Bill Text: IA HSB256 | 2015-2016 | 86th General Assembly | Introduced

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Bill Title: A study bill relating to state taxes and revenue by creating an alternative base income tax, modifying the state sales and use tax rates and the distribution of revenues from the natural resources and outdoor recreation trust fund, and including effective date and applicability provisions.

Spectrum: Unknown

Status: (Introduced - Dead) 2015-06-05 - In Ways and Means [HSB256 Detail]

Download: Iowa-2015-HSB256-Introduced.html

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House Study Bill 256 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON SANDS)
A BILL FOR
An Act relating to state taxes and revenue by creating an
alternative base income tax, modifying the state sales and
use tax rates and the distribution of revenues from the
natural resources and outdoor recreation trust fund, and
including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
SALES AND USE TAXES
Section 1. Section 423.2, subsection 1, unnumbered
paragraph 1, Code 2015, is amended to read as follows:
There is imposed a tax of six percent at the rate specified
in subsection 13 upon the sales price of all sales of tangible
personal property, consisting of goods, wares, or merchandise,
sold at retail in the state to consumers or users except as
otherwise provided in this subchapter .
Sec. 2. Section 423.2, subsections 2 and 3, Code 2015, are
amended to read as follows:
2. A tax of six percent at the rate specified in subsection
13 is imposed upon the sales price of the sale or furnishing
of gas, electricity, water, heat, pay television service, and
communication service, including the sales price from such
sales by any municipal corporation or joint water utility
furnishing gas, electricity, water, heat, pay television
service, and communication service to the public in its
proprietary capacity, except as otherwise provided in this
subchapter , when sold at retail in the state to consumers or
users.
3. A tax of six percent at the rate specified in subsection
13 is imposed upon the sales price of all sales of tickets
or admissions to places of amusement, fairs, and athletic
events except those of elementary and secondary educational
institutions. A tax of six percent at the rate specified in
subsection 13 is imposed on the sales price of an entry fee or
like charge imposed solely for the privilege of participating
in an activity at a place of amusement, fair, or athletic event
unless the sales price of tickets or admissions charges for
observing the same activity are taxable under this subchapter .
A tax of six percent at the rate specified in subsection 13
is imposed upon that part of private club membership fees or
charges paid for the privilege of participating in any athletic
sports provided club members.
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Sec. 3. Section 423.2, subsection 4, paragraph a, Code 2015,
is amended to read as follows:
a. A tax of six percent at the rate specified in subsection
13 is imposed upon the sales price derived from the operation
of all forms of amusement devices and games of skill, games of
chance, raffles, and bingo games as defined in chapter 99B , and
card game tournaments conducted under section 99B.7B , that are
operated or conducted within the state, the tax to be collected
from the operator in the same manner as for the collection of
taxes upon the sales price of tickets or admission as provided
in this section . Nothing in this subsection shall legalize any
games of skill or chance or slot-operated devices which are now
prohibited by law.
Sec. 4. Section 423.2, subsection 5, Code 2015, is amended
to read as follows:
5. There is imposed a tax of six percent at the rate
specified in subsection 13 upon the sales price from the
furnishing of services as defined in section 423.1 .
Sec. 5. Section 423.2, subsection 7, paragraph a,
unnumbered paragraph 1, Code 2015, is amended to read as
follows:
A tax of six percent at the rate specified in subsection 13
is imposed upon the sales price from the sales, furnishing, or
service of solid waste collection and disposal service.
Sec. 6. Section 423.2, subsection 8, paragraph a, Code 2015,
is amended to read as follows:
a. A tax of six percent at the rate specified in subsection
13 is imposed on the sales price from sales of bundled
transactions. For the purposes of this subsection , a “bundled
transaction” is the retail sale of two or more distinct and
identifiable products, except real property and services to
real property, which are sold for one nonitemized price. A
“bundled transaction” does not include the sale of any products
in which the sales price varies, or is negotiable, based on
the selection by the purchaser of the products included in the
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transaction.
Sec. 7. Section 423.2, subsection 9, Code 2015, is amended
to read as follows:
9. A tax of six percent at the rate specified in
subsection 13 is imposed upon the sales price from any mobile
telecommunications service, including all paging services,
that this state is allowed to tax pursuant to the provisions
of the federal Mobile Telecommunications Sourcing Act, Pub.
L. No. 106-252, 4 U.S.C. §116 et seq. For purposes of this
subsection , taxes on mobile telecommunications service, as
defined under the federal Mobile Telecommunications Sourcing
Act that are deemed to be provided by the customer’s home
service provider, shall be paid to the taxing jurisdiction
whose territorial limits encompass the customer’s place of
primary use, regardless of where the mobile telecommunications
service originates, terminates, or passes through and
shall in all other respects be taxed in conformity with
the federal Mobile Telecommunications Sourcing Act. All
other provisions of the federal Mobile Telecommunications
Sourcing Act are adopted by the state of Iowa and incorporated
into this subsection by reference. With respect to mobile
telecommunications service under the federal Mobile
Telecommunications Sourcing Act, the director shall, if
requested, enter into agreements consistent with the provisions
of the federal Act.
Sec. 8. Section 423.2, subsection 11, paragraph b,
subparagraph (2), Code 2015, is amended to read as follows:
(2) Transfer from the remaining revenues the amounts
required under Article VII, section 10, of the Constitution
of the State of Iowa to the natural resources and outdoor
recreation trust fund created in section 461.31 , if applicable .
Sec. 9. Section 423.2, subsection 13, Code 2015, is amended
by striking the subsection and inserting in lieu thereof the
following:
13. a. For the period beginning July 1, 2016, and ending
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June 30, 2017, the sales tax rate is six and one-eighth
percent.
b. For the period beginning July 1, 2017, and ending June
30, 2018, the sales tax rate is six and two-eighths percent.
c. For the period beginning July 1, 2018, and ending
December 31, 2029, the sales tax rate is six and three-eighths
percent.
d. Beginning January 1, 2030, the sales tax rate is five and
three-eighths percent.
Sec. 10. Section 423.5, subsection 1, unnumbered paragraph
1, Code 2015, is amended to read as follows:
Except as provided in paragraph “c” , an excise tax at the
rate of six percent specified in subsection 5 of the purchase
price or installed purchase price is imposed on the following:
Sec. 11. Section 423.5, subsection 5, Code 2015, is amended
by striking the subsection and inserting in lieu thereof the
following:
5. a. For the period beginning July 1, 2016, and ending
June 30, 2017, the use tax rate is six and one-eighth percent.
b. For the period beginning July 1, 2017, and ending June
30, 2018, the use tax rate is six and two-eighths percent.
c. For the period beginning July 1, 2018, and ending
December 31, 2029, the use tax rate is six and three-eighths
percent.
d. Beginning January 1, 2030, the use tax rate is five and
three-eighths percent.
Sec. 12. Section 423.43, subsection 1, paragraph b, Code
2015, is amended to read as follows:
b. Subsequent to the deposit into the general fund of the
state and after the transfer of such pursuant to paragraph “a” ,
the department shall do the following in the order prescribed:
(1) Transfer the revenues collected under chapter 423B , the
department shall transfer one-sixth .
(2) (a) Transfer the applicable percentage as specified
in subparagraph division (b) of such remaining revenues to the
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secure an advanced vision for education fund created in section
423F.2 .
(b) (i) For the period beginning July 1, 2016, and ending
June 30, 2017, the applicable percentage is sixteen and three
thousand two hundred sixty-five ten-thousandths percent.
(ii) For the period beginning July 1, 2017, and ending June
30, 2018, the applicable percentage is sixteen percent.
(iii) For the period beginning July 1, 2018, and ending
December 31, 2029, the applicable percentage is fifteen and six
thousand eight hundred sixty-three ten-thousandths percent.
(c) This paragraph subparagraph (2) is repealed December
31, 2029.
DIVISION II
NATURAL RESOURCES AND OUTDOOR RECREATION TRUST FUND
Sec. 13. Section 461.32, subsection 1, Code 2015, is amended
to read as follows:
1. A natural resources account is created in the trust fund.
Twenty-three Fifteen percent of the moneys credited to the
trust fund shall be allocated to the account.
Sec. 14. Section 461.33, subsection 1, Code 2015, is amended
to read as follows:
1. A soil conservation and water protection account is
created in the trust fund. Twenty Forty-five percent of the
moneys credited to the trust fund shall be allocated to the
account.
Sec. 15. Section 461.34, subsection 1, Code 2015, is amended
to read as follows:
1. A watershed protection account is created in the trust
fund. Fourteen Fifteen percent of the moneys credited to the
trust fund shall be allocated to the account.
Sec. 16. Section 461.35, Code 2015, is amended to read as
follows:
461.35 Iowa resources enhancement and protection fund ——
allocation.
Thirteen Nine percent of the moneys credited to the trust
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fund shall be allocated to the Iowa resources enhancement
and protection fund created in section 455A.18 for further
allocation as provided in section 455A.19 .
Sec. 17. Section 461.36, subsection 1, Code 2015, is amended
to read as follows:
1. A local conservation partnership account is created in
the trust fund. Thirteen Nine percent of the moneys credited
to the trust fund shall be allocated to the account.
Sec. 18. Section 461.37, subsection 1, Code 2015, is amended
to read as follows:
1. A trails account is created in the trust fund. Ten
Two percent of the moneys credited to the trust fund shall be
allocated to the account.
Sec. 19. Section 461.38, subsection 1, Code 2015, is amended
to read as follows:
1. A lake restoration account is created in the trust fund.
Seven Five percent of the moneys credited to the trust fund
shall be allocated to the account.
DIVISION III
ALTERNATIVE BASE INCOME TAX AND
ALTERNATIVE CUMULATIVE INCOME SURTAX
Sec. 20. Section 298.14, Code 2015, is amended to read as
follows:
298.14 School district income surtaxes.
1. a. For each fiscal year, the cumulative total of the
percents of surtax approved by the board of directors of a
school district and collected by the department of revenue
under sections 257.21 , 257.29 , and 298.2 , and the enrichment
surtax under section 442.15 , Code 1989, and an income surtax
collected by a political subdivision under chapter 422D , shall
not exceed twenty percent.
b. Notwithstanding paragraph “a” , or any other provision
of law to the contrary, for a taxpayer who makes an election
under section 422.5A, subsection 2, and who is subject to an
income surtax as provided in section 257.21, 257.29, 298.2,
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442.15, Code 1989, or chapter 422D, the appropriate governing
body shall impose, and the department of revenue shall collect,
an alternative cumulative income surtax from the taxpayer in an
amount equal to one hundred twenty-eight percent of the amount
generated by each surtax imposed on the taxpayer by the school
district or political subdivision for the tax year in which the
election is made.
2. A school district income surtax fund is created in the
office of treasurer of state. Income surtaxes collected by
the department of revenue under sections 257.21 , 257.29 , and
298.2 and section 442.15 , Code 1989, shall be deposited in the
school district income surtax fund to the credit of each school
district. A separate accounting of each surtax, by school
district, shall be maintained.
3. The director of the department of administrative
services shall draw warrants in payment of the surtaxes
collected in each school district. Warrants shall be payable
in two installments to be paid on approximately the first day
of December and the first day of February following collection
of the taxes and shall be delivered to the respective school
districts.
Sec. 21. NEW SECTION . 422.5A Tax imposed —— alternative
base income tax.
1. For purposes of this section, “base income” means the
adjusted gross income before the net operating loss deduction
as properly computed for federal income tax purposes under the
Internal Revenue Code, with the following adjustments:
a. Subtract a standard deduction equal to six thousand two
hundred thirty-five dollars for a married person who files
separately or a single person or equal to twelve thousand four
hundred seventy dollars for a married couple who files a joint
return, a surviving spouse, or a head of household.
b. Subtract interest and dividends from federal securities.
c. Subtract, to the extent included, the amount of social
security benefits taxable under section 86 of the Internal
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Revenue Code.
d. (1) Subtract, to the extent included, all of the
following:
(a) For a person who is disabled, or is fifty-five years of
age or older, or is the surviving spouse of an individual or
a survivor having an insurable interest in an individual who
would have qualified for the exemption under this subsection
for the tax year, the total amount of retirement income
received by the taxpayer, up to a maximum of six thousand
dollars for a person, other than a husband or wife, who files a
separate state income tax return and up to a maximum of twelve
thousand dollars for a husband and wife who file a joint state
income tax return. However, a surviving spouse who is not
disabled or fifty-five years of age or older can only exclude
the amount of pension or retirement pay received as a result
of the death of the other spouse. A husband and wife filing
separate state income tax returns or separately on a combined
state return are allowed a combined maximum exclusion under
this paragraph of up to twelve thousand dollars. The twelve
thousand dollar exclusion shall be allocated to the husband or
wife in the proportion that each spouse’s respective retirement
pay received bears to total combined retirement pay received.
(b) Retirement pay received by a taxpayer from the federal
government for military service performed in the armed forces,
the armed forces military reserve, or national guard. This
exclusion shall be in addition to the exclusion provided under
subparagraph division (a).
(c) Amounts received as survivor benefits by a taxpayer from
the federal government pursuant to 10 U.S.C. §1447, et seq.
This exclusion shall be in addition to the exclusion provided
under subparagraph division (a).
(2) This paragraph “d” is repealed January 1, 2023.
e. (1) For tax years beginning in the 2016 calendar year,
subtract, to the extent included, twelve and one-half percent
of the retirement income received by the taxpayer remaining
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after the subtractions in paragraph “d” .
(2) For tax years beginning in the 2017 calendar year,
subtract, to the extent included, twenty-five percent of the
retirement income received by the taxpayer remaining after the
subtractions in paragraph “d” .
(3) For tax years beginning in the 2018 calendar year,
subtract, to the extent included, thirty-seven and one-half
percent of the retirement income received by the taxpayer
remaining after the subtractions in paragraph “d” .
(4) For tax years beginning in the 2019 calendar year,
subtract, to the extent included, fifty percent of the
retirement income received by the taxpayer remaining after the
subtractions in paragraph “d” .
(5) For tax years beginning in the 2020 calendar year,
subtract, to the extent included, sixty-two and one-half
percent of the retirement income received by the taxpayer
remaining after the subtractions in paragraph “d” .
(6) For tax years beginning in the 2021 calendar year,
subtract, to the extent included, seventy-five percent of the
retirement income received by the taxpayer remaining after the
subtractions in paragraph “d” .
(7) For tax years beginning in the 2022 calendar year,
subtract, to the extent included, eighty-seven and one-half
percent of the retirement income received by the taxpayer
remaining after the subtractions in paragraph “d” .
(8) For tax years beginning on or after January 1, 2023,
subtract, to the extent included, retirement income received
by a taxpayer.
For purposes of this subsection, “retirement income” means a
governmental or other pension or retirement pay, including but
not limited to 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, and deferred
compensation plans or any earnings attributable to the deferred
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compensation plan.
2. Notwithstanding any other provision of law, a resident
or nonresident may, in lieu of the taxes imposed under section
422.5, elect to be subject to state income tax as imposed and
computed pursuant to subsection 3. Such election must be made
not later than the due date for filing the return for a taxable
year, including extensions thereof, and under rules to be
prescribed by the director.
3. a. A tax is imposed upon every resident and nonresident
of the state making the election under subsection 2 which tax
shall be levied, collected, and paid annually in an amount
equal to the base income of the resident or nonresident times
the applicable rate in paragraph “b” .
b. (1) For tax years beginning in the 2016 calendar year,
the rate is five and one-half percent.
(2) For tax years beginning in the 2017 calendar year, the
rate is five and thirty-eight hundredths percent.
(3) For tax years beginning in the 2018 calendar year, the
rate is five and one-quarter percent.
(4) For tax years beginning in the 2019 calendar year, the
rate is five and thirteen hundredths percent.
(5) For tax years beginning on or after January 1, 2020, the
rate is five percent.
4. Notwithstanding any other provision of law to the
contrary, a resident or nonresident making the election
under subsection 2 shall not be allowed any nonrefundable or
refundable credit otherwise allowed under this division for the
tax year for which the election is made, except for the credits
for withheld tax and estimated tax paid under section 422.16.
5. A taxpayer making the election under subsection 2 shall
be subject to an alternative cumulative income surtax as
provided in section 298.14, if applicable.
6. a. The director shall determine for the 2017 calendar
year and each subsequent calendar year the annual and
cumulative standard deduction factors to be applied to tax
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years beginning on or after January 1 of that calendar year.
The director shall compute the new dollar amounts of the
standard deductions specified in subsection 1, paragraph
“a” , by the latest cumulative standard deduction factor and
round off the result to the nearest ten dollars. The annual
and cumulative standard deduction factors determined by the
director under this subsection are not rules as defined in
section 17A.2, subsection 11.
b. For purposes of this subsection and notwithstanding
section 422.4, subsection 2, paragraph “b” , “cumulative standard
deduction factor” means the product of the annual standard
deduction factor for the 2017 calendar year and all annual
standard deduction factors for subsequent calendar years
as determined pursuant to this subsection. The cumulative
standard deduction factor applies to all tax years beginning
on or after January 1 of the calendar year for which the latest
annual standard deduction factor has been determined.
Sec. 22. Section 422.13, Code 2015, is amended by adding the
following new subsection:
NEW SUBSECTION . 1A. a. Notwithstanding subsection 1,
a resident or nonresident of this state who is at least
sixty-five years old on December 31 of the tax year and who
elects to be subject to the alternative base income tax in
subsection 422.5A, shall not be required to make and file a
return if the taxpayer’s base income does not exceed thirty-two
thousand dollars in the case of married persons filing jointly
or filing separately on a combined return, heads of household,
and surviving spouses or twenty-four thousand dollars in the
case of all other persons. For purposes of this subsection,
“base income” means the same as defined in section 422.5A,
subsection 1, except that it includes all amounts of pensions
or other retirement income received from any source which is
not taxable under section 422.5A as a result of the exclusions
in section 422.5A, subsection 1, paragraphs “c” through “e” , or
any other state law, but does not include military retirement
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pay described in section 422.7, subsections 31A and 31B.
b. A taxpayer who is at least sixty-five years old on
December 31 of the tax year and whose base income does not
exceed the applicable amounts in paragraph “a” and who does
not make and file a return pursuant to this section shall be
deemed to have made the election required in section 422.5A,
subsection 2.
Sec. 23. Section 422.13, subsection 2, Code 2015, is amended
to read as follows:
2. For purposes of determining the requirement for filing
a return under subsection 1 or 1A , the combined net income or
base income, as the case may be, of a husband and wife from
sources taxable under this division shall be considered.
DIVISION IV
CONFORMING CHANGES RELATED TO DIVISION III
Sec. 24. Section 68A.102, subsection 21, Code 2015, is
amended to read as follows:
21. “State income tax liability” means either the state
individual income tax imposed under section 422.5 , less the
amounts of nonrefundable credits allowed under chapter 422,
division II , or the alternative base income tax imposed under
section 422.5A if applicable .
Sec. 25. Section 257.21, subsection 2, Code 2015, is amended
to read as follows:
2. The instructional support income surtax shall be imposed
on the state individual income tax for the calendar year during
which the school’s budget year begins, 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, and shall be imposed on all individuals residing in the
school district on the last day of the applicable tax year. As
used in this section , “state individual income tax” means either
the taxes computed under section 422.5 , less the amounts of
nonrefundable credits allowed under chapter 422, division II ,
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except for the Iowa taxpayers trust fund tax credit allowed
under section 422.11E , or the tax computed under section 422.5A
if applicable .
Sec. 26. Section 422.16, subsection 8, Code 2015, is amended
to read as follows:
8. An employer or 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
subsections 1 and 12 of this section ; and any amount deducted
and withheld as tax under subsections 1 and 12 of this section
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 , or section 422.5A if applicable ,
irrespective of whether or not such tax has been, or will
be, paid over by the employer or withholding agent to the
department as provided by this chapter .
Sec. 27. Section 422.21, subsection 1, Code 2015, is amended
to read as follows:
1. Returns shall be in the form the director prescribes,
and shall be filed with the department on or before the last
day of the fourth month after the expiration of the tax year.
However, cooperative associations as defined in section 6072(d)
of the Internal Revenue Code shall file their returns on or
before the fifteenth day of the ninth month following the
close of the taxable year and nonprofit corporations subject
to the unrelated business income tax imposed by section
422.33, subsection 1A , shall file their returns on or before
the fifteenth day of the fifth month following the close of
the taxable year. If, under the Internal Revenue Code, a
corporation is required to file a return covering a tax period
of less than twelve months, the state return shall be for the
same period and is due forty-five days after the due date of
the federal tax return, excluding any extension of time to
file. In case of sickness, absence, or other disability, or
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if good cause exists, the director may allow further time for
filing returns. The director shall cause to be prepared blank
forms for the returns and shall cause them to be distributed
throughout the state and to be furnished upon application,
but failure to receive or secure the form does not relieve
the taxpayer from the obligation of making a return that is
required. The department may as far as consistent with the
Code draft income tax forms to conform to the income tax
forms of the internal revenue department of the United States
government. Each return by a taxpayer upon whom a tax is
imposed by section 422.5 or 422.5A shall show the county of the
residence of the taxpayer.
Sec. 28. Section 422D.2, Code 2015, is amended to read as
follows:
422D.2 Local income surtax.
A county may impose by ordinance a local income surtax as
provided in section 422D.1 at the rate set by the board of
supervisors, of up to one percent, on the state individual
income tax of each individual residing in the county at the
end of the individual’s applicable tax year. However, the
cumulative total of the percents of income surtax imposed on
any taxpayer in the county shall not exceed twenty percent ,
except as provided in section 298.14 . The reason for imposing
the surtax and the amount needed shall be set out in the
ordinance. The surtax rate shall be set to raise only the
amount needed. For purposes of this section , “state individual
income tax” means the tax computed under section 422.5 , less
the amounts of nonrefundable credits allowed under chapter
422, division II , except for the Iowa taxpayers trust fund tax
credit allowed under section 422.11E , or the tax computed under
section 422.5A if applicable .
DIVISION V
IMPLEMENTATION
Sec. 29. EFFECTIVE DATE. This Act takes effect January 1,
2016.
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Sec. 30. APPLICABILITY. Divisions III and IV of this Act
apply to tax years beginning on or after January 1, 2016.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill makes changes relating to state taxes and revenue
by creating an alternative base income tax and modifying the
state sales and use tax rates and the distribution of revenues
from the natural resources and outdoor recreation trust fund.
DIVISION I —— SALES AND USE TAXES. Division I relates to
state sales and use taxes and to an amendment to the Iowa
Constitution ratified on November 2, 2010, which created a
natural resources and outdoor recreation trust fund (fund)
and dedicated a portion of state revenues to the fund for
the purposes of protecting and enhancing water quality and
natural areas in the state including parks, trails, and fish
and wildlife habitat, and conserving agricultural soils in
the state (Article VII, section 10). The fund is codified in
Code section 461.31. Pursuant to the amendment, the amount
credited to the fund will be equal to the amount generated
by an increase in the state sales tax rate occurring after
the effective date of the constitutional amendment, but shall
not exceed the amount that a state sales tax rate of 0.375
percent would generate. The state sales tax rate has not
been increased since the effective date of the constitutional
amendment, so no amounts have been credited to the fund. The
division increases the sales tax rate and the use tax rate
from 6 percent to 6.125 percent on July 1, 2016, from 6.125
percent to 6.25 percent on July 1, 2017, and from 6.25 percent
to 6.375 percent on July 1, 2018. The division also amends the
transfer of use tax revenues to the secure an advanced vision
for education fund (SAVE) in Code section 423F.2 to ensure that
SAVE receives approximately the same proportion of the total
use tax revenue as it did prior to the use tax rate increases
provided in the division.
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DIVISION II —— THE NATURAL RESOURCES AND OUTDOOR RECREATION
TRUST FUND. Division II amends the distribution of moneys
credited to the natural resources and outdoor recreation trust
fund. Under current law, all moneys credited to the fund are
allocated to seven different accounts within the fund to be
used for the specified purposes of the account. The division
modifies the allocation of those moneys to each account. The
natural resources account is reduced from 23 percent of the
total moneys to 15 percent; the soil conservation and water
protection account is increased from 20 percent to 45 percent;
the watershed protection account is increased from 14 percent
to 15 percent; the Iowa resources enhancement and protection
fund is reduced from 13 percent to 9 percent; the local
conservation partnership account is reduced from 13 percent to
9 percent; the trails account is reduced from 10 percent to 2
percent; and the lake restoration account is reduced from 7
percent to 5 percent.
DIVISION III —— ALTERNATIVE BASE INCOME TAX. Division III
relates to the computation and imposition of an alternative
base income tax.
In lieu of the regular personal net income tax computed and
imposed under Code section 422.5, a resident or nonresident
individual may elect to be subject to an alternative base
income tax as provided in the division. An election must be
made not later than the due date for filing the return for
a taxable year, including extensions, and under rules to be
prescribed by the director.
The state income tax of a taxpayer making an election shall
be an amount of tax equal to the taxpayer’s base income times
a specified rate. For tax years beginning in each of the
calendar years 2016 through 2019, the rate is 5.50 percent,
5.38 percent, 5.25 percent, and 5.13 percent, respectively.
For tax years beginning on or after January 1, 2020, the rate
is 5 percent.
“Base income” is defined as the taxpayer’s adjusted gross
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income before the net operating loss deduction as properly
computed for federal income tax purposes, less a standard
deduction of $6,235 for a married person who files separately
or a single person or $12,470 for a married couple filing a
joint return, a surviving spouse, or a head of household, less
interest and dividends from federal securities, and less social
security benefits and a certain amount of retirement income,
which excluded amount of retirement income increases ratably
each tax year in calendar years 2016 through 2022. Beginning
in 2023, all retirement income is excluded from taxation under
the alternative base income tax. The division indexes the
standard deduction amounts for future inflation. A taxpayer
shall not be allowed any nonrefundable or refundable tax credit
for the tax year for which the election is made, except the
credits for withheld tax and estimated tax paid under Code
section 422.16.
Taxpayers who are 65 years of age or older who elect the
alternative base income tax are not required to file an
income tax return if base income does not exceed $32,000 for
a married person filing jointly or filing separately on a
combined return, a head of household, or a surviving spouse,
or $24,000 for all other persons. For purposes of calculating
base income for the filing threshold, taxpayers are required
to add back any social security benefits or retirement income
otherwise exempt under the bill except for military retirement
pay. Taxpayers who meet these requirements and who do not file
a tax return are deemed to have elected to be subject to the
alternative base income tax.
If a taxpayer making an election is also subject to a local
income surtax, that taxpayer is subject to a local income
surtax rate that is 28 percent higher than the rate otherwise
imposed by the school district or political subdivision.
DIVISION IV —— CONFORMING CHANGES. Division IV relates to
miscellaneous conforming changes relating to division III.
The division makes conforming changes to the definitions of
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“state income tax liability” for purposes of the Iowa election
campaign fund income tax checkoff in Code chapter 68A, and
“state individual income tax” for purposes of the emergency
medical services income surtax in Code chapter 422D, the
instructional support income surtax in Code section 257.21,
and, by reference, the educational improvement income surtax
in Code section 257.29 and the physical plant and equipment
income surtax in Code section 298.2, to include income tax
computed and imposed under the alternative system in new Code
section 422.5A. The division also amends Code sections 422.16
and 422.21 to include references to new Code section 422.5A
in provisions of those Code sections that reference the tax
imposed under Code section 422.5.
DIVISION V —— IMPLEMENTATION. Division V relates to
implementation of the bill.
The division provides that the bill takes effect January
1, 2016, and provides that divisions III and IV of the bill
(relating to the creation of the alternative base income tax)
apply to tax years beginning on or after January 1, 2016.
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