Bill Text: IA HF715 | 2023-2024 | 90th General Assembly | Introduced

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Bill Title: A bill for an act relating to state and local finance and the administration of the tax and related laws by the department of revenue, and including effective date, applicability, and retroactive applicability provisions.(Formerly HSB 187.)

Spectrum: Committee Bill

Status: (Introduced - Dead) 2023-05-01 - Withdrawn. H.J. 951. [HF715 Detail]

Download: Iowa-2023-HF715-Introduced.html

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House File 715 - Introduced
HOUSE FILE 715
BY COMMITTEE ON WAYS AND MEANS
(SUCCESSOR TO HSB 187)
A BILL FOR
An Act relating to state and local finance and the
administration of the tax and related laws by the department
of revenue, and including effective date, applicability, and
retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
IOWA EDUCATIONAL SAVINGS PLAN AND FIRST-TIME HOMEBUYERS DUE
DATES
Section 1. Section 422.7, subsection 22, paragraph a, Code
2023, is amended to read as follows:
a. Subtract the maximum contribution that may be deducted
for Iowa income tax purposes as a participant in the Iowa
educational savings plan trust pursuant to section 12D.3,
subsection 1 . For purposes of this paragraph, a participant
who makes a contribution on or before the date prescribed in
section 422.21 for making and filing an individual income tax
return, excluding extensions , or the date for making and filing
an individual income tax return determined by the director
pursuant to an order issued under section 421.17, subsection
30 , may elect to be deemed to have made the contribution on the
last day of the preceding calendar year. The director, after
consultation with the treasurer of state, shall prescribe by
rule the manner and method by which a participant may make an
election authorized by the preceding sentence.
Sec. 2. Section 541B.3, subsection 1, paragraph a, Code
2023, is amended to read as follows:
a. Beginning January 1, 2018, an An individual may open an
interest-bearing savings account with a financial institution
and designate the entire account as a first-time homebuyer
savings account for the purpose of paying or reimbursing a
designated beneficiary’s eligible home costs in connection with
a qualified home purchase. The first-time homebuyer savings
account designation shall be made no later than April 30 of the
year following the tax year during which the account is opened,
on forms provided by the department and shall be submitted on
or before the date prescribed in section 422.21 for making and
filing an individual income tax return, excluding extensions,
or the date for making and filing an individual income tax
return determined by the director pursuant to an order issued
under section 421.17, subsection 30, applicable to the tax year
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in which the account is opened .
Sec. 3. Section 541B.3, subsection 2, paragraph a, Code
2023, is amended to read as follows:
a. The account holder shall designate one individual as
beneficiary of the first-time homebuyer savings account. The
designation shall be made on forms provided by the department
and no later than April 30 of the year following the tax year
during which the account is opened and shall be submitted on
or before the date prescribed in section 422.21 for making and
filing an individual income tax return, excluding extensions,
or the date for making and filing an individual income tax
return determined by the director pursuant to an order issued
under section 421.17, subsection 30, applicable to the tax
year in which the designation is made . The account holder may
change the designated beneficiary of the first-time homebuyer
savings account at any time.
DIVISION II
BONUS DEPRECIATION AND INCREASED EXPENSING —— APPLICABILITY
Sec. 4. 2018 Iowa Acts, chapter 1161, section 134, is
amended to read as follows:
SEC. 134. APPLICABILITY.
1. This division of this Act applies to tax years beginning
on or after the effective date of this division of this Act.
2. The repeal of section 422.7, subsections 39, 39B, 43,
and 53, and section 422.35, subsections 19, 19B, 20, and
24, relating to bonus depreciation under section 168 of the
Internal Revenue Code or increased expensing under section 179
of the Internal Revenue Code, applies to property placed in
service on or after the effective date of this division of this
Act.
Sec. 5. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 6. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2023, for tax years
beginning on or after that date.
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DIVISION III
TAX FILING STATUS MODIFICATIONS
Sec. 7. Section 422.5, Code 2023, is amended by adding the
following new subsection:
NEW SUBSECTION . 12. For tax years beginning on or after
January 1, 2023, a taxpayer shall use the same filing status
for Iowa income tax purposes as the taxpayer used for federal
income tax purposes.
Sec. 8. Section 422.7, subsection 4, Code 2023, is amended
to read as follows:
4. Individual taxpayers and married taxpayers who file a
joint federal income tax return and who elect to file a joint
return or separate returns for Iowa income tax purposes may
avail themselves of the disability income exclusion and shall
compute the amount of the disability income exclusion subject
to the limitations for joint federal income tax return filers
provided by section 105(d) of the Internal Revenue Code. The
disability income exclusion provided in section 105(d) of the
Internal Revenue Code, as amended up to and including December
31, 1982, continues to apply for state income tax purposes for
tax years beginning on or after January 1, 1984.
Sec. 9. Section 422.7, subsection 5, paragraph a, Code 2023,
is amended to read as follows:
a. For tax years beginning in the 2023 calendar year,
subtract the amount of federal income taxes paid during the tax
year to the extent payment is for a tax year beginning prior
to January 1, 2023, and add any federal income tax refunds
received during the tax year to the extent the federal income
tax was deducted for a tax year beginning prior to January 1,
2023. Where married persons who have filed a joint federal
income tax return file separately for state tax purposes, such
total shall be divided between them according to the portion
of the total paid by each. Federal income taxes paid for a tax
year in which an Iowa return was not required to be filed shall
not be subtracted.
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Sec. 10. Section 422.12B, subsection 2, Code 2023, is
amended to read as follows:
2. Married taxpayers electing to file separate returns may
avail themselves of the earned income credit by allocating the
earned income credit to each spouse in the proportion that each
spouse’s respective earned income bears to the total combined
earned income. Taxpayers affected by the allocation provisions
of section 422.8 shall be permitted a deduction for the credit
only in the amount fairly and equitably allocable to Iowa under
rules prescribed by the director.
Sec. 11. Section 422.12C, subsection 4, Code 2023, is
amended to read as follows:
4. Married taxpayers who have filed joint federal returns
electing to file separate returns must determine the child and
dependent care credit under subsection 1 or the early childhood
development tax credit under subsection 2 based upon their
combined net income and allocate the total credit amount to
each spouse in the proportion that each spouse’s respective net
income bears to the total combined net income. Nonresidents
or part-year residents of Iowa must determine their Iowa child
and dependent care credit in the ratio of their Iowa source
net income to their all source net income. Nonresidents or
part-year residents who are married and elect to file separate
returns must allocate the Iowa child and dependent care credit
between the spouses in the ratio of each spouse’s Iowa source
net income to the combined Iowa source net income of the
taxpayers.
Sec. 12. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2023, for tax years
beginning on or after that date.
DIVISION IV
WITHHOLDING
Sec. 13. Section 99B.8, Code 2023, is amended to read as
follows:
99B.8 Tax on prizes.
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All prizes awarded pursuant to a gambling activity under
this chapter are Iowa earned income and are subject to state
and federal income tax laws. A person conducting a game of
skill, game of chance, bingo, or a raffle shall deduct state
income taxes, pursuant to section 422.16, subsection 1 2 , from
a cash prize awarded to an individual. An amount deducted from
the prize for payment of a state tax shall be remitted to the
department of revenue on behalf of the prize winner.
Sec. 14. Section 99D.16, Code 2023, is amended to read as
follows:
99D.16 Withholding tax on winnings.
All winnings provided in section 99D.11 are Iowa earned
income and are subject to state and federal income tax laws.
An amount deducted from winnings for payment of the state tax,
pursuant to section 422.16, subsection 1 2 , shall be remitted
to the department of revenue on behalf of the individual who
won the wager.
Sec. 15. Section 99F.18, Code 2023, is amended to read as
follows:
99F.18 Tax on winnings.
All winnings derived from slot machines operated pursuant to
this chapter are Iowa earned income and are subject to state
and federal income tax laws. An amount deducted from winnings
for payment of the state tax, pursuant to section 422.16,
subsection 1 2 , shall be remitted to the department of revenue
on behalf of the winner.
Sec. 16. Section 99G.31, subsection 3, paragraph i, Code
2023, is amended to read as follows:
i. The proceeds of any lottery prize shall be subject to
state and federal income tax laws. An amount deducted from the
prize for payment of a state tax, pursuant to section 422.16,
subsection 1 2 , shall be transferred by the authority to the
department of revenue on behalf of the prize winner.
Sec. 17. Section 422.16, Code 2023, is amended by striking
the section and inserting in lieu thereof the following:
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422.16 Withholding of income tax at source —— penalties ——
interest —— declaration of estimated tax —— bond.
1. As used in this section, unless the context otherwise
requires, “withholding agent” means any individual, fiduciary,
estate, trust, corporation, partnership or association in
whatever capacity acting and including all officers and
employees of the state of Iowa, or any municipal corporation
of the state of Iowa and of any school district or school
board of the state, or of any political subdivision of the
state of Iowa, or any tax-supported unit of government that is
obligated to pay or has control of paying or does pay to any
resident or nonresident of the state of Iowa or the resident’s
or nonresident’s agent any wages that are subject to the Iowa
income tax in the hands of such resident or nonresident, or
any of the above-designated entities making payment or having
control of making such payment of any taxable Iowa income
to any nonresident. The term “withholding agent” shall also
include an officer or employee of a corporation or association,
or a member or employee of a partnership, who as such officer,
employee, or member has the responsibility to perform an act
under this section and who subsequently knowingly violates the
provisions of this section. The term “withholding agent” shall
also include every employer as defined in this subchapter and
further defined in the Internal Revenue Code.
2. a. (1) Every withholding agent paying wages to an
Iowa resident, or nonresident working in Iowa, shall deduct
and withhold from the wages an amount which will approximate
the annual tax liability of the person on a calendar year
basis, calculated on the basis of tables to be prepared by the
department and schedules or percentage rates, based on the
wages, to be prescribed by the department.
(2) Every employee or other person shall declare to the
withholding agent the amount of the employee’s or other
person’s withholding allowance to be used in applying the
tables and schedules or percentage rates. However, the amount
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of withholding allowance declared shall not exceed the amount
to which the employee or other person is entitled except
as allowed under sections 3402(m)(1) and 3402(m)(3) of the
Internal Revenue Code and as allowed by rules prescribed by the
director. The claiming of an amount of withholding allowance
in excess of entitlement is a serious misdemeanor.
b. (1) In the case of a nonresident having income subject
to taxation by Iowa, but not subject to withholding of such
tax under this subsection or subject to the provisions of
section 422.16B, a withholding agent shall withhold from such
income at the same rate as provided in this subsection. A
withholding agent and nonresident shall be subject to the
provisions of this section, according to the context, except
that a withholding agent may be absolved of the requirement to
withhold taxes from the income of a nonresident upon receipt of
a certificate from the department issued in accordance with the
provisions of section 422.17.
(2) In the case of a nonresident having income from a trade
or business carried on by the nonresident in whole or in part
within the state of Iowa, the nonresident shall be considered
to be subject to the provisions of this paragraph unless
such trade or business is of such nature that the business
entity itself, as a withholding agent, is required to and does
withhold Iowa income tax from the distributions made to such
nonresident from such trade or business.
c. For the purposes of this subsection , at a rate specified
by the department, state income tax shall be withheld from
pensions, annuities, other similar periodic payments, and other
income payments under sections 3402(o), 3402(p), 3402(s),
3405(a), 3405(b), and 3405(c) of the Internal Revenue Code made
to Iowa residents if the payments are subject to Iowa tax.
d. For the purposes of this subsection, state income tax
shall be withheld on winnings in excess of six hundred dollars
derived from gambling activities authorized under chapter
99B or 99G. State income tax shall be withheld on winnings
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in excess of one thousand dollars from gambling activities
authorized under chapter 99D. State income tax shall be
withheld on winnings in excess of one thousand two hundred
dollars derived from slot machines authorized under chapter
99F.
e. For the purposes of this subsection, state income tax
shall be withheld at the highest rate described in section
422.5A from supplemental wages of an employee in those
circumstances in which the employer treats the supplemental
wages as wholly separate from regular wages for purposes
of withholding and federal income tax is withheld from the
supplemental wages under section 3402(g) of the Internal
Revenue Code.
3. a. A withholding agent is not required to withhold
state income tax from payments subject to taxation made
to a nonresident for commodity credit certificates, grain,
livestock, domestic fowl, or other agricultural commodities
or products sold to a withholding agent by a nonresident or
the nonresident’s representative, if the withholding agent
provides on forms prescribed by the department information
relating to the sales required by the department to determine
the state income tax liabilities of a nonresident. However,
a withholding agent may elect to make estimated tax payments
on behalf of a nonresident on the basis of the net income of
the nonresident from the agricultural commodities or products,
if the estimated tax payments are made on or before the last
day of the first month after the end of the tax years of the
nonresident.
b. Nonresidents engaged in any facet of feature film,
television, or educational production using the film or
videotape disciplines in the state are not subject to Iowa
withholding if the employer has applied to the department for
exemption from the withholding requirement and the department
has determined that any nonresident receiving wages would be
entitled to a credit against Iowa income taxes paid.
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c. Individuals described in section 29C.24 are not subject
to withholding, as provided in that section.
4. a. A withholding agent required to deduct and withhold
tax under subsection 2 shall file a return on or before the
last day of the month following the quarterly period on forms
prescribed by the director and remit to the department the
amount of tax due at the following frequencies:
(1) A withholding agent shall remit income tax withheld on
a quarterly basis if the withholding agent withholds less than
six thousand dollars annually and no more than five hundred
dollars in any one month. Payment shall be due on the same day
as the quarterly return.
(2) A withholding agent shall remit income tax withheld on
a monthly basis if the withholding agent withholds more than
five hundred dollars in any one month and not more than five
thousand dollars in a semimonthly period. Payment shall be
made on or before the fifteenth day of the month following
the month of withholding, except that a deposit for the third
month in a calendar quarter shall be due on the same day as the
quarterly return.
(3) A withholding agent shall remit income tax withheld on
a semimonthly basis if the withholding agent withholds more
than five thousand dollars in a semimonthly period. The first
semimonthly deposit for the period from the first of the month
through the fifteenth of the month is due on the twenty-fifth
day of the month in which the withholding occurs. The second
monthly deposit for the period from the sixteenth of the month
through the end of the month is due on the tenth day of the
month following the month in which the withholding occurs.
(4) A withholding agent may elect to remit on an annual
basis if the withholding agent employs not more than two
employees and expects to employ the employees for the full
calendar year. The electing withholding agent shall remit the
full amount of income taxes required to be withheld from the
wages of the employees for the full calendar year with the
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quarterly return for the first calendar quarter. The amount
to be paid shall be computed as if the employees were employed
for the full calendar year for the same wages and with the
same pay periods as prevailed during the first quarter of the
year with respect to such employees. The electing withholding
agent shall only remit the lump sum payment with the written
consent of all employees involved. The withholding agent shall
be entitled to recover from the employee any part of the lump
sum payment that represents an advance to the employee. If
a withholding agent pays a lump sum with the first quarterly
return, the withholding agent shall be excused from filing
further quarterly returns for the calendar year involved unless
the withholding agent hires other or additional employees.
b. Every withholding agent on or before February 15
following the close of the calendar year in which the
withholding occurs shall send to the department copies of
income statements required by subsection 8. At the discretion
of the director, the withholding agent shall not be required to
send income statements if the information is available from the
internal revenue service or other state or federal agencies.
c. If the director has reason to believe that the collection
of the tax provided for in subsection 2 is in jeopardy, the
director may require the withholding agent to file a return
as required in paragraph “a” , and pay the tax at any time, in
accordance with section 422.30. The director may authorize
incorporated banks, trust companies, or other depositories
authorized by law which are depositories or financial agents of
the United States or of this state, to receive any tax imposed
under this chapter, in the manner, at the times, and under the
conditions the director prescribes. The director shall also
prescribe the manner, times, and conditions under which the
receipt of the tax by those depositories is to be treated as
payment of the tax to the department.
d. The director, in cooperation with the department of
management, may periodically change the filing and remittance
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thresholds by administrative rule if in the best interest of
the state and the taxpayer.
5. Every withholding agent who fails to withhold or pay to
the department any sums required by this chapter to be withheld
and paid, shall be personally, individually, and corporately
liable to the state of Iowa, and any sum withheld in accordance
with the provisions of subsection 2, shall be deemed to be
held in trust for the state of Iowa. Notwithstanding section
489.304, this subsection applies to a member or manager of a
limited liability company.
6. In the event a withholding agent fails to withhold and
pay over to the department any amount required to be withheld
under subsection 2, such amount may be assessed against
such withholding agent in the same manner as prescribed for
the assessment of income tax under the provisions of this
subchapter and subchapter VI.
7. Whenever the director determines that any withholding
agent has failed to withhold or pay over to the department sums
required to be withheld under subsection 2, the unpaid amount
shall be a lien as described in section 422.26, shall attach
to the property of that withholding agent, and in all other
respects the procedure with respect to such lien shall apply
as set forth in section 422.26.
8. a. Every withholding agent required to deduct and
withhold tax under subsection 2 shall furnish to each employee,
nonresident, or other person with respect to the income
paid by the employer or withholding agent to each employee,
nonresident, or other person during the calendar year, on or
before January 31 of the succeeding year, or, in the case of
an employee, if the employment of the employee is terminated
before the close of the calendar year, within thirty days from
the day on which the last payment of wages or other taxable
income is made, if requested by the employee, but not later
than January 31 of the following year, an income statement
showing all of the following:
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(1) The name and address of the employer or withholding
agent, and the taxpayer identification number of the employer
or withholding agent.
(2) The name of the employee, nonresident, or other person
and the taxpayer identification number of that employee,
nonresident, or other person, together with the last known
address of the employee, nonresident, or other person to whom
wages or other taxable income has been paid during the period.
(3) The gross amount of wages or other taxable income paid
to the employee, nonresident, or other person.
(4) The total amount deducted and withheld as tax under the
provisions of subsection 2.
(5) The total amount of federal income tax withheld.
b. An income statement required to be furnished by this
subsection with respect to any wages or other taxable Iowa
income or any additional information required to be displayed
on the income statement shall be in such form or forms as the
director may prescribe by rule.
9. A withholding agent shall be liable for the payment of
the tax required to be deducted and withheld or the amount
actually deducted, whichever is greater, under subsection
2. Any amount deducted and withheld as tax under subsection
2 during any calendar year upon the wages of any employee,
nonresident, or other person shall be allowed as a credit to
the employee, nonresident, or other person against the tax
imposed by section 422.5 for the tax year in which it was
withheld, irrespective of whether or not such tax has been, or
will be, paid by the withholding agent to the department as
provided by this chapter.
10. a. If the amount of income tax withheld by the
withholding agent on behalf of an employee, nonresident, or
other person after complying with this section is more than the
income tax liability of said employee, nonresident, or other
person as determined under the provisions of this subchapter,
the overpayment of tax may first be credited against any income
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tax or installment payment then due the state of Iowa by
the employee, nonresident, or other person for the tax year,
and any balance of one dollar or more shall be refunded to
the employee, nonresident, or other person with interest in
accordance with section 421.60, subsection 2, paragraph “e” .
b. Amounts less than one dollar shall be refunded to the
taxpayer, nonresident, or other person only upon written
application, in accordance with section 422.73, and only if the
application is filed within twelve months after the due date
of the return.
c. Refunds in the amount of one dollar or more provided
for by this subsection shall be paid by the treasurer of
state by warrants drawn by the director of the department of
administrative services, or an authorized employee of the
department of administrative services, and the taxpayer’s
return of income shall constitute a claim for refund for this
purpose, except in respect to amounts of less than one dollar.
There is appropriated, out of any funds in the state treasury
not otherwise appropriated, a sum sufficient to carry out the
provisions of this subsection.
11. a. In addition to any other penalty provided by law,
a withholding agent required to furnish or file an income
statement required by this chapter is subject to a civil
penalty of five hundred dollars for each occurrence of the
following:
(1) Willful failure to furnish an employee, nonresident, or
other person with an income statement.
(2) Willfully furnishing an employee, nonresident, or other
person with a false or fraudulent income statement.
(3) Willful failure to file an income statement with the
department.
(4) Willfully filing a false or fraudulent income statement
with the department.
b. A withholding agent is subject to the penalty as provided
in section 421.27. Any penalty assessed under section 421.27
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shall be in addition to the tax or additional tax due under
this section. The taxpayer shall also pay interest on the tax
or additional tax at the rate in effect under section 421.7,
for each month counting each fraction of a month as an entire
month, computed from the date the semimonthly, monthly, or
quarterly deposit form was required to be filed. The penalty
and interest become a part of the tax due from the withholding
agent.
c. If any withholding agent, being a domestic or foreign
corporation, required under the provisions of this section
to withhold on wages or other taxable Iowa income subject to
this chapter, fails to withhold the amounts required to be
withheld, make the required returns or remit to the department
the amounts withheld, the director may, having exhausted
all other means of enforcement of the provisions of this
chapter, certify such fact or facts to the secretary of state,
who shall thereupon cancel the articles of incorporation or
foreign registration statement, as the case may be, of such
corporation, and the rights of such corporation to carry on
business in the state of Iowa shall cease. The secretary of
state shall immediately notify by registered mail such domestic
or foreign corporation of the action taken by the secretary of
state. The provisions of section 422.40, subsection 3, shall
be applicable.
d. The department shall, upon request of any fiduciary,
furnish said fiduciary with a certificate of acquittance
showing that no liability as a withholding agent exists with
respect to the estate or trust for which said fiduciary acts,
provided the department has determined that there is no such
liability.
12. a. (1) Taxpayers filing a return shall make estimated
tax payments if their Iowa income tax liability can reasonably
be expected to amount to two hundred dollars or more for the
year.
(2) In the cases of farmers and fishermen, the exceptions
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provided in the Internal Revenue Code with respect to making
estimated payments apply.
b. (1) The estimated tax shall be paid in quarterly
installments. The first installment shall be paid on or before
the last day of the fourth month of the taxpayer’s tax year for
which the estimated payments apply. The other installments
shall be paid on or before the last day of the sixth month of
the tax year, the last day of the ninth month of the tax year,
and the last day of the first month after the tax year. A
taxpayer may elect to pay an installment prior to the due date.
(2) If a taxpayer filing a return has reason to believe that
the taxpayer’s Iowa income tax may increase or decrease, either
for purposes of meeting the requirement to make estimated
tax payments or for the purpose of increasing or decreasing
estimated tax payments, the taxpayer shall increase or decrease
any subsequent estimated tax payments accordingly.
(3) Any tax still payable after applying credits for taxes
paid through withholding, estimated tax, and composite return
tax, is due and payable on or before the end of the fourth month
following the close of the tax year.
c. If a taxpayer is unable to make the taxpayer’s estimated
tax payments, the payments may be made by a duly authorized
agent, or by the guardian or other person charged with the care
of the person or property of the taxpayer.
d. (1) Estimated tax paid is a credit against the amount
of tax found payable on a final, completed return, as provided
in subsection 10, relating to the credit for the tax withheld
against the tax found payable on a return properly and
correctly prepared under sections 422.5 through 422.25.
(2) Any overpayment of one dollar or more shall be refunded
to the taxpayer and the return constitutes a claim for refund
for this purpose. Amounts less than one dollar shall not be
refunded.
(3) The method provided by section 6654 of the Internal
Revenue Code for determining what is applicable to the addition
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to tax for underpayment of the tax payable applies to persons
required to make payments of estimated tax under this section
except the amount to be added to the tax for underpayment of
estimated tax is an amount determined at the rate in effect
under section 421.7. This addition to tax specified for
underpayment of the tax payable is not subject to waiver
provisions relating to reasonable cause, except as provided in
the Internal Revenue Code. Underpayment of estimated tax shall
be determined in the same manner as provided under the Internal
Revenue Code and the exceptions in the Internal Revenue Code
also apply.
e. In lieu of claiming a refund, the taxpayer may elect to
have the overpayment shown on the taxpayer’s final, completed
return for the taxable year credited to the taxpayer’s tax
liability for the following taxable year.
13. The director shall enter into an agreement with the
secretary of the treasury of the United States with respect to
withholding of income tax as provided by this chapter, pursuant
to an Act of Congress, section 1207 of the Tax Reform Act of
1976, Pub. L. No. 94-455, amending 5 U.S.C. §5517.
14. a. The director may, when necessary and advisable
in order to secure the collection of the tax required to
be deducted and withheld or the amount actually deducted,
whichever is greater, require a withholding agent to file with
the director a bond, issued by a surety company authorized to
conduct business in this state and approved by the insurance
commissioner as to solvency and responsibility, in an amount
as the director may fix, to secure the payment of the tax and
penalty due or which may become due. In lieu of the bond,
securities shall be kept in the custody of the department and
may be sold by the director at public or private sale, without
notice to the depositor, if it becomes necessary to do so in
order to recover any tax and penalty due. Upon a sale, any
surplus above the amounts due under this section shall be
returned to the withholding agent who deposited the securities.
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b. If the withholding agent fails to file the bond as
requested by the director to secure collection of the tax, the
withholding agent is subject to penalty for failure to file the
bond. The penalty is equal to fifteen percent of the tax the
withholding agent is required to withhold on an annual basis.
However, the penalty shall not exceed five thousand dollars.
15. The director may allow additional time for filing
documents required under this section with the department in
the case of illness, disability, absence, or if good cause is
shown.
Sec. 18. Section 422.16B, subsection 7, Code 2023, is
amended to read as follows:
7. All powers of the director and requirements of the
director apply to returns filed under this section including
but not limited to the provisions of this subchapter and
subchapter VI . The provisions of section 422.16, subsection 2
4 , paragraph “c” , and subsections 6, 10 7, 11 , and 14, applying
to withholding agents, shall apply in the same manner to
pass-through entities under this section .
Sec. 19. Section 422.17, Code 2023, is amended to read as
follows:
422.17 Certificate issued by department to make payments
without withholding.
Any nonresident whose Iowa income is not subject to section
422.16, subsection 1 2, paragraph “a” , “c” , “d” , or “e” , in
whole or in part, and who elects to be governed by section
422.16, subsection 12 2, paragraph “b” , to the extent that the
nonresident pays the entire amount of tax properly estimated on
or before the last day of the fourth month of the nonresident’s
tax year, for the year, may for the year of the election
and payment, be granted a certificate from the department
authorizing each withholding agent, the income from whom the
nonresident has considered in the payment of estimated tax and
to the extent the income is included in the estimate, to make
payments of income to the nonresident without withholding tax
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from those payments. Withholding agents, if payments exceed
the tax liability estimated by the nonresident as indicated
upon the certificate, shall withhold tax in accordance with
section 422.16, subsection 12 2, paragraph “b” .
DIVISION V
FUTURE CORRESPONDING CHANGE
Sec. 20. Section 422.16, subsection 2, paragraph e, Code
2023, as amended in this Act, is amended to read as follows:
e. For the purposes of this subsection, state income tax
shall be withheld at the highest rate described in section
422.5A 422.5 from supplemental wages of an employee in those
circumstances in which the employer treats the supplemental
wages as wholly separate from regular wages for purposes
of withholding and federal income tax is withheld from the
supplemental wages under section 3402(g) of the Internal
Revenue Code.
Sec. 21. EFFECTIVE DATE. This division of this Act takes
effect January 1, 2026.
DIVISION VI
SETTLEMENT AUTHORITY —— NOTICE OF ASSESSMENT —— ESTIMATION OF
TAX
Sec. 22. Section 421.5, Code 2023, is amended by striking
the section and inserting in lieu thereof the following:
421.5 Settling claims for taxes, penalties, and interest ——
abatement.
1. As used in this section:
a. “Department” means the department of revenue.
b. “Settle” or “settlement” includes any compromise or
abatement of any taxes, penalties, or interest.
2. In addition to the authority granted to the department
pursuant to section 17A.10 and notwithstanding section 7D.9,
the department may, in its sole discretion, settle any taxes,
penalties, or interest.
3. The department may enter into a settlement in the
case of doubtful liability, doubtful collectability, severe
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economic hardship, or to promote effective tax administration,
regardless of whether the amount was the subject of a timely
filed appeal or return.
4. Whenever a settlement is made, the department shall
make a complete record of the case showing the tax assessed or
claimed due, tax refund claimed, recommendations, reports, and
audits of departmental personnel if any, the taxpayer’s grounds
for dispute or contest together with all of the evidence, and
the amounts, conditions, and settlement of the same.
5. A taxpayer shall not have the right to a settlement of
any tax, penalty, or interest liability under this section.
Any determination by the department regarding the settlement
shall be discretionary and shall be final and conclusive except
in the case of fraud, mutual mistake of material fact, or as
otherwise stated in a written settlement agreement between the
taxpayer and the department.
6. The department may require an application for relief
under this section.
7. The department shall adopt rules to administer this
section.
Sec. 23. Section 421.10, Code 2023, is amended to read as
follows:
421.10 Appeal period —— applicability.
The appeal period for revision of assessment of tax,
interest, and penalties set out under section 422.28 , 423.37 ,
437A.9 , 437A.22 , 437B.5 , 437B.18 , 452A.64 , 453A.29 , or 453A.46
applies to appeals to notices from the department denying
changes in filing methods, denying refund claims, and denying
portions of refund claims for the tax covered by that section,
and notices of any adverse department action directed to a
specific taxpayer, other than licensing, which involves a
calculation.
Sec. 24. Section 421.60, subsection 2, paragraphs i and m,
Code 2023, are amended by striking the paragraphs.
Sec. 25. Section 421B.11, subsection 3, Code 2023, is
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amended to read as follows:
3. Judicial review of the actions of the director may be
sought in accordance with section 422.29 and chapter 17A and
section 423.38 .
Sec. 26. Section 422.25, subsection 1, paragraph c, Code
2023, is amended to read as follows:
c. (1) The period for examination and determination of the
correct amount of tax is unlimited in the case of a false or
fraudulent return made with the intent to evade tax or in the
case of a failure to file a return.
(2) If a person required to file a return with the
department fails to file the return with the department, the
department may, at any time, estimate the tax due based upon
information or knowledge the department is able to obtain.
(3) If the department estimates an amount of tax under
subparagraph (2), the following shall apply:
(a) The department shall issue a notice of assessment
to the person for which the tax is estimated in accordance
with section 421.60. The notice of assessment shall not be
appealable pursuant to section 422.28 or 422.29, except to
appeal the determination that the person is required to file a
return.
(b) The department shall include a statement with the
notice that if the person files a return within three years
from the date on the notice of assessment, the department
may replace the assessment with the amount shown due on the
person’s return, plus any applicable penalty and interest,
and the department may examine that return and determine the
tax, penalty, and interest within the period provided in this
section.
(c) If the person fails to file a return within three years
from the date on the notice of assessment, the person may pay
the tax, penalty, and interest and file a refund claim within
the time period provided in section 422.73, or may request
relief under section 421.5.
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Sec. 27. Section 422.75, Code 2023, is amended to read as
follows:
422.75 Statistics —— publication.
The department shall prepare and publish an annual report
which shall include statistics reasonably available, with
respect to the operation of this chapter , including amounts
collected, classification of taxpayers, and such other facts
as are deemed pertinent and valuable. The annual report shall
also include the reports and information required pursuant to
section 421.60, subsection 2 , paragraphs “i” and paragraph “l” .
Sec. 28. Section 423.33, subsection 1, paragraphs a and b,
Code 2023, are amended to read as follows:
a. If a purchaser fails to pay sales tax to the retailer
required to collect the tax, then in addition to all of the
rights, obligations, and remedies provided, a use tax is
payable by the purchaser directly to the department, and
sections 423.31 , 423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and
423.42 apply to the purchaser.
b. For failure to pay the sales or use tax as described
in paragraph “a” , the retailer and purchaser are jointly
liable, unless the circumstances described in section 29C.24,
subsection 3 , paragraph “a” , subparagraph (2), section 421.60,
subsection 2 , paragraph “m” , section 423.34A , or section
423.45, subsection 4 , paragraph “b” or “e” , or subsection 5 ,
paragraph “c” or “e” , are applicable.
Sec. 29. Section 423.33, subsection 3, Code 2023, is amended
to read as follows:
3. Event sponsor’s liability for sales or use tax. A person
sponsoring a flea market or a craft, antique, coin, or stamp
show or similar event shall obtain from every retailer selling
tangible personal property, specified digital products, or
taxable services at the event proof that the retailer possesses
a valid sales or use tax permit or secure from the retailer
a statement, taken in good faith, that tangible personal
property, specified digital products, or services offered for
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sale are not subject to sales tax. Failure to do so renders
a sponsor of the event liable for payment of any sales tax,
interest, and penalty due and owing from any retailer selling
property or services at the event. Sections 423.31 , 423.37 ,
423.38 , 423.39 , 423.40 , 423.41 , and 423.42 apply to the
sponsors. For purposes of this subsection , a “person sponsoring
a flea market or a craft, antique, coin, or stamp show or similar
event” does not include a marketplace facilitator as defined in
section 423.14A, subsection 1 , an organization which sponsors
an event determined to qualify as an event involving casual
sales pursuant to section 423.3, subsection 39 , or the state
fair or a fair as defined in section 174.1 .
Sec. 30. Section 423.37, subsection 1, Code 2023, is amended
to read as follows:
1. a. As soon as practicable after a return is filed and
in any event within three years after the return is filed,
the department shall may examine it the return , assess and
determine the tax due if the return is found to be incorrect,
and give notice to the person liable for the tax of the
assessment and determination as provided in subsection 2
paragraph “b” . If a return, when filed, is incorrect or
insufficient, the department shall determine the amount of
tax due from information or knowledge the department is able
to obtain. The determination may be made using any generally
recognized valid and reliable sampling technique, whether or
not the person being audited has complete records, and if
mutually agreed upon by the department and the person being
audited . The period for the examination and determination of
the correct amount of tax is unlimited in the case of a false or
fraudulent return made with the intent to evade tax or in the
case of a failure to file a return .
b. The department shall issue a notice of assessment in
accordance with section 421.60. The notice shall be appealable
pursuant to sections 422.28 and 422.29. If the person fails to
appeal the notice of assessment, the person may pay the tax,
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penalty, and interest and file a refund claim within the time
period provided in section 422.73, or may request relief under
section 421.5.
Sec. 31. Section 423.37, subsection 2, Code 2023, is amended
by striking the subsection and inserting in lieu thereof the
following:
2. a. If a return required by this subchapter is not filed,
the period for examination and determination of the correct
amount of tax is unlimited. The department may, at any time,
estimate the tax due from the information or knowledge the
department is able to obtain.
b. If the department estimates an amount of tax under this
subsection, the following shall apply:
(1) The department shall issue a notice of assessment
to the person for which the tax is estimated in accordance
with section 421.60. The notice of assessment shall not be
appealable pursuant to sections 422.28 and 422.29, except to
appeal the determination that the person is required to file
the return.
(2) The department shall include a statement with the
notice that if the person files a return within three years
from the date on the notice of assessment, the department
may replace the assessment with the amount shown due on the
person’s return, plus any applicable penalty and interest,
and the department may examine that return and determine the
tax, penalty, and interest within the period provided in this
section.
(3) If the person fails to file a return within three years
from the date on the notice of assessment, the person may pay
the tax, penalty, and interest and file a refund claim within
the time period provided in section 422.73, or may request
relief under section 421.5.
Sec. 32. Section 423.45, subsection 4, paragraph b, Code
2023, is amended to read as follows:
b. The sales tax liability for all sales of tangible
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personal property and specified digital products and all sales
of services is upon the seller and the purchaser unless the
seller takes from the purchaser a valid exemption certificate
stating under penalty of perjury that the purchase is for a
nontaxable purpose and is not a retail sale as defined in
section 423.1 , or the seller is not obligated to collect tax
due, or unless the seller takes a fuel exemption certificate
pursuant to subsection 5 . If the tangible personal property,
specified digital products, or services are purchased tax free
pursuant to a valid exemption certificate and the tangible
personal property, specified digital products, or services are
used or disposed of by the purchaser in a nonexempt manner, the
purchaser is solely liable for the taxes and shall remit the
taxes directly to the department and sections 423.31 , 423.37 ,
423.38 , 423.39 , 423.40 , 423.41 , and 423.42 shall apply to the
purchaser.
Sec. 33. Section 423.45, subsection 5, paragraphs c and d,
Code 2023, are amended to read as follows:
c. The seller may accept a completed fuel exemption
certificate, as prepared by the purchaser, for three
years unless the purchaser files a new completed exemption
certificate. If the fuel is purchased tax free pursuant to a
fuel exemption certificate which is taken by the seller, and
the fuel is used or disposed of by the purchaser in a nonexempt
manner, the purchaser is solely liable for the taxes, and shall
remit the taxes directly to the department and sections 423.31 ,
423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and 423.42 shall apply
to the purchaser.
d. The purchaser may apply to the department for its
review of the fuel exemption certificate. In this event, the
department shall review the fuel exemption certificate within
twelve months from the date of application and determine the
correct amount of the exemption. If the amount determined
by the department is different than the amount that the
purchaser claims is exempt, the department shall promptly
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notify the purchaser of the determination. Failure of the
department to make a determination within twelve months from
the date of application shall constitute a determination that
the fuel exemption certificate is correct as submitted. A
determination of exemption by the department is final unless
the purchaser appeals to the director for a revision of the
determination within sixty days after the date of the notice
of determination. The director shall grant a hearing, and
upon the hearing, the director shall determine the correct
exemption and notify the purchaser of the decision by mail.
The decision of the director is final unless the purchaser
seeks judicial review of the director’s decision under section
423.38 422.29 within sixty days after the date of the notice
of the director’s decision. Unless there is a substantial
change, the department shall not impose penalties pursuant
to section 423.40 both retroactively to purchases made after
the date of application and prospectively until the department
gives notice to the purchaser that a tax or additional tax is
due, for failure to remit any tax due which is in excess of a
determination made under this section . A determination made by
the department pursuant to this subsection does not constitute
an audit for purposes of section 423.37 .
Sec. 34. Section 423.57, Code 2023, is amended to read as
follows:
423.57 Statutes applicable.
The director shall administer this subchapter as it relates
to the taxes imposed in this chapter in the same manner and
subject to all the provisions of, and all of the powers,
duties, authority, and restrictions contained in sections
423.14 , 423.14A , 423.14B , 423.15 , 423.16 , 423.17 , 423.19 ,
423.20 , 423.21 , 423.22 , 423.23 , 423.24 , 423.25 , 423.29 , 423.31 ,
423.33 , 423.34 , 423.34A , 423.35 , 423.37 , 423.38 , 423.39 ,
423.40 , 423.41 , and 423.42 , section 423.43, subsection 1 , and
sections 423.45 , 423.46 , and 423.47 .
Sec. 35. NEW SECTION . 452A.23 Motor fuel tax ——
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administration by department.
The department shall administer the taxes imposed by this
chapter in the same manner as and subject to section 422.25,
subsection 4, section 423.35, and section 423.37.
Sec. 36. Section 452A.66, Code 2023, is amended to read as
follows:
452A.66 Statutes applicable to motor fuel tax.
1. The appropriate state agency shall administer the taxes
imposed by this chapter in the same manner as and subject to
section 422.25, subsection 4 , and section 423.35 .
2. All the provisions of section 422.26 shall apply in
respect to the taxes, penalties, interest, and costs imposed
by this chapter excepting that as applied to any tax imposed
by this chapter , the lien provided in section 422.26 shall
be prior and paramount over all subsequent liens upon any
personal property within this state, or right to such personal
property, belonging to the taxpayer without the necessity of
recording as provided in section 422.26 . The requirements for
recording shall, as applied to the tax imposed by this chapter ,
apply only to the liens upon real property. When requested to
do so by any person from whom a taxpayer is seeking credit,
or with whom the taxpayer is negotiating the sale of any
personal property, or by any other person having a legitimate
interest in such information, the director shall, upon being
satisfied that such a situation exists, inform such person as
to the amount of unpaid taxes due by such taxpayer under the
provisions of this chapter . The giving of such information
under such circumstances shall not be deemed a violation of
section 452A.63 as applied to this chapter .
Sec. 37. Section 453A.28, subsection 1, Code 2023, is
amended to read as follows:
1. a. If after any audit, examination of records, or
other investigation the department finds that any person has
sold cigarettes without stamps affixed or that any person
responsible for paying the tax has not done so as required by
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this subchapter , the department shall fix and determine the
amount of tax due, and shall assess the tax against the person,
together with a penalty as provided in section 421.27 . The
taxpayer shall pay interest on the tax or additional tax at the
rate determined under section 421.7 counting each fraction of
a month as an entire month, computed from the date the tax was
due. If any person fails to furnish evidence satisfactory to
the director showing purchases of sufficient stamps to stamp
unstamped cigarettes purchased by the person, the presumption
shall be that the cigarettes were sold without the proper
stamps affixed. Within three years after the report is filed
or within three years after the report became due, whichever is
later, the department shall examine the report and determine
the correct amount of tax. The period for examination and
determination of the correct amount of tax is unlimited in the
case of a false or fraudulent report made with the intent to
evade tax, or in the case of a failure to file a report, or if a
person purchases or is in possession of unstamped cigarettes.
b. If the department issues an estimated assessment due to
failure to file a report, the procedures described in section
423.37, subsections 1 and 2, shall apply to taxes, fees, and
interest imposed under this subchapter in the same manner and
with the same effect as the provisions apply to the taxes
imposed under chapter 423.
Sec. 38. Section 453A.46, subsection 1, paragraph a, Code
2023, is amended to read as follows:
a. (1) On or before the twentieth day of each calendar
month every distributor with a place of business in this state
shall file a return with the director showing for the preceding
calendar month the quantity and wholesale sales price of each
tobacco product brought, or caused to be brought, into this
state for sale; made, manufactured, or fabricated in this state
for sale in this state; and any other information the director
may require. Every licensed distributor outside this state
shall in like manner file a return with the director showing
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for the preceding calendar month the quantity and wholesale
sales price of each tobacco product shipped or transported to
retailers in this state to be sold by those retailers and any
other information the director may require. Returns shall
be made upon forms furnished or made available in electronic
form and prescribed by the director and shall contain other
information as the director may require. Each return shall be
accompanied by a remittance for the full tax liability shown
on the return, less a discount as fixed by the director not to
exceed five percent of the tax. Within three years after the
return is filed or within three years after the return became
due, whichever is later, the department shall examine it,
determine the correct amount of tax, and assess the tax against
the taxpayer for any deficiency. The period for examination
and determination of the correct amount of tax is unlimited in
the case of a false or fraudulent return made with the intent
to evade tax, or in the case of a failure to file a return.
(2) If the department issues an estimated assessment due to
failure to file a return, the procedures described in section
423.37, subsections 1 and 2, shall apply to taxes, fees, and
interest imposed under this subchapter in the same manner and
with the same effect as the provisions apply to the taxes
imposed under chapter 423.
Sec. 39. REPEAL. Section 423.38, Code 2023, is repealed.
Sec. 40. EFFECTIVE DATE. This division of this Act takes
effect January 1, 2024.
DIVISION VII
TAX RETURN PREPARERS AND PERSONS AUTHORIZED TO ACT FOR
TAXPAYERS
Sec. 41. Section 421.59, subsections 1 and 2, Code 2023, are
amended to read as follows:
1. a. A taxpayer may authorize an individual to act on
behalf of the taxpayer by filing a power of attorney with
the department, on a form prescribed by the department. The
department may prescribe a separate form or integrate the
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requirements of the form into a return when feasible.
b. A taxpayer may at any time revoke a power of attorney
filed with the department pursuant to this subsection . Upon
processing of the taxpayer’s revocation of a power of attorney,
the department shall cease honoring the power of attorney.
2. Unless otherwise prohibited by law, the department may
authorize the following persons to act and receive information
on behalf of and exercise all of the rights of a taxpayer, and
may establish by rule the documentation required to verify
authorization to act, regardless of whether a power of attorney
has been filed pursuant to subsection 1 :
a. A guardian, conservator, or custodian appointed by a
court, if a taxpayer has been deemed legally incompetent by a
court. The authority of the appointee to act on behalf of the
taxpayer shall be limited to the extent specifically stated in
the order of appointment.
(1) Upon request, a guardian, conservator, or custodian of
a taxpayer shall submit to the department a copy of the court
order appointing the guardian, conservator, or custodian.
(2) The department has standing to petition the court that
appointed the guardian, conservator, or custodian to verify the
appointment or to determine the scope of the appointment.
b. A receiver appointed pursuant to chapter 680 . An
appointed receiver shall be limited to act on behalf of the
taxpayer by the authority stated in the order of appointment.
(1) Upon the request of the department, a receiver shall
submit to the department a copy of the court order appointing
the receiver.
(2) The department has standing to petition the court
that appointed the receiver to verify the appointment or to
determine the scope of the appointment.
c. An individual who has been named as an authorized
representative on a fiduciary return of income filed under
section 422.14 or a tax return filed under chapter 450 .
d. c. An individual holding the following title or position
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within a corporation, association, partnership, or other
business entity:
(1) An officer or employee of the corporation or association
who is authorized to act on behalf of the corporation or
association in tax matters.
(2) A designated partner or employee of the partnership
who is authorized to act on behalf of the partnership in tax
matters.
(3) A person authorized to act on behalf of the limited
liability company in tax matters pursuant to a valid statement
of authority or employee of the company who is authorized to
act on behalf of the company in tax matters.
e. d. A licensed attorney who has appeared on behalf of
the taxpayer or the probate estate in a court proceeding.
Authorization under this paragraph is limited to those matters
within the scope of the representation.
f. e. A parent or guardian of a taxpayer who has not
reached the age of majority where the same parent or guardian
has signed the taxpayer’s return on behalf of the taxpayer.
Authorization under this paragraph is limited to those matters
relating to the return signed by the parent or guardian .
Authorization under this paragraph automatically terminates
when the taxpayer reaches the age of majority pursuant to
section 599.1 .
g. f. A representative of a government entity. An
individual seeking to act on behalf of a government entity
pursuant to this paragraph shall affirm the authority of
the individual to act on behalf of the government entity in
a manner designated by the department. The department may
require evidence to demonstrate the individual has authority to
act on behalf of the government entity.
h. g. An executor or personal representative of an estate.
(1) Upon request, the executor or personal representative
shall submit to the department a copy of the will or court
order appointing the executor or personal representative.
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(2) The department has standing to petition the court that
appointed the executor or personal representative to verify the
appointment or to determine the scope of the appointment.
i. h. A trustee.
(1) Upon request a trustee shall submit a certification of
trust, or in the absence of a certification of trust a copy of
the court order appointing the trustee if one has been issued,
or a copy of the trust.
(2) The department has standing to petition the court that
appointed the trustee to verify the appointment or to determine
the scope of the appointment.
j. i. A person named as an agent in a general or durable
power of attorney document that is currently in force and such
document has not been prescribed by the department of revenue.
k. j. A successor as defined in section 633.356, subsection
2 , of a very small estate.
Sec. 42. Section 421.62, subsection 2, Code 2023, is amended
by adding the following new paragraph:
NEW PARAGRAPH . c. Notwithstanding subsection 1, paragraph
“d” , subparagraph (2), for purposes of this subsection, “tax
return preparer” includes any of the following:
(1) An individual licensed as a certified public accountant
or a licensed public accountant under chapter 542 or a similar
law of another state.
(2) An individual admitted to practice law in this state or
another state.
(3) An enrolled agent enrolled to practice before the
federal internal revenue service pursuant to 31 C.F.R. §10.4.
DIVISION VIII
SETOFF
Sec. 43. 2020 Iowa Acts, chapter 1064, section 16,
subsection 6, is amended to read as follows:
6. Fees. The department shall may establish fees for use of
the setoff system to be paid by participating public agencies
to the department.
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Sec. 44. CONTINGENT EFFECTIVE DATE. This division of this
Act takes effect on the effective date of the rules adopted by
the department of revenue pursuant to chapter 17A implementing
2020 Iowa Acts, chapter 1064, other than transitional rules.
DIVISION IX
HOMESTEAD PROPERTY TAX CREDIT
Sec. 45. Section 425.11, subsection 1, paragraph e, Code
2023, is amended by striking the paragraph and inserting in
lieu thereof the following:
e. (1) “Owner” means the person who holds the fee simple
title to the homestead. “Owner” also includes the following:
(a) The person occupying as a surviving spouse.
(b) The person occupying under a contract of purchase which
contract has been recorded in the office of the county recorder
of the county in which the property is located.
(c) The person occupying the homestead under devise or by
operation of the inheritance laws where the whole interest
passes or where the divided interest is shared only by persons
related or formerly related to each other by blood, marriage,
or adoption.
(d) The person occupying the homestead is a shareholder of a
family farm corporation that owns the property.
(e) The person occupying the homestead under a deed which
conveys a divided interest where the divided interest is shared
only by persons related or formerly related to each other by
blood, marriage, or adoption.
(f) Where the person occupying the homestead holds a
life estate with the reversion interest held by a nonprofit
corporation organized under chapter 504, provided that the
holder of the life estate is liable for and pays property tax
on the homestead.
(g) Where the person occupying the homestead holds an
interest in a horizontal property regime under chapter
499B, regardless of whether the underlying land committed to
the horizontal property regime is in fee or as a leasehold
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interest, provided that the holder of the interest in the
horizontal property regime is liable for and pays property tax
on the homestead.
(h) Where the person occupying the homestead is a member
of a community land trust as defined in 42 U.S.C. §12773,
regardless of whether the underlying land is in fee or as a
leasehold interest, provided that the member of the community
land trust is occupying the homestead and is liable for and
pays property tax on the homestead.
(i) The person occupying the homestead regardless of
whether the underlying land is in fee or as a leasehold
interest, provided that the person is occupying the homestead
and is liable for and pays property tax on the homestead.
(2) For the purpose of this subchapter, the word “owner”
shall be construed to mean a bona fide owner and not one for
the purpose only of availing the person of the benefits of this
subchapter. In order to qualify for the homestead tax credit,
evidence of ownership shall be on file in the office of the
clerk of the district court or recorded in the office of the
county recorder at the time the owner files with the assessor
a verified statement of the homestead claimed by the owner as
provided in section 425.2.
Sec. 46. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 47. APPLICABILITY. This division of this Act applies
to claims under chapter 425, subchapter I, for credits against
property taxes due and payable in fiscal years beginning on or
after July 1, 2024.
DIVISION X
PROPERTY TAX CREDITS AND RENT REIMBURSEMENT
Sec. 48. Section 425.17, subsection 7, Code 2023, is amended
to read as follows:
7. “Income” means the sum of Iowa net income as defined
in section 422.7 , plus all of the following to the extent not
already included in Iowa net income: capital gains , ; alimony , ;
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child support money , ; cash public assistance and relief,
except property tax relief granted under this subchapter , ;
amount of in-kind assistance for housing expenses , the gross
amount of any pension or annuity, including but not limited
to ; total amounts received from a governmental or other
pension or retirement plan, including defined benefit or
defined contribution plans; annuities; individual retirement
accounts; plans maintained or contributed to by an employer,
or maintained or contributed to by a self-employed person
as an employer; deferred compensation plans or any earnings
attributable to the deferred compensation plans; income
received pursuant to a farm tenancy agreement covering real
property; railroad retirement benefits , ; payments received
under the federal Social Security Act, except child insurance
benefits received by a member of the claimant’s household ; , and
all military retirement and veterans’ disability pensions , ;
interest received from the a state or federal government
or any of its instrumentalities , ; workers’ compensation ;
and the gross amount of disability income or “loss of time”
insurance. “Income” does not include gifts from nongovernmental
sources, or surplus foods or other relief in kind supplied by
a governmental agency. In determining income, net operating
losses and net capital losses shall not be considered.
Sec. 49. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 50. APPLICABILITY.
1. This division of this Act applies to claims under chapter
425, subchapter II, for credits against property taxes due and
payable in fiscal years beginning on or after July 1, 2024.
2. This division of this Act applies to claims under chapter
425, subchapter II, for reimbursement for rent constituting
property taxes paid in base years beginning on or after January
1, 2023.
3. This division of this Act applies to claims under section
435.22 for a credit for manufactured and mobile home taxes due
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and payable in fiscal years beginning on or after July 1, 2024.
DIVISION XI
ELECTRONIC COMMUNICATIONS —— RULES
Sec. 51. Section 421.60, subsection 11, paragraph c,
subparagraph (1), Code 2023, is amended to read as follows:
(1) Notwithstanding any provision of law to the contrary,
when an electronic communication is posted to the department’s
electronic portal for a person who has made such an election,
the posting of the electronic communication shall satisfy any
requirement of mailing or personal service in this title ,
chapter 17A, chapter 272D , or sections 321.105A and 533.329 .
DIVISION XII
TRANSFERS FROM 529 ACCOUNT TO ROTH IRA
Sec. 52. Section 422.7, subsection 22, paragraph c,
subparagraph (1), Code 2023, is amended by adding the following
new subparagraph division:
NEW SUBPARAGRAPH DIVISION . (g) A direct trustee-to-trustee
transfer to a Roth individual retirement account in accordance
with section 529(c)(3)(E) of the Internal Revenue Code, as
enacted by the federal Consolidated Appropriations Act, 2023,
Pub. L. No. 117-328.
Sec. 53. APPLICABILITY. This division of this Act applies
to tax years beginning on or after January 1, 2024.
DIVISION XIII
COMPOSITE RETURN FILING EXCLUSION FOR FINANCIAL INSTITUTIONS
AND CERTAIN FINANCIAL HOLDING COMPANIES
Sec. 54. Section 422.16B, subsection 5, Code 2023, is
amended by adding the following new paragraph:
NEW PARAGRAPH . 0c. The pass-through entity meets any of the
following requirements for the tax year:
(1) The pass-through entity is a financial institution
subject to the franchise tax under section 422.60 and files a
franchise tax return required under section 422.62 and pays any
franchise tax shown due on the return.
(2) The pass-through entity wholly owns one or more
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financial institutions subject to the franchise tax under
section 422.60 that are treated as disregarded entities for
federal and Iowa income tax purposes, and at least ninety
percent of the gross income of the pass-through entity for the
tax year is also reportable income on the franchise tax return
of the financial institutions wholly owned by the pass-through
entity, and such financial institutions file the franchise tax
returns required under section 422.62 and pay any franchise tax
shown due on the franchise tax return.
Sec. 55. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 56. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2023, for tax years
beginning on or after that date.
DIVISION XIV
RETIRED FARMER INCOME EXCLUSIONS
Sec. 57. Section 422.7, subsection 13, paragraph a,
subparagraph (4), Code 2023, is amended to read as follows:
(4) “Materially participated” means the same as “material
participation” in section 469(h) of the Internal Revenue Code ,
except that section 469(h)(3) of the Internal Revenue Code
shall not apply .
Sec. 58. Section 422.7, subsection 14, paragraph f,
subparagraph (5), Code 2023, is amended to read as follows:
(5) “Materially participated” means the same as “material
participation” in section 469(h) of the Internal Revenue Code ,
except that section 469(h)(3) of the Internal Revenue Code
shall not apply .
Sec. 59. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 60. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2023, for tax years
beginning on or after that date.
DIVISION XV
INSTRUCTIONAL SUPPORT INCOME SURTAX
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Sec. 61. Section 257.24, Code 2023, is amended to read as
follows:
257.24 Deposit of instructional support income surtax.
1. The director of revenue , by the last day of each month,
shall deposit all moneys received as collected and determined
by the department of revenue to be instructional support income
surtax to the in the preceding month, and shall credit of each
district from which the moneys are received collected , in the
school district income surtax fund which is established in
section 298.14 .
2. a. The director of revenue shall deposit instructional
support income surtax moneys received on or before November 1
of the year following the close of the school budget year for
which the surtax is imposed to the credit of each district from
which the moneys are received in the school district income
surtax fund.
b. Instructional support income surtax moneys received or
refunded after November 1 of the year following the close of
the school budget year for which the surtax is imposed shall be
deposited in or withdrawn from the general fund of the state
and shall be considered part of the cost of administering the
instructional support income surtax.
Sec. 62. Section 257.25, Code 2023, is amended to read as
follows:
257.25 Instructional support income surtax certification.
1. On or before October 20 November 15 each year,
the director of revenue shall make an accounting of the
instructional support income surtax collected under this
chapter applicable to tax returns for the last preceding
calendar year, or for a taxpayer’s fiscal year ending during
the second half of that calendar year and after the date the
board adopts a resolution to participate in the program, or the
first half of the succeeding calendar year, since January 1 of
the same calendar year from taxpayers in each school district
in the state which has approved the instructional support
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program, and shall certify to the department of management and
the department of education the amount of total instructional
support income surtax credited from the taxpayers of each
school district.
2. On or before January 15 of each year, the director of
revenue shall make an accounting of the instructional support
income surtax collected under this chapter during the preceding
calendar year from taxpayers in each school district in the
state which has approved the instructional support program,
and shall certify to the department of management and the
department of education the amount of total instructional
support income surtax credited from the taxpayers of each
school district.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill relates to state and local finance and the
administration of the tax and related laws by the department
of revenue (department).
DIVISION I —— IOWA EDUCATIONAL SAVINGS PLAN AND FIRST-TIME
HOMEBUYERS DUE DATES. The bill makes changes to the Iowa
educational plan trust (529 plans) and the first-time home
buyer savings account program.
The bill provides that if the director of revenue (director)
extends the date for making and filing an individual income
tax return in the case of a natural disaster as is currently
permitted in Code section 421.17(30), the taxpayer may elect
that a contribution made to a 529 plan during the extended time
to file such a return may be deemed to have been made for the
prior calendar year.
The bill provides that the first-time homebuyers savings
account designations must be provided to the department on
or before the date to file an individual income tax return,
excluding extensions, or on or before the extended filing date
if the director extends the date for making and filing an
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individual income tax return in the case of a natural disaster.
DIVISION II —— BONUS DEPRECIATION AND INCREASED EXPENSING
—— APPLICABILITY. The “trigger” (2018 Iowa Acts, chapter
1161, sections 99 through 134) went into effect on January 1,
2023. The bill provides that the repeal of bonus depreciation
and increased expensing provisions in the trigger applies to
tax years beginning on or after January 1, 2023, for property
placed in service on or after January 1, 2023.
DIVISION III —— TAX FILING STATUS MODIFICATIONS. For tax
years beginning on or after January 1, 2023, the bill requires
a taxpayer to use the same filing status for Iowa individual
income tax purposes as the taxpayer used for federal individual
income tax purposes. The bill also strikes provisions implying
that a taxpayer may elect to use a different tax filing status
on the taxpayer’s Iowa and federal income tax returns.
The division applies to tax years beginning on or after
January 1, 2023.
DIVISION IV —— WITHHOLDING. The bill rewrites Code section
422.16 relating to withholding agents withholding Iowa tax from
the wages or other income of a resident or nonresident. The
bill defines “withholding agent” similarly to the definition
in Code section 422.4.
Under current law, most retirement income is no longer
subject to Iowa income tax. The bill strikes provisions
requiring the withholding of state income tax from retirement
income made to Iowa residents if the retirement income is no
longer subject to Iowa income tax.
The bill excludes some pass-through entity income for
purposes of calculating whether a taxpayer is required to make
estimated tax payments.
DIVISION V —— FUTURE CORRESPONDING CHANGE. Commencing with
tax years beginning on or after January 1, 2026, the highest
individual Iowa income tax rate becomes a flat tax rate and the
individual income tax rate is moved from Code section 422.5A
to Code section 422.5. The bill strikes a reference to the
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highest individual income tax rate in Code section 422.5A and
replaces that reference with Code section 422.5.
The division takes effect January 1, 2026.
DIVISION VI —— SETTLEMENT AUTHORITY —— NOTICE OF ASSESSMENT
—— ESTIMATION OF TAX. Under current law, the director may
compromise and settle doubtful claims for taxes or refunds.
The bill defines “settle” or “settlement” to include any
compromise or abatement of tax, penalties, and interest. The
bill specifies that the department may settle any taxes,
penalties, and interest in the case of doubtful liability,
doubtful collectability, economic hardship, or to promote
effective tax administration. The bill requires the department
to make a complete record of the settlement. A taxpayer shall
not have the right to a settlement under the bill, and any
determination by the department regarding a settlement shall be
discretionary and final, except in the case of fraud, mutual
mistake, or stated in a written settlement agreement. The
bill strikes Code section 421.60(2)(i) and (m) which relate to
the settlement of taxes owed the state and makes conforming
changes.
The bill amends Code section 421.10 relating to the appeal
period for the revision of the assessment of tax. The bill
specifies that the appeal period provisions apply to notices
from the department involving adverse department actions
directed at a specific taxpayer, other than licensing, which
involves a calculation. Under current law, the appeal period
provisions relate to all agency actions regardless if the
action is adverse, if any department action is directed at
a specific taxpayer, other than licensing, and involves a
calculation.
The bill amends Code section 422.25 to specify that if a
taxpayer required to file a return with the department fails
to file the return or files a false or fraudulent return, the
department may, at any time, estimate the tax due based upon
information or knowledge the department is able to obtain. If
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the department estimates the tax due, the bill requires the
department to issue a notice of assessment to the taxpayer
and creates procedures for the department to follow if the
taxpayer files a return within three years from the date of
the assessment, and creates procedures if the taxpayer fails
to file such a return within three years from the date of the
assessment.
The bill amends Code section 423.37(1) (sales and use tax)
to specify that the department may examine a sales tax return
within three years after the return is filed. Under current
law, the department is required to examine such a return
within three years. The bill establishes procedures for when
a sales tax return is incorrect or insufficient when filed.
The bill requires the department to determine the amount of
tax due from information or knowledge the department is able
to obtain including using any generally recognizable sampling
technique to determine the tax owed, if the sampling technique
is mutually agreed upon by the department and the person
being audited. The bill requires the department to issue a
notice of assessment if the return is found to be incorrect,
and establishes procedures for the taxpayer to appeal the
assessment, or pay the tax, penalty, and interest, and file a
refund claim on the estimated tax if necessary.
The bill amends Code section 423.37(2) establishing the
procedures for when a sales or use tax return is not filed. The
bill states the period for examination and determination of the
correct amount of tax is unlimited, and allows the department
to estimate the amount of tax due. The bill requires the
department to issue a notice of assessment, and establishes
procedures for the taxpayer to appeal the assessment, or pay
the tax, penalty, and interest, and file a refund claim on the
estimated tax if necessary.
The bill specifies the department of revenue shall
administer the taxes in Code chapter 452A (motor fuel and
special fuel taxes) in the same manner as Code sections
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422.25(4) (payments first credited to penalty and interest),
423.35 (posting a bond), and 423.37 (procedures for when a
return is filed incorrectly or not filed), which is also
amended in the bill.
The bill specifies the department of revenue shall
administer the taxes in Code chapter 453A (cigarette and
tobacco taxes) in the same manner as Code section 423.37
(procedures when return is filed incorrectly or not filed),
which is also amended in the bill.
The bill repeals Code section 423.38 relating to provisions
that are applicable to the judicial review of the actions
of the department involving sales and use taxes, and makes
conforming changes.
The division takes effect January 1, 2024.
DIVISION VII —— TAX RETURN PREPARERS AND PERSONS AUTHORIZED
TO ACT FOR TAXPAYERS. The bill requires additional tax return
preparers to include the preparer’s personal identification
number on any return prepared by the preparer and filed with
the department if the preparer is licensed as a certified
public accountant or a licensed public accountant under Code
chapter 542 or a similar law of another state, if the preparer
is admitted to practice law in this state, or if the preparer
is an enrolled agent enrolled to practice before the Internal
Revenue Service.
The bill modifies provisions relating to the authority
of a person to act on behalf of a taxpayer in Code section
421.59, including striking the authority of an individual to
act on behalf of a taxpayer who has been named as an authorized
representative on a fiduciary return or an inheritance tax
return.
DIVISION VIII —— SETOFF. The bill allows but does not
require the department to establish a fee for use of the setoff
system. Currently, the department is required to charge a
fee for use of the setoff system. The setoff system is a
centralized system designed to collect debt owed to public
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agencies. The setoff system operated by the department is
currently not operational until the department adopts rules.
DIVISION IX —— HOMESTEAD PROPERTY TAX CREDIT. The bill
amends Code section 425.11 relating to the homestead credit.
The bill expands the definition of “owner” to allow a person
occupying a homestead to receive the homestead credit
regardless of whether the underlying land is held in fee or as
a leasehold interest, provided that the person is occupying
the homestead and is liable for and pays property tax on the
homestead.
The division takes effect upon enactment and applies to
claims under Code chapter 425, subchapter I, for credits
against property taxes due and payable in fiscal years
beginning on or after July 1, 2024.
DIVISION X —— PROPERTY TAX CREDITS AND RENT REIMBURSEMENT.
The bill modifies the definition of “income” to include
certain retirement, deferred, or rental income for purposes of
calculating eligibility for the elderly and disabled property
tax credit or for reimbursement of rent constituting property
taxes paid under Code chapter 425, subchapter II.
The division applies to claims under Code chapter 425
for credits due and payable in fiscal years beginning on or
after July 1, 2024, and for rent reimbursement in base years
beginning on or after January 1, 2023. The division also
applies to claims for a credit for manufactured and mobile home
taxes due in fiscal years beginning on or after July 1, 2024.
DIVISION XI —— ELECTRONIC COMMUNICATION —— RULES. The
bill provides that if the department posts a rule to the
department’s electronic portal, the posting of the electronic
communication shall satisfy any requirement of mailing or
personal service for purposes of Code chapter 17A (Iowa
administrative procedure Act).
DIVISION XII —— TRANSFERS FROM 529 ACCOUNT TO ROTH IRA.
Under the federal Consolidated Appropriations Act, 2023, Pub.
L. No. 117-328, transfers from a 529 educational account to a
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Roth Individual Retirement Account beneficiary are exempt from
federal taxation, subject to Roth contribution limits and the
aggregate lifetime limit of $35,000, and if the 529 educational
account has existed for at least 15 years. The bill also makes
such a transfer exempt from state individual income taxation.
DIVISION XIII —— COMPOSITE RETURN FILING EXCLUSION FOR
FINANCIAL INSTITUTIONS AND CERTAIN FINANCIAL INSTITUTIONS.
Under the bill, a pass-through entity is not required to remit
Iowa income or franchise tax on behalf of a nonresident member
if either of the following apply: the pass-through entity
is a financial institution subject to the franchise tax and
files a franchise tax return and pays any franchise tax owed;
or the pass-through entity wholly owns one or more financial
institutions subject to the franchise tax, and at least 90
percent of the gross income of the pass-through entity for the
tax year is also reportable income on the franchise tax return
of the wholly owned financial institutions and any franchise
tax owed is paid.
DIVISION XIV —— RETIRED FARMER INCOME EXCLUSIONS. The
bill modifies the definition of “materially participated” for
purposes of the retired farmer tenancy income exclusion and
the retired farmer capital gain exclusion by excluding section
469(h)(3) of the Internal Revenue Code from the definition of
“materially participated” in section 469(h) of the Internal
Revenue Code.
This division takes effect upon enactment and applies
retroactively to tax years beginning on or after January 1,
2023.
DIVISION XV —— INSTRUCTIONAL SUPPORT INCOME SURTAX. The
bill modifies the manner in which the instructional support
income surtax is deposited into the school district income
surtax fund by requiring monthly deposits into the fund and
prohibiting certain income surtax moneys from being deposited
into the general fund of the state. The bill also modifies the
instructional support income tax certification and accounting
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dates by the department of revenue to the department of
management.
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