sale of tangible personal property, 53 5 services, or specified digital products between a retailer and 53 6 a purchaser. 53 7 (C) Owns, rents, licenses, makes available, or operates 53 8 any electronic or physical infrastructure or any property, 53 9 process, method, copyright, trademark, or patent that connects 53 10 retailers to purchasers for the purpose of making retail sales 53 11 of tangible personal property, services, or specified digital 53 12 products. 53 13 (D) Provides a platform or other marketplace for making 53 14 retail sales of tangible personal property, services, or 53 15 specified digital products, or otherwise facilitates retail 53 16 sales of tangible personal property, services, or specified 53 17 digital products, regardless of ownership or control of the 53 18 tangible personal property, services, or specified digital 53 19 products that are the subject of the retail sale. 53 20 (E) Provides software development or research and 53 21 development activities related to any activity described in 53 22 this subparagraph subdivision (i), if such software development 53 23 or research and development activities are directly related 53 24 to the physical or electronic marketplace provided by a 53 25 marketplace provider. 53 26 (F) Provides or offers fulfillment or storage services for 53 27 a retailer. 53 28 (G) Sets prices for a retailer's sale of tangible personal 53 29 property, services, or specified digital products. 53 30 (H) Provides or offers customer service to a retailer or 53 31 a retailer's customers, or accepts or assists with returns or 53 32 exchanges of tangible personal property, services, or specified 53 33 digital products sold by a retailer. 53 34 (ii) The person directly or indirectly does any of the 53 35 following: 54 1 (A) Collects the sales price or purchase price of a retail 54 2 sale of tangible personal property, services, or specified 54 3 digital products. 54 4 (B) Provides payment processing services for a retail sale 54 5 of tangible personal property, services, or specified digital 54 6 products. 54 7 (C) Charges, collects, or otherwise receives selling 54 8 fees, listing fees, referral fees, closing fees, fees for 54 9 inserting or making available tangible personal property, 54 10 services, or specified digital products on a marketplace, or 54 11 other consideration from the facilitation of a retail sale of 54 12 tangible personal property, services, or specified digital 54 13 products, regardless of ownership or control of the tangible 54 14 personal property, services, or specified digital products that 54 15 are the subject of the retail sale. 54 16 (D) Through terms and conditions, agreements, or 54 17 arrangements with a third party, collects payment in connection 54 18 with a retail sale of tangible personal property, services, 54 19 or specified digital products from a purchaser and transmits 54 20 that payment to the retailer, regardless of whether the person 54 21 collecting and transmitting such payment receives compensation 54 22 or other consideration in exchange for the service. 54 23 (E) Provides a virtual currency that purchasers are allowed 54 24 or required to use to purchase tangible personal property, 54 25 services, or specified digital products. 54 26 (b) For purposes of this paragraph, "marketplace provider" 54 27 includes but is not limited to a digital distribution service, 54 28 digital distribution platform, online portal, or an application 54 29 store. 54 30 e. (1) A retailer that makes Iowa sales through the use of 54 31 a solicitor. For purposes of this paragraph, "solicitor" means 54 32 a person that directly or indirectly solicits business for a 54 33 retailer. 54 34 (2) (a) A retailer is deemed to have a solicitor in 54 35 this state if the retailer enters into an agreement with a 55 1 resident under which the resident, for a commission, fee, or 55 2 other similar consideration, directly or indirectly refers 55 3 potential customers, whether by link on an internet site, 55 4 or otherwise, to the retailer. This determination may be 55 5 rebutted by a showing of proof that the resident with whom the 55 6 retailer has an agreement did not engage in any solicitation 55 7 in this state on behalf of the retailer that would satisfy the 55 8 nexus requirement of the United States Constitution during the 55 9 calendar year in question. 55 10 (b) This subparagraph (2) shall not apply to a retailer that 55 11 has Iowa gross revenue from Iowa sales of ten thousand dollars 55 12 or less for the immediately preceding calendar year or the 55 13 current calendar year. 55 14 (c) For purposes of this subparagraph (2): 55 15 (i) "Iowa gross revenue" means gross revenue from Iowa 55 16 sales to purchasers who were referred to the retailer by all 55 17 solicitors who are residents. 55 18 (ii) "Resident" includes an individual who is a resident 55 19 of this state, as defined in section 422.4, and any business 55 20 that owns any tangible or intangible property with a situs in 55 21 this state, or that has one or more employees performing or 55 22 providing services for the business in this state. 55 23 (d) This paragraph "e" does not apply to chapter 422 and 55 24 does not expand or contract the state's jurisdiction to tax a 55 25 trade or business under chapter 422. 55 26 f. A retailer that owns, controls, rents, licenses, makes 55 27 available, or uses any tangible or intangible property in this 55 28 state or with a situs in this state, to make or otherwise 55 29 facilitate a retail sale. 55 30 g. (1) Any person that enters into a contract or agreement 55 31 with a governmental entity, including but not limited to 55 32 contracts for the provision of financial assistance or 55 33 incentives such as a tax credit, forgivable loan, grant, tax 55 34 rebate, or any other thing of value. For purposes of this 55 35 subparagraph, "governmental entity" means any unit of government 56 1 in the executive, legislative, or judicial branch, or any 56 2 political subdivision of the state, including but not limited 56 3 to a city, county, township, or school district. 56 4 (2) Every bid submitted and each contract or agreement 56 5 executed by a state agency shall contain a certification by 56 6 the bidder or contractor stating that the bidder or contractor 56 7 is registered with the department pursuant to this chapter 56 8 and will collect and remit Iowa sales and use tax due under 56 9 this chapter. In the certification, the bidder or contractor 56 10 shall also acknowledge that the state agency may declare the 56 11 contractor or bid void if the certification is false or becomes 56 12 false. Fraudulent certification, by act or omission, may 56 13 result in the state agency or its representative filing for 56 14 damages for breach of contract. 56 15 h. Any affiliate of any retailer that is required to collect 56 16 and remit sales and use tax under this chapter, provided the 56 17 affiliate makes retail sales. 56 18 Sec. 98. Section 423.15, unnumbered paragraph 1, Code 2018, 56 19 is amended to read as follows: 56 20 All sales ofproductstangible personal property, services, 56 21 or specified digital products, except those sales enumerated 56 22 in section 423.16, shall be sourced according to this section 56 23 by sellers obligated to collect Iowa sales and use tax. The 56 24 sourcing rules described in this section apply to sales of 56 25 tangible personal property, specified digitalgoodsproducts, 56 26 and all services other than telecommunications services. This 56 27 section only applies to determine a seller's obligation to pay 56 28 or collect and remitaIowa sales or use tax with respect to 56 29 the seller's sale of a product. This section does not affect 56 30 the obligation of a purchaser or lessee to remit tax on the use 56 31 of the product to the taxing jurisdictions in which the use 56 32 occurs. A seller's obligation to collect Iowa sales tax or 56 33 Iowa use tax only occurs if the sale is sourced to this state. 56 34WhetherIowa sales tax applies to a sale sourced to Iowashall 56 35 be determined based on the location at which the sale is 57 1 consummated by delivery or, in the case of a service, where the 57 2 first use of the service occursmade by a seller subject to 57 3 section 423.1, subsection 48, or section 423.14A. 57 4 Sec. 99. Section 423.15, subsection 1, paragraph e, Code 57 5 2018, is amended to read as follows: 57 6 e. When paragraphs "a", "b", "c", and "d" do not apply, 57 7 including the circumstance where the seller is without 57 8 sufficient information to apply the previous rules, then the 57 9 location will be determined by the address from which tangible 57 10 personal property was shipped, from which the specified digital 57 11goodproduct or the computer software delivered electronically 57 12 was first available for transmission by the seller, or from 57 13 which the service was provided disregarding for these purposes 57 14 any location that merely provided the digital transfer of the 57 15 product sold. 57 16 Sec. 100. Section 423.22, Code 2018, is amended to read as 57 17 follows: 57 18 423.22 Taxation in another state. 57 19 If any person who causes tangible personal property or 57 20 specified digital products to be brought into this state or 57 21 who uses in this state services enumerated in section 423.2 57 22 has already paid a tax in another state in respect to the sale 57 23 or use of the property or the performance of the service, or 57 24 an occupation tax in respect to the property or service, in 57 25 an amount less than the tax imposed by subchapter II or III, 57 26 the provisions of those subchapters shall apply, but at a rate 57 27 measured by the difference only between the rate fixed by 57 28 subchapter II or III and the rate by which the previous tax on 57 29 the sale or use, or the occupation tax, was computed. If the 57 30 tax imposed and paid in the other state is equal to or more than 57 31 the tax imposed by those subchapters, then a tax is not due in 57 32 this state on the personal property or service. 57 33 Sec. 101. Section 423.29, subsection 1, Code 2018, is 57 34 amended to read as follows: 57 35 1. Every seller who is a retailer and who is making taxable 58 1 sales of tangible personal property or specified digital 58 2 products in Iowa shall, at the time ofselling the property 58 3making the sale, collect the sales tax. Every seller who 58 4 is a retailermaintaining a place of business in this state 58 5that is not otherwise required to collect sales tax under the 58 6 provisions of this chapter and who is selling tangible personal 58 7 property or specified digital products for use in Iowa shall, 58 8 at the time of making the sale, whether within or without the 58 9 state, collect the use tax. Sellers required to collect sales 58 10 or use tax shall give to any purchaser a receipt for the tax 58 11 collected in the manner and form prescribed by the director. 58 12 Sec. 102. Section 423.30, subsection 1, Code 2018, is 58 13 amended to read as follows: 58 14 1. The director may, upon application, authorize the 58 15 collection of the use tax by any seller who is a retailer not 58 16 maintaining a place of business within this state and not 58 17 registered under the agreement, who, to the satisfaction of 58 18 the director, furnishes adequate security to ensure collection 58 19 and payment of the tax. Such sellers shall be issued, without 58 20 charge, permits to collect tax subject to any regulations 58 21 which the director shall prescribe. When so authorized, it 58 22 shall be the duty of foreign sellers to collect the tax upon 58 23 all tangible personal property and specified digital products 58 24 sold, to the retailer's knowledge, for use within this state, 58 25 in the same manner and subject to the same requirements as a 58 26 retailer maintaining a place of business within this state. 58 27 The authority and permit may be canceled when, at any time, the 58 28 director considers the security inadequate, or that tax can 58 29 more effectively be collected from the person using property 58 30 in this state. 58 31 Sec. 103. Section 423.31, subsection 1, Code 2018, is 58 32 amended to read as follows: 58 33 1. Each person subject to this section and section 423.36 58 34 and in accordance with the provisions of this section and 58 35 section 423.36 shall, on or before the last day of the month 59 1 following the close of each calendar quarter during which 59 2 such person is or has become or ceased being subject to the 59 3 provisions of this section and section 423.36, make, sign, and 59 4 file a return for the calendar quarter in the form as may be 59 5 required. Returns shall show information relating to sales 59 6 prices includinggoods, wares,tangible personal property, 59 7 specified digital products, and services converted to the 59 8 use of such person, the amounts of sales prices excluded and 59 9 exempt from the tax, the amounts of sales prices subject to 59 10 tax, a calculation of tax due, and any other information for 59 11 the period covered by the return as may be required. Returns 59 12 shall be signed by the retailer or the retailer's authorized 59 13 agent and must be certified by the retailer to be correct in 59 14 accordance with forms and rules prescribed by the director. 59 15 Sec. 104. Section 423.31, subsection 5, paragraph a, Code 59 16 2018, is amended to read as follows: 59 17 a. Upon making application and receiving approval from 59 18 the director, aparent corporationperson and itsaffiliated 59 19 corporationsaffiliates that make retail sales of tangible 59 20 personal property, specified digital products, or taxable 59 21 enumerated services may make deposits and file a consolidated 59 22 sales tax return for the affiliated group, pursuant to rules 59 23 adopted by the director. Aparent corporationperson and each 59 24 affiliatecorporationthat files a consolidated return are 59 25 jointly and severally liable for all tax, penalty, and interest 59 26 found due for the tax period for which a consolidated return is 59 27 filed or required to be filed. 59 28 Sec. 105. Section 423.32, subsection 1, paragraph b, Code 59 29 2018, is amended to read as follows: 59 30 b. The deposit form is due on or before the twentieth day of 59 31 the month following the month of collection, except a deposit 59 32 is not required for the third month of the calendar quarter, 59 33 and the total quarterly amount, less the amounts deposited for 59 34 the first two months of the quarter, is due with the quarterly 59 35 report on the last day of the month following the month of 60 1 collection. At that time, the retailer shall file with the 60 2 department a return for the preceding quarterly period in the 60 3 form prescribed by the director showing the purchase price of 60 4 the tangible personal property, specified digital products, and 60 5 services sold by the retailer during the preceding quarterly 60 6 period, the use of which is subject to the use tax imposed 60 7 by this chapter, and other information the director deems 60 8 necessary for the proper administration of the use tax. 60 9 Sec. 106. Section 423.33, subsection 3, Code 2018, is 60 10 amended to read as follows: 60 11 3. Event sponsor's liability for sales tax. A person 60 12 sponsoring a flea market or a craft, antique, coin, or stamp 60 13 show or similar event shall obtain from every retailer selling 60 14 tangible personal property, specified digital products, 60 15 or taxable services at the event proof that the retailer 60 16 possesses a valid sales tax permit or secure from the retailer 60 17 a statement, taken in good faith, that tangible personal 60 18 property, specified digital products, or services offered for 60 19 sale are not subject to sales tax. Failure to do so renders 60 20 a sponsor of the event liable for payment of any sales tax, 60 21 interest, and penalty due and owing from any retailer selling 60 22 property or services at the event. Sections 423.31, 423.32, 60 23 423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 apply to the 60 24 sponsors. For purposes of this subsection, a "person sponsoring 60 25 a flea market or a craft, antique, coin, or stamp show or similar 60 26 event" does not include an organization which sponsors an 60 27 event determined to qualify as an event involving casual sales 60 28 pursuant to section 423.3, subsection 39, or the state fair or 60 29 a fair as defined in section 174.1. 60 30 Sec. 107. Section 423.33, Code 2018, is amended by adding 60 31 the following new subsection: 60 32 NEW SUBSECTION. 4. Liability of affiliates. 60 33 a. Notwithstanding any other provision of law to the 60 34 contrary, if any retailer required to collect and remit sales 60 35 and use tax pursuant to sections 423.14, 423.14A, and 423.29, 61 1 or any other provision of this chapter, fails to do so, all 61 2 affiliates that directly, indirectly, or constructively control 61 3 the retailer shall be jointly and severally liable for any tax, 61 4 penalty, and interest under this chapter, regardless of whether 61 5 the affiliate is a retailer. 61 6 b. Pursuant to paragraph "a", the department may elect 61 7 to assess the full amount of any tax, penalty, and interest 61 8 against the retailer, an affiliate of the retailer described 61 9 in paragraph "a", or any combination of the retailer and the 61 10 retailer's affiliates described in paragraph "a". 61 11 c. Notwithstanding any other provision of law to the 61 12 contrary, the department has the discretion to deem an 61 13 affiliate of a retailer an agent or alter ego of that retailer. 61 14 d. Notwithstanding any other provision of law to the 61 15 contrary, the department has the discretion to disregard or 61 16 look through any organizational structure of an enterprise in 61 17 order to assess and collect any tax, penalty, and interest 61 18 against an affiliate that is acting to benefit an affiliate or 61 19 an enterprise of which the affiliate is a part. 61 20 Sec. 108. Section 423.34, Code 2018, is amended to read as 61 21 follows: 61 22 423.34 Liability of user. 61 23 Any person who uses any tangible personal property, 61 24 specified digital products, or services enumerated in section 61 25 423.2 upon which the use tax has not been paid, either to the 61 26 county treasurer or to a retailer or direct to the department 61 27 as required by this subchapter, shall be liable for the payment 61 28 of tax, and shall on or before the last day of the month next 61 29 succeeding each quarterly period pay the use tax upon all 61 30 property or services used by the person during the preceding 61 31 quarterly period in the manner and accompanied by such returns 61 32 as the director shall prescribe. All of the provisions of 61 33 sections 423.32 and 423.33 with reference to the returns and 61 34 payments shall be applicable to the returns and payments 61 35 required by this section. 62 1 Sec. 109. Section 423.36, subsection 1, Code 2018, is 62 2 amended to read as follows: 62 3 1. A person shall not engage in or transact business as a 62 4 retailer making taxable sales of tangible personal property, 62 5 specified digital products, or furnishing services within 62 6 this state or as a retailer making taxable sales of tangible 62 7 personal property, specified digital products, or furnishing 62 8 services for use within this state, unless a permit has been 62 9 issued to the retailer under this section, except as provided 62 10 in subsection 7. Every person desiring to engage in or 62 11 transact business as a retailer shall file with the department 62 12 an application for a permit to collect sales or use tax. Every 62 13 application for a sales or use tax permit shall be made upon 62 14 a form prescribed by the director and shall set forth any 62 15 information the director may require. The application shall 62 16 be signed by an owner of the business if a natural person; in 62 17 the case of a retailer which is an association or partnership, 62 18 by a member or partner; and in the case of a retailer which 62 19 is a corporation, by an executive officer or some person 62 20 specifically authorized by the corporation to sign the 62 21 application, to which shall be attached the written evidence of 62 22 the person's authority. 62 23 Sec. 110. Section 423.36, subsection 2, paragraph a, Code 62 24 2018, is amended to read as follows: 62 25 a. Notwithstanding subsection 1, if any person will make 62 26 taxable sales of tangible personal property, specified digital 62 27 products, or furnish services to any state agency, that person 62 28 shall, prior to the sale, apply for and receive a permit to 62 29 collect sales or use tax pursuant to this section. A state 62 30 agency shall not purchase tangible personal property, specified 62 31 digital products, or services from any person unless that 62 32 person has a valid, unexpired permit issued pursuant to this 62 33 section and is in compliance with all other requirements in 62 34 this chapter imposed upon retailers, including but not limited 62 35 to the requirement to collect and remit sales and use tax and 63 1 file sales and use tax returns. 63 2 Sec. 111. Section 423.36, subsection 7, paragraph b, Code 63 3 2018, is amended to read as follows: 63 4 b. Persons engaged in selling tangible personal property, 63 5 specified digital products, or furnishing services shall not be 63 6 required to obtain or retain a sales tax permit for a place of 63 7 business at which taxable sales of tangible personal property, 63 8 specified digital products, or taxable performance of services 63 9 will not occur. 63 10 Sec. 112. Section 423.36, subsection 9, paragraph a, Code 63 11 2018, is amended to read as follows: 63 12 a. Except as provided in paragraph "b", purchasers, users, 63 13 and consumers of tangible personal property, specified digital 63 14 products, or enumerated services taxed pursuant to subchapter 63 15 II or III of this chapter or chapter 423B may be authorized, 63 16 pursuant to rules adopted by the director, to remit tax owed 63 17 directly to the department instead of the tax being collected 63 18 and paid by the seller. To qualify for a direct pay tax permit, 63 19 the purchaser, user, or consumer must accrue a tax liability 63 20 of more than four thousand dollars in tax under subchapters 63 21 II and III in a semimonthly period and make deposits and file 63 22 returns pursuant to section 423.31. This authority shall not 63 23 be granted or exercised except upon application to the director 63 24 and then only after issuance by the director of a direct pay 63 25 tax permit. 63 26 Sec. 113. Section 423.40, subsection 2, Code 2018, is 63 27 amended to read as follows: 63 28 2. a. Any person who knowingly sells tangible personal 63 29 property, specified digital products, tickets or admissions 63 30 to places of amusement and athletic events, or gas, water, 63 31 electricity, or communication service at retail, or engages in 63 32 the furnishing of services enumerated in section 423.2, in this 63 33 state without procuring a permit to collect tax, as provided 63 34 in section 423.36, or who violates section 423.24 and the 63 35 officers of any corporation who so act are guilty of a serious 64 1 misdemeanor. 64 2 b. A person who knowingly sells tangible personal property, 64 3 specified digital products, tickets or admissions to places of 64 4 amusement and athletic events, or gas, water, electricity, or 64 5 communication service at retail, or engages in the furnishing 64 6 of services enumerated in section 423.2, in this state after 64 7 the person's sales tax permit has been revoked and before it 64 8 has been restored as provided in section 423.36, subsection 6, 64 9 and the officers of any corporation who so act are guilty of an 64 10 aggravated misdemeanor. 64 11 Sec. 114. Section 423.41, Code 2018, is amended to read as 64 12 follows: 64 13 423.41 Books ==== examination. 64 14 Every retailer required or authorized to collect taxes 64 15 imposed by this chapter and every person using in this state 64 16 tangible personal property, specified digital products, 64 17 services, or the product of services shall keep records, 64 18 receipts, invoices, and other pertinent papers as the director 64 19 shall require, in the form that the director shall require, 64 20 for as long as the director has the authority to examine and 64 21 determine tax due. The director or any duly authorized agent 64 22 of the department may examine the books, papers, records, 64 23 and equipment of any personeitherselling tangible personal 64 24 property, specified digital products, or services or liable 64 25 for the tax imposed by this chapter, and investigate the 64 26 character of the business of any person in order to verify 64 27 the accuracy of any return made, or if a return was not made 64 28 by the person, ascertain and determine the amount due under 64 29 this chapter. These books, papers, and records shall be made 64 30 available within this state for examination upon reasonable 64 31 notice when the director deems it advisable and so orders. If 64 32 the taxpayer maintains any records in an electronic format, 64 33 the taxpayer shall comply with reasonable requests by the 64 34 director or the director's authorized agents to provide those 64 35 electronic records in a standard record format. The preceding 65 1 requirements shall likewise apply to users and persons 65 2 furnishing services enumerated in section 423.2. 65 3 Sec. 115. Section 423.45, subsection 4, paragraphs a, b, and 65 4 e, Code 2018, are amended to read as follows: 65 5 a. The department shall issue or the seller may separately 65 6 provide exemption certificates in the form prescribed by the 65 7 director, including certificates not made of paper, which 65 8 conform to the requirements of paragraph "c", to assist 65 9 retailers in properly accounting for nontaxable sales of 65 10 tangible personal property, specified digital products, 65 11 or services to purchasers for a nontaxable purpose. The 65 12 department shall also allow the use of exemption certificates 65 13 for those circumstances in which a sale is taxable but the 65 14 seller is not obligated to collect tax from the buyer. 65 15 b. The sales tax liability for all sales of tangible 65 16 personal property and specified digital products and all sales 65 17 of services is upon the seller and the purchaser unless the 65 18 seller takes from the purchaser a valid exemption certificate 65 19 stating under penalty of perjury that the purchase is for a 65 20 nontaxable purpose and is not a retail sale as defined in 65 21 section 423.1, or the seller is not obligated to collect tax 65 22 due, or unless the seller takes a fuel exemption certificate 65 23 pursuant to subsection 5. If the tangible personal property, 65 24 specified digital products, or services are purchased tax free 65 25 pursuant to a valid exemption certificate and the tangible 65 26 personal property, specified digital products, or services are 65 27 used or disposed of by the purchaser in a nonexempt manner, the 65 28 purchaser is solely liable for the taxes and shall remit the 65 29 taxes directly to the department and sections 423.31, 423.32, 65 30 423.37, 423.38, 423.39, 423.40, 423.41, and 423.42 shall apply 65 31 to the purchaser. 65 32 e. If the circumstances change and as a result the tangible 65 33 personal property, specified digital products, or services are 65 34 used or disposed of by the purchaser in a nonexempt manner or 65 35 the purchaser becomes obligated to pay the tax, the purchaser 66 1 is liable solely for the taxes and shall remit the taxes 66 2 directly to the department in accordance with this subsection. 66 3 Sec. 116. Section 423.57, Code 2018, is amended to read as 66 4 follows: 66 5 423.57 Statutes applicable. 66 6 The director shall administer this subchapter as it relates 66 7 to the taxes imposed in this chapter in the same manner and 66 8 subject to all the provisions of, and all of the powers, 66 9 duties, authority, and restrictions contained in sections 66 10 423.14, 423.14A, 423.15, 423.16, 423.17, 423.19, 423.20, 66 11 423.21, 423.22, 423.23, 423.24, 423.25, 423.29, 423.31, 423.32, 66 12 423.33, 423.34, 423.34A, 423.35, 423.37, 423.38, 423.39, 66 13 423.40, 423.41, and 423.42, section 423.43, subsection 1, and 66 14 sections 423.45, 423.46, and 423.47. 66 15 Sec. 117. Section 423.58, Code 2018, is amended to read as 66 16 follows: 66 17 423.58 Collection, permit, and tax return exemption for 66 18 certain out=of=state businesses. 66 19 Notwithstanding sections 423.14, 423.14A, 423.29, 423.31, 66 20 423.32, and 423.36, a person meeting the requirements of 66 21 section 29C.24 is not required to obtain a sales or use tax 66 22 permit, collect and remit sales and use tax, or make and file 66 23 applicable sales or use tax returns, as provided in section 66 24 29C.24, subsection 3, paragraph "a", subparagraph (2). 66 25 Sec. 118. Section 423B.5, subsection 1, Code 2018, is 66 26 amended to read as follows: 66 27 1. A local sales and services tax at the rate of not more 66 28 than one percent may be imposed by a county on the sales price 66 29 taxed by the state under chapter 423, subchapter II. A local 66 30 sales and services tax shall be imposed on the same basis as 66 31 the state sales and services tax or in the case of the use of 66 32 natural gas, natural gas service, electricity, or electric 66 33 service on the same basis as the state use tax and shall not 66 34 be imposed on the sale of any property or on any service not 66 35 taxed by the state, except the tax shall not be imposed on 67 1 the sales price from the sale of motor fuel or special fuel 67 2 as defined in chapter 452A which is consumed for highway use 67 3 or in watercraft or aircraft if the fuel tax is paid on the 67 4 transaction and a refund has not or will not be allowed, 67 5 on the sales price from the sale of equipment by the state 67 6 department of transportation, or on the sales price from the 67 7 sale or use of natural gas, natural gas service, electricity, 67 8 or electric service in a city or county where the sales price 67 9 from the sale of natural gas or electric energy is subject to 67 10 a franchise fee or user fee during the period the franchise 67 11 or user fee is imposed. A local sales and services tax is 67 12 applicable to transactions within those incorporated and 67 13 unincorporated areas of the county where it is imposedand, 67 14 which transactions include but are not limited to sales sourced 67 15 pursuant to sections 423.15, 423.17, 423.19, or 423.20, to a 67 16 location within that incorporated or unincorporated area of the 67 17 county. The tax shall be collected by all persons required 67 18 to collect state sales taxes. All cities contiguous to each 67 19 other shall be treated as part of one incorporated area and the 67 20 tax would be imposed in each of those contiguous cities only 67 21 if the majority of those voting in the total area covered by 67 22 the contiguous cities favors its imposition. In the case of a 67 23 local sales and services tax submitted to the registered voters 67 24 of two or more contiguous counties as provided in section 67 25 423B.1, subsection 4, paragraph "c", all cities contiguous to 67 26 each other shall be treated as part of one incorporated area, 67 27 even if the corporate boundaries of one or more of the cities 67 28 include areas of more than one county, and the tax shall be 67 29 imposed in each of those contiguous cities only if a majority 67 30 of those voting on the tax in the total area covered by the 67 31 contiguous cities favored its imposition. 67 32 Sec. 119. Section 423B.6, subsection 2, paragraph b, Code 67 33 2018, is amended to read as follows: 67 34 b. The ordinance of a county board of supervisors imposing 67 35 a local sales and services tax shall adopt by reference the 68 1 applicable provisions of the appropriate sections of chapter 68 2 423. All powers and requirements of the director to administer 68 3 the state sales tax law and use tax law are applicable to the 68 4 administration of a local sales and services tax law and the 68 5 local excise tax, including but not limited to the provisions 68 6 of section 422.25, subsection 4, sections 422.30, 422.67, 68 7 and 422.68, section 422.69, subsection 1, sections 422.70 68 8 through 422.75, section 423.14, subsection 1 and subsection 68 9 2, paragraphs "b" through "e", and sections 423.14A, 423.15, 68 10 423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 through 68 11 423.42, 423.46, and 423.47. Local officials shall confer 68 12 with the director of revenue for assistance in drafting the 68 13 ordinance imposing a local sales and services tax. A certified 68 14 copy of the ordinance shall be filed with the director as soon 68 15 as possible after passage. 68 16 Sec. 120. LEGISLATIVE INTENT. It is the intent of the 68 17 general assembly that the provisions of this division of this 68 18 Act amending the definition of "place of business" in section 68 19 423.1, subsection 37, and "sales" in section 423.1, subsection 68 20 50, enacting definitions of "sold at retail in the state" in 68 21 section 423.1, subsection 55A, and "subscription" in section 68 22 423.1, subsection 57A, and amending the enumerated service of 68 23 pay television in 423.2, subsection 6, paragraph "al", are 68 24 conforming amendments consistent with current state law, and 68 25 that the amendments do not change the application of current 68 26 law but instead reflect current law both before and after the 68 27 enactment of this division of this Act. 68 28 Sec. 121. RELATIONSHIP TO EXISTING LAW FOR TAXATION OF 68 29 SPECIFIED DIGITAL PRODUCTS. The provisions of this division of 68 30 this Act relating to the imposition of tax on the sale or use of 68 31 "specified digital products", as defined in this division of 68 32 this Act, shall not be construed as affecting the taxability 68 33 or nontaxability under other provisions of existing law of 68 34 sales or uses occurring prior to the enactment of this division 68 35 of this Act of products meeting the definition of "specified 69 1 digital products", as defined in this division of this Act. 69 2 Sec. 122. EFFECTIVE DATE. 69 3 1. Except as provided in subsection 2, this division of this 69 4 Act takes effect January 1, 2019. 69 5 2. The following take effect July 1, 2018: 69 6 a. The sections of this division of this Act amending 69 7 section 423.1, subsections 37 and 50. 69 8 b. The sections of this division of this Act enacting 69 9 section 423.1, subsections 55A and 57A. 69 10 c. The section of this division of this Act amending section 69 11 423.2, subsection 1, paragraph "a", subparagraph (1). 69 12 d. The provision amending the enumerated service of pay 69 13 television to include but not be limited to streaming video, 69 14 video on=demand, and pay=per=view, in the section of this 69 15 division of this Act amending section 423.2, subsection 6. 69 16 e. The provisions adding photography and retouching to the 69 17 list of enumerated services subject to the sales tax in the 69 18 section of this division of this Act amending section 423.2, 69 19 subsection 6. 69 20 f. The section of this division of this Act enacting section 69 21 423.2, subsection 8, paragraph "d". 69 22 g. The section of this division of this Act amending section 69 23 423.5, subsection 1, paragraph "a". 69 24 h. The section of this division of this Act entitled 69 25 "legislative intent" which describes the intent of the general 69 26 assembly with respect to certain amendments in this division of 69 27 this Act to the definition of "place of business" in section 69 28 423.1, subsection 37, "sales" in section 423.1, subsection 50, 69 29 the enactment of a definition for "subscription" in section 69 30 423.1, subsection 57A, and "sold at retail" in section 423.1, 69 31 subsection 55A, and amendments to the enumerated service of pay 69 32 television in section 423.2, subsection 6, paragraph "al". 69 33 DIVISION V 69 34 HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE RENTAL EXCISE TAX 69 35 CHANGES 70 1 Sec. 123. Section 423A.2, subsection 1, Code 2018, is 70 2 amended to read as follows: 70 3 1. For the purposes of this chapter, unless the context 70 4 otherwise requires: 70 5 a. "Department" means the department of revenue. 70 6 b. "Lessor" means any of the following: 70 7 (1) A person engaged in the business of renting lodging to 70 8 users. 70 9 (2) A person who acquires a right to or interest in any 70 10 lodging with an intent to rent the lodging to another person. 70 11 (3) A person who actually or constructively rents lodging, 70 12 regardless of who owns or controls the lodging. 70 13 (4) A lodging facilitator. 70 14 (5) A retailer or retailer maintaining a place of business 70 15 in this state as defined in section 423.1, including those 70 16 persons who meet the requirements of section 423.14A, which 70 17 retailer or retailer maintaining a place of business in this 70 18 state would be responsible for collection and payment of the 70 19 hotel and motel tax if it were a sales or use tax under chapter 70 20 423. 70 21 c. "Lodging" means rooms, apartments, or sleeping quarters 70 22 in a hotel, motel, inn, public lodging house, rooming house, 70 23 cabin, apartment, residential property, or manufactured or 70 24 mobile home which is tangible personal property, or in a 70 25 tourist court, or in any place where sleeping accommodations 70 26 are furnished to transient guests for rent, whether with or 70 27 without meals. Lodging does not include rooms that are not 70 28 used for sleeping accommodations. 70 29 d. "Lodging facilitator" means any person who facilitates 70 30 the renting of lodging to users by satisfying subparagraphs (1) 70 31 and (2) as follows: 70 32 (1) The person directly or indirectly does any of the 70 33 following: 70 34 (a) Lists, makes available, or advertises lodging for rent 70 35 by a lessor in any forum. 71 1 (b) Transmits or otherwise communicates an offer or 71 2 acceptance between a lessor or user. 71 3 (c) Owns, rents, licenses, makes available, or operates any 71 4 electronic or physical infrastructure or any property, process, 71 5 method, copyright, trademark, or patent that connects lessors 71 6 and users to each other. 71 7 (d) Provides a platform or other marketplace for renting 71 8 lodging or otherwise facilitates the renting of lodging, 71 9 regardless of ownership or control of the lodging. 71 10 (e) Provides software development or research and 71 11 development activities related to any activity described in 71 12 this subparagraph (1), if such software development or research 71 13 and development activities are directly related to the physical 71 14 or electronic marketplace provided by a lodging facilitator. 71 15 (f) Provides or offers fulfillment or storage services for a 71 16 lessor. 71 17 (g) Sets prices for a lessor's rental of lodging. 71 18 (h) Provides or offers customer service to a lessor or 71 19 a lessor's customers, or accepts or assists with returns, 71 20 exchanges, cancellations, or rescheduling of the rental of 71 21 lodging by a lessor. 71 22 (2) The person directly or indirectly does any of the 71 23 following: 71 24 (a) Collects the sales price for the renting of the lodging. 71 25 (b) Provides payment processing services for the renting of 71 26 lodging. 71 27 (c) Charges, collects, or otherwise receives booking fees, 71 28 advertising revenues, or other consideration from the renting 71 29 of lodging or the facilitation of the renting of lodging, 71 30 regardless of ownership or control of the lodging. 71 31 (d) Through terms and conditions, agreements, or 71 32 arrangements with a third party, collects payment in connection 71 33 with a rental of lodging from a user and transmits that payment 71 34 to the lessor, regardless of whether the person collecting 71 35 and transmitting such payment receives compensation or other 72 1 consideration in exchange for the service. 72 2 (e) Provides a virtual currency that users are allowed or 72 3 required to use to rent lodging. 72 4d.e. "Person" means the same as the term is defined in 72 5 section 423.1. 72 6e.f. "Renting", "rental", or "rent" means a transfer of 72 7 possession or control of lodging for a fixed or indeterminate 72 8 term for consideration and includes any kind of direct or 72 9 indirect charge for such lodging or its use. 72 10f.g. "Sales price" meansthe consideration for renting of 72 11 lodging and means the same as the term is defined in section 72 12 423.1all direct or indirect consideration, including but 72 13 not limited to cash, credit, property, and services, paid in 72 14 connection with any charge of any description associated with 72 15 the renting of lodging or with communicating, negotiating, 72 16 reserving, booking, facilitating, or otherwise arranging to 72 17 rent lodging, including but not limited to booking fees, 72 18 reservation fees, service fees, cleaning fees, linen fees, 72 19 towel fees, and nonrefundable deposits. When determining "sales 72 20 price", no deduction shall be taken for any of the following: 72 21 (1) The lessor's cost of the property rented. 72 22 (2) The cost of materials used, labor or service cost, 72 23 interest, losses, all costs of transportation to the lessor, 72 24 all taxes imposed on the lessor, or any other expenses of the 72 25 lessor. 72 26 (3) Charges by the lessor for any services necessary to 72 27 complete the rental transaction. 72 28g.h. "User" means a person to whom lodging is rented. 72 29 Sec. 124. NEW SECTION. 423A.3A Collection and remittance by 72 30 lodging facilitators ==== joint and several liability. 72 31 If a transaction for the rental of lodging involves both a 72 32 lodging facilitator and another lessor, all of the following 72 33 shall apply: 72 34 1. The lodging facilitator shall collect the state=imposed 72 35 tax under section 423A.3 and the locally imposed tax under 73 1 section 423A.4 on the entire sales price paid by the user, 73 2 regardless of the amount of the sales price that will 73 3 ultimately accrue to or benefit the lodging facilitator, 73 4 another lessor, or any other person. 73 5 2. The lodging facilitator and any other lessor involved 73 6 in the transaction shall be jointly and severally liable for 73 7 collecting and remitting the tax under sections 423A.3 and 73 8 423A.4. 73 9 Sec. 125. Section 423A.5, Code 2018, is amended to read as 73 10 follows: 73 11 423A.5 Exemptions. 73 121.There are exempted from the provisions of this chapter 73 13 and from the computation of any amount of tax imposed by 73 14section 423A.3this chapter all of the following: 73 15a.1. The sales price from the renting of lodging which is 73 16 rented by the same person for a period of more than thirty=one 73 17 consecutive days. 73 18b.2. The sales price from the renting of sleeping rooms 73 19 in dormitoriesand in memorial unionsat all universities and 73 20 colleges located in the state of Iowa. 73 212. There is exempted from the provisions of this chapter and 73 22 from the computation of any amount of tax imposed by section 73 23 423A.4 all of the following:73 24a. The sales price from the renting of lodging or rooms 73 25 exempt under subsection 1.73 26b.3. The sales price of lodging furnished to the guests of 73 27 a religious institution if the property is exempt under section 73 28 427.1, subsection 8, and the purpose of renting is to provide a 73 29 place for a religious retreat or function and not a place for 73 30 transient guests generally. 73 31 Sec. 126. Section 423A.6, subsection 4, Code 2018, is 73 32 amended to read as follows: 73 33 4. Section 422.25, subsection 4, sections 422.30, 422.67, 73 34 and 422.68, section 422.69, subsection 1, sections 422.70, 73 35 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 74 1 1, and sections 423.23, 423.24, 423.25, 423.31, 423.33, 74 2 423.35, 423.37 through 423.42, and 423.47, consistent with the 74 3 provisions of this chapter, apply with respect to the taxes 74 4 authorized under this chapter, in the same manner and with the 74 5 same effect as if the state and local hotel and motel taxes 74 6 were retail sales taxes within the meaning of those statutes. 74 7 Notwithstanding this subsection, the director shall provide for 74 8 quarterly filing of returns and for other than quarterly filing 74 9 of returns both as prescribed in section 423.31. The director 74 10 may require all persons who are engaged in the business of 74 11 deriving any sales price subject to tax under this chapter to 74 12 register with the department. All taxes collected under this 74 13 chapter by a retailer, lessor, or anyindividualother person 74 14 are deemed to be held in trust for the state of Iowa and the 74 15 local jurisdictions imposing the taxes. 74 16 Sec. 127. Section 423C.2, subsection 3, Code 2018, is 74 17 amended to read as follows: 74 18 3. "Lessor" meansaany of the following: 74 19 a. A person engaged in the business of renting automobiles 74 20 to users."Lessor" includes a74 21 b. A motor vehicle dealer licensed pursuant to chapter 74 22 322 who rents automobiles to users.For this purpose, the 74 23 objective of making a profit is not necessary to make the 74 24 renting activity a business.74 25 c. A person who acquires a right to or interest in any 74 26 automobile with an intent to rent the automobile to another 74 27 person. 74 28 d. A person who actually or constructively rents 74 29 automobiles, regardless of who owns or controls the 74 30 automobiles. 74 31 e. A rental facilitator. 74 32 f. A retailer or retailer maintaining a place of business in 74 33 this state as defined in section 423.1, including those persons 74 34 who meet the requirements of section 423.14A, which retailer or 74 35 retailer maintaining a place of business in this state would be 75 1 responsible for collection and payment of the automobile rental 75 2 excise tax if it were a sales or use tax under chapter 423. 75 3 Sec. 128. Section 423C.2, Code 2018, is amended by adding 75 4 the following new subsection: 75 5 NEW SUBSECTION. 06. "Rental facilitator" means any person 75 6 who facilitates the renting of an automobile to users by 75 7 satisfying paragraphs "a" and "b" as follows: 75 8 a. The person directly or indirectly does any of the 75 9 following: 75 10 (1) Lists, makes available, or advertises automobiles for 75 11 rent by a lessor in any forum. 75 12 (2) Transmits or otherwise communicates an offer or 75 13 acceptance between a lessor or user. 75 14 (3) Owns, rents, licenses, makes available, or operates any 75 15 electronic or physical infrastructure or any property, process, 75 16 method, copyright, trademark, or patent that connects lessors 75 17 and users to each other. 75 18 (4) Provides a platform or other marketplace for 75 19 renting automobiles or otherwise facilitates the renting 75 20 of automobiles, regardless of ownership or control of the 75 21 automobile. 75 22 (5) Provides software development or research and 75 23 development activities related to any activity described in 75 24 this paragraph "a", if such software development or research and 75 25 development activities are directly related to the physical or 75 26 electronic marketplace provided by a rental facilitator. 75 27 (6) Provides or offers fulfillment or storage services for a 75 28 lessor. 75 29 (7) Sets prices for a lessor's rental of automobiles. 75 30 (8) Provides or offers customer service to a lessor or 75 31 a lessor's customers, or accepts or assists with returns, 75 32 exchanges, cancellations, or rescheduling of the rental of 75 33 automobiles by a lessor. 75 34 b. The person directly or indirectly does any of the 75 35 following: 76 1 (1) Collects the rental price for the renting of an 76 2 automobile. 76 3 (2) Provides payment processing services for the renting of 76 4 an automobile. 76 5 (3) Charges, collects, or otherwise receives booking 76 6 fees, advertising revenues, or other consideration from the 76 7 renting of an automobile or the facilitation of the renting 76 8 of an automobile, regardless of ownership or control of the 76 9 automobile. 76 10 (4) Through terms and conditions, agreements, or 76 11 arrangements with a third party, collects payment in connection 76 12 with a rental of automobiles from a user and transmits that 76 13 payment to the lessor, regardless of whether the person 76 14 collecting and transmitting such payment receives compensation 76 15 or other consideration in exchange for the service. 76 16 (5) Provides a virtual currency that users are allowed or 76 17 required to use to rent automobiles. 76 18 Sec. 129. Section 423C.2, subsection 6, Code 2018, is 76 19 amended by striking the subsection and inserting in lieu 76 20 thereof the following: 76 21 6. "Rental price" means all direct or indirect 76 22 consideration, including but not limited to cash, credit, 76 23 property, and services, paid in connection with any charge of 76 24 any description associated with the renting of an automobile 76 25 or with communicating, negotiating, reserving, booking, 76 26 facilitating, or otherwise arranging to rent an automobile, 76 27 including but not limited to booking fees, reservation fees, 76 28 service fees, and nonrefundable deposits. When determining 76 29 "rental price", no deduction shall be taken for any of the 76 30 following: 76 31 a. The lessor's cost of the property rented. 76 32 b. The cost of materials used, labor or service cost, 76 33 interest, losses, all costs of transportation to the lessor, 76 34 all taxes imposed on the lessor, or any other expenses of the 76 35 lessor. 77 1 c. Charges by the lessor for any services necessary to 77 2 complete the rental transaction. 77 3 Sec. 130. NEW SECTION. 423C.3A Collection and remittance by 77 4 rental facilitators ==== joint and several liability. 77 5 If a transaction for the rental of an automobile involves 77 6 both a rental facilitator and another lessor, all of the 77 7 following shall apply: 77 8 1. The rental facilitator shall collect the tax under 77 9 section 423C.3 on the entire rental price paid by the user, 77 10 regardless of the amount of the rental price that will 77 11 ultimately accrue to or benefit the rental facilitator, another 77 12 lessor, or any other person. 77 13 2. The rental facilitator and any other lessor involved 77 14 in the transaction shall be jointly and severally liable for 77 15 collecting and remitting the tax under section 423C.3. 77 16 Sec. 131. LEGISLATIVE INTENT. It is the intent of the 77 17 general assembly that the provision of this division of this 77 18 Act amending the definition of "lodging" in section 423A.2, 77 19 subsection 1, paragraph "c", is a conforming amendment 77 20 consistent with current state law, and that the amendment 77 21 does not change the application of current law but instead 77 22 reflects current law both before and after the enactment of 77 23 this division of this Act. 77 24 Sec. 132. EFFECTIVE DATE. 77 25 1. Except as provided in subsection 2, this division of this 77 26 Act takes effect January 1, 2019. 77 27 2. The following take effect July 1, 2018: 77 28 a. The provision amending the definition of "lodging" in the 77 29 section of this division of this Act amending section 423A.2, 77 30 subsection 1, paragraph "c". 77 31 b. The section of this division of this Act entitled 77 32 "legislative intent" which describes the intent of the general 77 33 assembly with respect to the amendment in this division of 77 34 this Act to the definition of "lodging" in section 423A.2, 77 35 subsection 1, paragraph "c". 78 1 EXPLANATION 78 2 The inclusion of this explanation does not constitute agreement with 78 3 the explanation's substance by the members of the general assembly. 78 4 This bill makes numerous changes to income taxes, the 78 5 sales and use taxes and local option sales tax, the hotel and 78 6 motel excise tax, the automobile rental excise tax, the Iowa 78 7 educational savings plan trust, and the Iowa ABLE savings plan 78 8 trust. 78 9 DIVISION I ==== INCOME TAX CHANGES BEGINNING IN TAX YEAR 2018. 78 10 The federal Protecting Americans From Tax Hikes Act (PATH Act) 78 11 enacted by Congress in 2015 made permanent certain increased 78 12 phase=out amounts and increased credit percentages of the 78 13 federal earned income tax credit (EITC) that were scheduled 78 14 to expire in 2018, made permanent the deduction for certain 78 15 expenses incurred by elementary and secondary school teachers 78 16 that was scheduled to expire in 2015, made permanent certain 78 17 tax=free distributions to charities from individual retirement 78 18 accounts (IRAs) that were set to expire in 2015, and made 78 19 permanent the option to deduct sales and use taxes in lieu of 78 20 state and local income taxes that was set to expire in 2015. 78 21 To date, Iowa has not coupled with these federal changes for 78 22 purposes of the Iowa individual income tax. Division I couples 78 23 with these federal changes for purposes of the Iowa individual 78 24 income tax for tax year 2018. Division I also couples 78 25 for tax year 2018 with certain accounting method and other 78 26 miscellaneous changes made in the federal Tax Cuts and Jobs Act 78 27 of 2017 for purposes of the individual and corporate income 78 28 taxes, and the franchise tax, to the extent those amendments 78 29 affect the calculation of federal adjusted gross income or 78 30 federal taxable income for federal tax purposes for tax year 78 31 2018. These include amendments contained in the following 78 32 sections of the federal Tax Cuts and Jobs Act: {13102 (small 78 33 business accounting method changes), {13221 (accounting method 78 34 rules for the taxable year of inclusion), {13504 (repeal of 78 35 technical termination of partnerships), {13541 (electing small 79 1 business trust), {13543 (treatment of S corporation conversion 79 2 to C corporation), {13611 (repeal of special rule permitting 79 3 recharacterization of Roth IRA conversions), and {13613 79 4 (extended rollover period for qualified plan loans). 79 5 These provisions apply retroactively to January 1, 2018, for 79 6 tax years beginning on or after that date, but prior to January 79 7 1, 2019. 79 8 IRC {179 DEDUCTION. The IRC {179 deduction provides a tax 79 9 deduction in lieu of depreciation for certain property placed 79 10 in service during a tax year. Under current law, for Iowa 79 11 tax purposes, the maximum IRC {179 deduction per tax year is 79 12 $25,000. This maximum deduction is incrementally reduced when 79 13 a taxpayer's eligible property placed in service during the tax 79 14 year exceeds $200,000 (investment limitation). 79 15 The federal Tax Cuts and Jobs Act of 2017 made several 79 16 changes to the IRC {179 deduction, including increasing the 79 17 statutory maximum deduction to $1 million, and increasing 79 18 the statutory investment limitation to $2.5 million. The 79 19 bill couples for Iowa individual income tax purposes with the 79 20 changes made to the IRC {179 deduction in the federal Tax Cuts 79 21 and Jobs Act beginning in tax year 2018, but limits the maximum 79 22 deduction to $100,000, and sets the investment limitation at 79 23 $400,000. The maximum deduction and limitation amount are 79 24 increased to $250,000 and $1 million, respectively, for tax 79 25 years beginning on or after January 1, 2020. 79 26 If the total IRC {179 deduction allocated to a taxpayer from 79 27 one or more partnerships, S corporations, or limited liability 79 28 companies exceeds the applicable amount described above in a 79 29 tax year, the bill allows the taxpayer to deduct the amount 79 30 in excess of that amount evenly over a five=year tax period 79 31 beginning in the subsequent tax year. Taxpayers who elect 79 32 to take advantage of this provision are not allowed to take 79 33 the IRC {179 deduction for the tax year of the election on 79 34 any eligible property placed in service by the taxpayer, but 79 35 are allowed to deduct depreciation on such amounts that would 80 1 otherwise be allowable under federal law, without regard to the 80 2 bonus depreciation allowance. 80 3 Under current Iowa law, for previous tax years, individual 80 4 taxpayers were required to recompute their Iowa itemized 80 5 deductions under Code section 422.9(2) to account for 80 6 differences between the federal and Iowa treatment of the 80 7 IRC {179 deduction. The bill provides that taxpayers must 80 8 make those same adjustments to federal adjusted gross income 80 9 beginning in tax year 2018. 80 10 These provisions apply retroactively to January 1, 2018, for 80 11 tax years beginning on or after that date. 80 12 The division takes effect upon enactment. 80 13 DIVISION II ==== INDIVIDUAL INCOME TAX CHANGES BEGINNING IN 80 14 TAX YEAR 2019. Division II makes numerous changes to the Iowa 80 15 individual income tax beginning in tax year 2019. 80 16 TAX RATE CHANGES. Current law provides nine regular tax 80 17 brackets containing progressively higher amounts of taxable 80 18 income that are taxed at progressively higher tax rates, from 80 19 a low of 0.36 percent, to a high of 8.98 percent. The taxable 80 20 income amounts in each tax bracket are indexed to inflation 80 21 and increased each year. For tax years beginning on or after 80 22 January 1, 2019, the bill reduces the tax rate in each bracket 80 23 as follows: 80 24 Tax rates for tax year 2019 Tax rates for tax year 80 25 2020 and beyond 80 26 1) 0.34% 0.32% 80 27 2) 0.68% 0.65% 80 28 3) 2.31% 2.20% 80 29 4) 4.28% 4.10% 80 30 5) 5.94% 5.60% 80 31 6) 6.29% 6.10% 80 32 7) 6.60% 6.58% 80 33 8) 7.84% 7.82% 80 34 9) 8.89% 8.89% 80 35 INTERNAL REVENUE CODE (IRC) COUPLING. Under current law 81 1 with the exception of the solar energy credit and the state 81 2 research activities credit, Code references to the IRC include 81 3 the IRC in effect on January 1, 2015, meaning federal income 81 4 tax revisions made by Congress in 2015 through 2017 are not 81 5 applicable for Iowa tax purposes, including revisions made in 81 6 the PATH Act of 2015 and the federal Tax Cuts and Jobs Act of 81 7 2017. The bill adopts, or couples with, these revisions for 81 8 purposes of the individual income tax beginning in tax year 81 9 2019, except for certain revisions as described below. The 81 10 coupling is accomplished generally by updating the definition 81 11 of IRC as it applies to the individual income tax to mean 81 12 the IRC as amended and in effect on January 1, 2018. The 81 13 updated definition does not apply to the state solar energy 81 14 system credit in Code section 422.11L, or the state individual 81 15 research activities credit in Code section 422.10, because both 81 16 of those credits contain their own definition of IRC. 81 17 Code section 422.9 provided individuals a deduction from 81 18 net income for state sales and use taxes if the individual 81 19 chose to deduct sales and use tax in lieu of state income taxes 81 20 or the standard deduction for federal income tax purposes. 81 21 The deduction was set to expire under both federal and Iowa 81 22 law beginning in tax year 2016. The federal deduction was 81 23 made permanent by the PATH Act of 2015, and the bill couples 81 24 with these federal changes to the deduction, thus making it 81 25 permanent for tax year 2019 and beyond. 81 26 The federal deduction for other taxes paid was limited to 81 27 $10,000 per year under most circumstances by the federal Tax 81 28 Cuts and Jobs Act of 2017, but the bill decouples from this 81 29 limitation. Taxpayers will be allowed to deduct other taxes 81 30 paid in computing state itemized deductions to the same extent 81 31 as is allowed under current state law, without regard to the 81 32 $10,000 limitation described above. 81 33 BONUS DEPRECIATION DECOUPLING. The bill decouples, for Iowa 81 34 individual income tax purposes, from the federal additional 81 35 first=year depreciation allowance in section 168(k) of the IRC 82 1 (bonus depreciation) which was extended and modified by the 82 2 federal PATH Act of 2015 and the federal Tax Cuts and Jobs Act 82 3 of 2017. By decoupling, taxpayers who claim bonus depreciation 82 4 for federal tax purposes are required to add such depreciation 82 5 amounts back to Iowa net income, but are then allowed under 82 6 existing state law to deduct the amount of depreciation that 82 7 would otherwise be allowable under federal law, without regard 82 8 to the bonus depreciation allowance. 82 9 STANDARD DEDUCTION INCREASES. When calculating taxable 82 10 income for purposes of the individual income tax, individuals 82 11 are allowed to choose between a standard deduction or itemized 82 12 deductions. The standard deduction under current law for tax 82 13 year 2018 is $2,030 for a single person or a married person who 82 14 files separately, and is $5,000 for a married couple filing 82 15 jointly, a surviving spouse, or a head of household. These 82 16 amounts are indexed to inflation and increased each year. 82 17 The bill increases the standard deduction amounts beginning 82 18 in tax year 2019 to $3,000 for a single person or a married 82 19 person who files separately, and to $7,500 for a married couple 82 20 filing jointly, a surviving spouse, or a head of household. 82 21 The bill indexes these standard deduction amounts to inflation 82 22 so they will be increased in future tax years. 82 23 QUALIFIED BUSINESS INCOME DEDUCTION. The federal Tax Cuts 82 24 and Jobs Act of 2017 created a deduction in calculating federal 82 25 taxable income for noncorporate taxpayers of up to 20 percent 82 26 of certain domestic qualified business income earned by a 82 27 taxpayer from a partnership, S corporation, limited liability 82 28 company, other pass=through entity, or a sole proprietorship. 82 29 This deduction was further amended by the federal Consolidated 82 30 Appropriations Act of 2018. The deduction is calculated under 82 31 section 199A of the IRC and includes numerous limitations based 82 32 on the type of trade or business involved, the income of the 82 33 trade or business, and the income of the taxpayer claiming the 82 34 deduction. The federal deduction applies to tax years 2018 82 35 through 2025, and is available to a taxpayer regardless of 83 1 whether the taxpayer claims the standard deduction or itemized 83 2 deductions for federal tax purposes. 83 3 The bill provides a deduction in computing Iowa taxable 83 4 income for purposes of the individual income tax equal to 25 83 5 percent of the taxpayer's qualified business income deduction 83 6 allowed for federal income tax purposes beginning in tax 83 7 year 2019. With regard to individuals, the Iowa deduction 83 8 is available regardless of whether the individual claims 83 9 the standard deduction or itemized deductions for Iowa tax 83 10 purposes. With regard to an estate or trust, the starting 83 11 point for calculating Iowa income tax will include the full 83 12 amount of the federal qualified business income deduction, so 83 13 the bill requires the estate or trust to add back 75 percent of 83 14 such amount when calculating Iowa taxable income. 83 15 The bill provides special rules for calculating the 83 16 qualified business income deduction in the case of an entity 83 17 filing an Iowa composite income tax return on behalf of all of 83 18 the entity's nonresident partners, members, beneficiaries, or 83 19 shareholders. In such cases, the deduction on the composite 83 20 return shall be an amount equal to 25 percent of the federal 83 21 qualified business income deduction that would be allowable to 83 22 an individual reporting the same items of income and loss that 83 23 are included on the composite return. 83 24 LIKE=KIND EXCHANGES. IRC {1031 provides for a deferral of 83 25 gain or loss resulting from exchanges of property that meet 83 26 certain conditions. The federal Tax Cuts and Jobs Act of 2017 83 27 repealed this provision with respect to exchanges of personal 83 28 property. IRC {1031 still provides for deferrals of gain or 83 29 loss with respect to qualifying real property. 83 30 The bill decouples, for Iowa individual income tax purposes, 83 31 with the federal repeal of deferrals under IRC {1031 for 83 32 qualifying personal property, and permits individuals to defer 83 33 gain or loss on qualifying personal property to the extent such 83 34 deferral would have been permitted under IRC {1031 prior to 83 35 its amendment by the federal Tax Cuts and Jobs Act of 2017. 84 1 EFFECTIVE DATE AND APPLICABILITY. The division takes effect 84 2 January 1, 2019, and applies to tax years beginning on or after 84 3 that date. 84 4 DIVISION III ==== CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN 84 5 TRUST AND IOWA ABLE SAVINGS PLAN TRUST. Division III makes 84 6 several changes to the Iowa educational savings plan trust in 84 7 Code chapter 12D (Iowa 529 plan), the disabilities expenses 84 8 savings plan trust in Code chapter 12I (Iowa ABLE plan), and 84 9 the income tax treatment of contributions to and withdrawals 84 10 from such plans. 84 11 IRC {529, which governs state tuition programs, previously 84 12 required that in order for a state tuition program to be 84 13 considered qualified and therefore eligible for certain 84 14 federal tax benefits, the program must be established to 84 15 allow contributions for the purposes of funding certain 84 16 qualifying expenses of attendance at institutions of higher 84 17 education. Accordingly, the Iowa 529 plan allows participants 84 18 to contribute and withdraw funds to and from the Iowa 529 plan 84 19 for the payment of higher education costs related to attendance 84 20 at institutions of higher education. 84 21 The federal Tax Cuts and Jobs Act of 2017 amended IRC 84 22 {529 to provide that during each tax year, up to $10,000 of 84 23 cash distributions from all qualified tuition programs for a 84 24 beneficiary for tuition expenses in connection with enrollment 84 25 or attendance at an elementary or secondary public, private, 84 26 or religious school, may be considered a distribution for 84 27 qualified higher education expenses and thus excludable from 84 28 income for federal income tax purposes. The federal Tax 84 29 Cuts and Jobs Act of 2017 also provided that under certain 84 30 conditions, amounts in qualified tuition programs may be 84 31 transferred to a qualified ABLE account without incurring 84 32 federal income tax consequences. 84 33 The bill amends the Iowa 529 plan to provide for qualified 84 34 withdrawals from the plan for elementary or secondary school 84 35 tuition as is now allowed under federal law pursuant to the 85 1 federal Tax Cuts and Jobs Act of 2017. The bill modifies the 85 2 findings and purpose provision of the Iowa 529 plan in Code 85 3 section 12D.1(1) by striking or amending specific references 85 4 to higher education and institutions of higher education so 85 5 that such provisions more generally reference education and 85 6 educational institutions, and by providing that the Iowa 529 85 7 plan's purpose is to make available an opportunity to invest in 85 8 a public trust to fund future formal education needs. 85 9 The bill strikes the definition of "higher education costs", 85 10 as well as numerous references to that term throughout the Iowa 85 11 529 plan, and replaces them with the term "qualified education 85 12 expenses", which is defined in the bill to mean the same as 85 13 qualified higher education expenses as defined in IRC {529, 85 14 including elementary and secondary school tuition to the extent 85 15 such tuition amounts are described and allowed under IRC {529. 85 16 The bill also replaces numerous references to "institution 85 17 of higher education" throughout the Iowa 529 plan with 85 18 references to a "qualified educational institution", which 85 19 is defined in the bill to include an institution of higher 85 20 education and any elementary or secondary, public, private, or 85 21 religious school described in IRC {529. 85 22 The federal Tax Cuts and Jobs Act of 2017 also amended 85 23 IRC {529 to allow certain transfers from a qualified tuition 85 24 program to an ABLE account without incurring federal income tax 85 25 consequences. The bill amends the Iowa 529 plan to provide 85 26 that a participant may transfer amounts in an Iowa 529 plan to 85 27 an ABLE account, including the Iowa ABLE plan, if the transfer 85 28 is permitted under IRC {529. The Iowa 529 plan is further 85 29 amended to allow the transfer of funds to another account in 85 30 the Iowa 529 plan, if the transfer is permitted under IRC {529. 85 31 Several other modifications are made to the Iowa 529 plan 85 32 to remove references to the imposition of penalties for 85 33 cancellation and late payments under the trust, to remove 85 34 certain references to the ability to amend participation 85 35 agreements, to describe rules and procedures for determining 86 1 account successors in the case of death of a participant, and 86 2 to modify the permissible investment direction that may be 86 3 provided by participants and beneficiaries under the trust. 86 4 Finally, the bill adds Iowa 529 plan accounts to the list of 86 5 exemptions from execution under Code section 627.6. 86 6 Under current law in Code section 422.7(32)(c), previously 86 7 tax=deducted contributions to an Iowa 529 plan that are 86 8 withdrawn for purposes other than the payment of qualified 86 9 education expenses are required to be added back to income 86 10 in computing Iowa individual income tax. The bill amends 86 11 this provision to provide that Iowa 529 plan withdrawals of 86 12 previously tax=deducted contributions must be added back to 86 13 Iowa income unless the amount is a withdrawal or transfer 86 14 for one of three eligible purposes. First, for the payment 86 15 of qualified higher education expenses. Second, for the 86 16 payment of tuition to an elementary or secondary school if the 86 17 tuition amounts are qualified education expenses. Third, for a 86 18 change in beneficiaries under, or transfer to another account 86 19 within, the Iowa 529 plan, or a transfer to the Iowa ABLE plan, 86 20 provided such beneficiary change or transfer is permitted under 86 21 the Iowa 529 plan. The bill defines "qualified education 86 22 expenses" and "tuition" to mean the same as defined under the 86 23 Iowa 529 plan. The bill defines "elementary or secondary 86 24 school" to mean an elementary or secondary school in this state 86 25 which is accredited under Code section 256.11 (educational 86 26 standards), and adheres to the provisions of the federal 86 27 Civil Rights Act of 1964 and Code chapter 216 (civil rights 86 28 commission). The bill defines "qualified higher education 86 29 expenses" to mean the same as defined under IRC {529. 86 30 The bill amends the income tax treatment of contributions 86 31 to and withdrawals from the Iowa ABLE plan to provide that a 86 32 contribution shall not be deducted from Iowa income tax to the 86 33 extent it represents a transfer from the Iowa 529 plan that was 86 34 previously deducted as a contribution to the Iowa 529 plan, 86 35 and that amounts resulting from a cancellation or withdrawal 87 1 from the Iowa ABLE plan for purposes other than the payment of 87 2 qualified disability expenses shall be added back to income in 87 3 computing Iowa individual income tax to the extent the amount 87 4 was previously transferred from the Iowa 529 plan and deducted 87 5 as a contribution to the Iowa 529 plan. 87 6 The division takes effect upon enactment and applies 87 7 retroactively to January 1, 2018, for withdrawals and transfers 87 8 from the Iowa educational savings plan trust made on or after 87 9 that date, and for tax years beginning on or after that date. 87 10 DIVISION IV ==== SALES AND USE TAXES. Division IV makes 87 11 numerous changes to the sales and use taxes, including the 87 12 local option sales tax. 87 13 SPECIFIED DIGITAL PRODUCTS. The bill imposes the sales and 87 14 use tax at a rate of six percent on the sale or use of specified 87 15 digital products in Iowa. The bill defines "specified digital 87 16 products" as electronically transferred digital audio=visual 87 17 works, digital audio works, digital books, or other digital 87 18 products. These and other related terms are defined in 87 19 the bill in new Code section 423.1(55A). The sales or use 87 20 tax applies whether the purchaser obtains permanent use or 87 21 less than permanent use of the specified digital product, 87 22 whether the sale or use is conditioned or not conditioned upon 87 23 continued payment from the purchaser, and whether the sale or 87 24 use is on a subscription basis or is not on a subscription 87 25 basis. The bill also provides that the sale or use of digital 87 26 code that may be used to obtain or access a specified digital 87 27 product at a later date is taxed in the same manner as a 87 28 specified digital product. 87 29 The bill creates an exemption for the sale or use of 87 30 specified digital products to a non=end user, as defined in the 87 31 bill. 87 32 The bill amends numerous existing sales and use tax 87 33 exemptions to include specified digital products, including 87 34 the following: sales the state is prohibited from taxing 87 35 under the United States Constitution or the Iowa Constitution; 88 1 sales to certain nonprofit corporations, organizations, 88 2 educational institutions, legal aid organizations, museums, 88 3 art centers, organ procurement organizations, hospitals, or 88 4 hospice facilities; sales by a state fair; sales to political 88 5 subdivisions; sales by counties or cities; casual sales; sales 88 6 of property which will be distributed as prizes to players 88 7 of certain amusement games; sales to recognized community 88 8 action agencies; uses of property for which the sales tax has 88 9 already been paid; sales in the regular course of business; 88 10 and property brought into Iowa by a nonresident and used here 88 11 temporarily. The bill amends a sales tax refund provision 88 12 relating to relief agencies that purchase property for free 88 13 distribution to the poor to include purchases of specified 88 14 digital products. 88 15 The bill makes certain other conforming amendments related 88 16 to the treatment of specified digital products for purposes 88 17 of the administration of the sales and use taxes. The bill 88 18 provides that the imposition of tax on the sale or use of 88 19 specified digital products shall not be construed as affecting 88 20 the taxability or nontaxability under other provisions of 88 21 existing law of sales or uses occurring prior to the enactment 88 22 of this division of this Act of products meeting the definition 88 23 of "specified digital products". 88 24 SUBSCRIPTIONS AND PAY TELEVISION SERVICE. The bill amends 88 25 the definition of "sale" in Code section 423.1(50) for purposes 88 26 of the sales tax to provide that a sale includes but is not 88 27 limited to any transfer, exchange, or barter on a subscription 88 28 basis. The bill defines "subscription" in new Code section 88 29 423.1(57A). 88 30 The bill amends the taxable service of pay television to 88 31 provide that pay television includes but is not limited to 88 32 streaming video, video on=demand, and pay=per=view. 88 33 The bill provides that it is the intent of the general 88 34 assembly that these changes to the definition of "sale" and 88 35 "subscription", and changes to the service of pay television, 89 1 are conforming amendments consistent with current state law, 89 2 and that the amendments do not change the application of 89 3 current law but instead reflect current law both before and 89 4 after the enactment of these changes. 89 5 These changes take effect July 1, 2018. 89 6 OTHER CHANGES TO TAXABLE SERVICES. Under current law, the 89 7 services of photography and retouching are subject to the 89 8 sales and use tax, but such services are taxed as if they were 89 9 sales of tangible personal property. The bill strikes these 89 10 provisions treating photography and retouching as tangible 89 11 personal property, and adds photography and retouching to the 89 12 list of enumerated services subject to the sales and use tax. 89 13 These changes to photography and retouching take effect July 89 14 1, 2018. 89 15 Current law provides that a limousine service is subject 89 16 to the sales and use tax. The bill modifies this service to 89 17 provide that a personal transportation service shall be subject 89 18 to the sales and use tax, and includes taxis, driver services, 89 19 ride sharing services, rides for hire, and limousine services 89 20 as examples of the types of services which qualify as a taxable 89 21 personal transportation service. 89 22 Under current law, the furnishing of information services, 89 23 as defined in Code section 423.3(66), is exempt from the 89 24 sales and use tax. The bill strikes this exemption and makes 89 25 information services a taxable service for purposes of the 89 26 sales and use tax. The bill defines "information services". 89 27 The bill additionally adds the following services to the 89 28 list of enumerated services subject to the sales and use 89 29 tax: storage of tangible or electronic files, documents, or 89 30 other records; services arising from or related to installing, 89 31 maintaining, servicing, repairing, operating, upgrading, or 89 32 enhancing specified digital products; video game services and 89 33 tournaments; and software as a service. 89 34 OTHER SALES AND USE TAX EXEMPTIONS. Current law provides 89 35 a sales and use tax exemption for access charges related to 90 1 online computer services in Code section 423.3(65), and for any 90 2 retail sale delivered electronically in Code section 423.3(67). 90 3 The bill strikes both of these exemptions. 90 4 The bill creates a sales and use tax exemption in new 90 5 Code section 423.3(103) for certain sales to a commercial 90 6 enterprise for use exclusively by the commercial enterprise. 90 7 The exemption specifies that such a use fails to qualify as 90 8 a use exclusively by the commercial enterprise if its use 90 9 for noncommercial purposes is more than de minimis. The 90 10 bill provides that the terms "de minimis" and "noncommercial 90 11 purposes" shall be defined by the director of revenue by 90 12 rule. The bill defines "commercial enterprise" to mean the 90 13 same as defined under the machinery and equipment sales and 90 14 use tax exemption in Code section 423.3(47), which includes 90 15 businesses and manufacturers conducted for profit and centers 90 16 for data processing services to insurance companies, financial 90 17 institutions, businesses, and manufacturers, but excludes 90 18 professions and occupations and nonprofit organizations. 90 19 The exemption applies to sales of specified digital 90 20 products, and to the furnishing of the following enumerated 90 21 taxable services: storage of tangible or electronic files, 90 22 documents, or other records; information services; services 90 23 arising from or related to installing, maintaining, servicing, 90 24 repairing, operating, upgrading, or enhancing specified digital 90 25 products; and software as a service. 90 26 The bill adds the sale of services to the items that may 90 27 qualify for the sales and use tax exemption in Code section 90 28 423.3(63) relating to items purchased for the purposes of 90 29 providing them as prizes to players of certain amusement games. 90 30 SALES AND USE TAX NEXUS AND COLLECTION REQUIREMENTS. The 90 31 bill modifies the requirement of persons to collect and remit 90 32 the state sales and use taxes and the local option sales tax. 90 33 Current law requires retailers to collect sales tax for taxable 90 34 items sold at retail in the state. The bill defines "sold 90 35 at retail in the state" and other similar terms to include 91 1 but not be limited to sales sourced to this state under Code 91 2 chapter 423 (sales and use tax), and provides that it is 91 3 the intent of the general assembly that the definition is a 91 4 conforming amendment consistent with current state law, and 91 5 that the amendment does not change the application of current 91 6 law but instead reflects current law both before and after the 91 7 enactment of the definition. The enactment of the definition 91 8 of "sold at retail in the state" takes effect July 1, 2018. 91 9 Under current law, Code section 423.15 provides general 91 10 rules for the sourcing of sales to Iowa. The bill amends a 91 11 provision in this Code section relating to when sales tax 91 12 applies to a sale sourced to Iowa, to provide that Iowa sales 91 13 tax applies to a sale sourced to Iowa made by a seller who is a 91 14 retailer maintaining a place of business in this state, or who 91 15 is subject to the new Code section 423.14A (described below). 91 16 The bill also amends provisions relating to the requirement 91 17 of retailers maintaining a place of business in this state to 91 18 collect use tax in Code sections 423.14 and 423.29, to provide 91 19 that use tax shall be collected by retailers not otherwise 91 20 required to collect sales tax under Code chapter 423 (sales and 91 21 use tax). 91 22 Under current law in Code section 423B.5, the local sales and 91 23 services tax is applicable to transactions within the areas of 91 24 the county imposing the tax. The bill amends this provision 91 25 to provide that a transaction occurring within the taxing area 91 26 includes a sale sourced to a location in that area pursuant 91 27 to the sourcing rules governing the sales and use tax (Code 91 28 sections 423.15 through 423.20). 91 29 The bill creates new Code section 423.14A that deems certain 91 30 persons, or agents of those persons, to be a retailer and 91 31 a retailer maintaining a place of business in this state 91 32 on or after January 1, 2019, and subjects those persons to 91 33 all requirements of Code chapter 423 (sales and use taxes), 91 34 including but not limited to the requirement to collect and 91 35 remit Iowa sales and use tax, and the requirement to collect 92 1 and remit the local option sales tax. The bill provides that 92 2 the requirements in Code section 423.14A are in addition to, 92 3 and not in lieu of, any other application of Code chapter 423 92 4 to a retailer or a retailer maintaining a place of business in 92 5 this state. Qualifying persons required to collect and remit 92 6 Iowa sales and use tax include any person described below. For 92 7 purposes of any threshold requirement described below that 92 8 involves the sales of taxable items, the bill defines "Iowa 92 9 sales" to include any sale sourced to this state under Code 92 10 chapter 423, or otherwise sold in this state or for delivery 92 11 into this state, of tangible personal property, specified 92 12 digital products, or services. 92 13 A qualifying person includes any retailer that has gross 92 14 revenue from Iowa sales equal to or exceeding $100,000 for the 92 15 current or previous calendar year. 92 16 A qualifying person includes any retailer that makes Iowa 92 17 sales in 200 or more separate transactions for the current or 92 18 previous calendar year. 92 19 A qualifying person includes any retailer that owns, 92 20 licenses, or uses software or data files (as defined in the 92 21 bill) that are installed or stored on property used in this 92 22 state. 92 23 A qualifying person includes any retailer that uses in=state 92 24 software (as defined in the bill) to make Iowa sales. 92 25 A qualifying person includes any retailer that provides, or 92 26 enters into an agreement to provide, a content distribution 92 27 network (as defined in the bill) in this state to facilitate, 92 28 accelerate, or enhance the delivery of the retailer's internet 92 29 site to purchasers. However, this provision does not apply to 92 30 any retailer that has gross revenue from Iowa sales of less 92 31 than $100,000 for the current or previous calendar year. 92 32 A qualifying person includes any retailer that makes Iowa 92 33 sales through a marketplace provider (as defined in the bill). 92 34 However, this provision does not apply to any retailer that 92 35 has gross revenue from Iowa sales of less than $10,000 for the 93 1 current or previous calendar year. 93 2 A qualifying person includes any marketplace provider that 93 3 makes or facilitates Iowa sales for a retailer equal to or 93 4 exceeding $100,000, or in 200 or more separate transactions for 93 5 the current or previous year. The bill requires marketplace 93 6 providers to collect Iowa sales and use tax on the entire 93 7 sales price or purchase price paid the purchaser, regardless 93 8 of the amount that will ultimately accrue to or benefit the 93 9 marketplace provider or any other person, includes other 93 10 provisions related to marketplace providers, and subjects 93 11 certain marketplace providers and retailers described in the 93 12 bill to joint and several liability for the collection and 93 13 payment of Iowa sales and use tax. 93 14 A qualifying person includes a retailer that makes Iowa 93 15 sales through the use of a solicitor (as defined in the bill). 93 16 The bill creates a presumption that a retailer has a solicitor 93 17 in this state under certain circumstances. This provision does 93 18 not apply to retailers that have gross revenue from Iowa sales 93 19 referred by solicitors of $10,000 or less for the current or 93 20 previous calendar year. 93 21 A qualifying person includes any person that owns, controls, 93 22 rents, licenses, makes available, or uses any tangible or 93 23 intangible property in this state or with a situs in this state 93 24 to make or facilitate a retail sale. 93 25 A qualifying person includes any person that enters into a 93 26 contract or agreement with a governmental entity, as defined in 93 27 the bill, including but not limited to contracts or agreements 93 28 for the provision of financial assistance or incentives such as 93 29 a tax credit, forgivable loan, grant, tax rebate, or any other 93 30 thing of value. This provision includes certain requirements 93 31 for contractors who submit bids and agreements to state 93 32 agencies similar to language in current Code section 423.2(10). 93 33 The bill strikes the similar language under existing law in 93 34 Code section 423.2(10). 93 35 A qualifying person includes any affiliate or any retailer 94 1 that is required to collect Iowa sales and use tax, provided 94 2 the affiliate makes retail sales. 94 3 OTHER MISCELLANEOUS SALES AND USE TAX CHANGES. The bill 94 4 moves provisions relating to the deposit and transfer of sales 94 5 tax revenues in Code section 423.11 to a new Code section 94 6 423.2A, and makes corresponding changes to other provisions of 94 7 the Code that reference those deposit and transfer provisions. 94 8 The bill amends the definition of "lease or rental", "use", 94 9 "use tax", and "user" in Code section 423.1. The bill also 94 10 amends the definition of "bundled transaction" in Code section 94 11 423.2(8) to incorporate certain language also included in 94 12 the definition of "bundled transaction" for purposes of the 94 13 streamlined sales tax agreement, of which Iowa is a member 94 14 state. The changes to the definition of bundled transaction 94 15 take effect July 1, 2018. 94 16 The bill defines "personal property" for purposes of the 94 17 sales and use tax to include but not be limited to tangible 94 18 personal property and specified digital products. 94 19 The bill amends the definition of "place of business" in 94 20 Code section 423.1 to include places where specified digital 94 21 products or services are offered for sale, and provides that 94 22 it is the intent of the general assembly that the change to 94 23 the definition is a conforming amendment consistent with 94 24 current state law, and that the amendment does not change the 94 25 application of current law but instead reflects current law 94 26 both before and after the enactment of the change. These 94 27 changes to the definition of "place of business" take effect 94 28 July 1, 2018. 94 29 The bill provides that when any retailer required under 94 30 Iowa law to collect and remit sales and use tax fails to do 94 31 so, the retailer and any affiliate that directly, indirectly, 94 32 or constructively controls the retailer shall be held jointly 94 33 and severally liable for the tax and any resulting penalty and 94 34 interest, regardless of whether the affiliate is a retailer. 94 35 The bill provides the department the authority to assess 95 1 the full amount of any tax, penalty, or interest against 95 2 the retailer and these affiliates, and gives the department 95 3 discretion to disregard or look through any organizational 95 4 structure of an enterprise to assess tax, penalty, and interest 95 5 against an affiliate of a retailer. The term "affiliate" for 95 6 purposes of these provisions is defined under existing law in 95 7 Code section 423.1(2). 95 8 Finally, the bill adds several Code sections relating to 95 9 the requirement to collect sales and use tax to the provisions 95 10 for which failure to comply may subject a retailer to personal 95 11 liability under Code section 421.26. 95 12 EFFECTIVE DATE PROVISIONS. Except as otherwise provided 95 13 above, the division takes effect January 1, 2019. 95 14 DIVISION V ==== HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE 95 15 RENTAL EXCISE TAX. The bill amends the hotel and motel excise 95 16 tax in Code chapter 423A and the automobile rental excise tax 95 17 in Code chapter 423C to expand the types of persons who must 95 18 collect and remit the excise taxes, and to make other changes 95 19 to the administration of the taxes. 95 20 Current law requires lessors, as defined with respect to 95 21 each excise tax, to collect the excise tax. The bill amends 95 22 the definition of "lessor" under each tax to more broadly 95 23 include any person who acquires a right or interest in lodging 95 24 or an automobile, any person who actually or constructively 95 25 rents lodging or an automobile, lodging facilitators and rental 95 26 facilitators, and retailers who would be required to collect 95 27 the excise taxes if the excise taxes were a sales and use tax 95 28 under Code chapter 423. The bill defines a lodging facilitator 95 29 with respect to the hotel and motel excise tax, and defines a 95 30 rental facilitator with respect to the automobile rental excise 95 31 tax, to include certain persons who facilitate the renting of 95 32 the taxable items by directly or indirectly performing certain 95 33 acts with regard to the rental transaction. The bill modifies 95 34 the definition of "sales price" for purposes of the hotel 95 35 and motel excise tax and "rental price" with respect to the 96 1 automobile rental excise tax. 96 2 The bill repeals an exemption from the hotel and motel excise 96 3 tax provided for the renting of rooms in a memorial union of an 96 4 Iowa college or university, and expands an exemption for the 96 5 renting of rooms in certain religious institutions so that it 96 6 also applies to the state and local hotel and motel excise tax. 96 7 Under current law, that exemption only applies to the local 96 8 hotel and motel excise tax. 96 9 The bill modifies the definition of "lodging" for purposes 96 10 of the hotel and motel excise tax to include a cabin, 96 11 apartment, or residential property. The bill provides that it 96 12 is the intent of the general assembly that the change to the 96 13 definition of "lodging" is a conforming amendment consistent 96 14 with current state law, and that the amendments do not change 96 15 the application of current law but instead reflect current law 96 16 both before and after the enactment of these changes. The 96 17 changes to the definition of "lodging" take effect July 1, 96 18 2018. 96 19 Finally, the bill provides that if a transaction under 96 20 either excise tax involves both a lessor and a lodging 96 21 facilitator or rental facilitator, as applicable, then both 96 22 parties will be jointly and severally liable for the applicable 96 23 tax, and further provides that the lodging facilitator or 96 24 rental facilitator shall collect the entire amount of tax 96 25 due on the transaction, regardless of the amount that will 96 26 ultimately accrue to the benefit of the lodging facilitator or 96 27 rental facilitator, or any other person. 96 28 EFFECTIVE DATE PROVISIONS. Except as otherwise provided 96 29 above, the division takes effect January 1, 2019. LSB 5613HV (5) 87 mm/jh
