Text: SSB1353            Text: SSB1355


Senate Study Bill 1354

SENATE FILE BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the state earned income tax credit by 2 increasing the amount of the tax credit and making the tax 3 credit refundable and including effective and retroactive 4 applicability date provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2247XC 82 7 mg/gg/14 PAG LIN 1 1 Section 1. Section 422.12B, subsection 1, Code 2007, is 1 2 amended to read as follows: 1 3 1. The taxes imposed under this division less the credits 1 4 allowed under section 422.12 shall be reduced by an earned 1 5 income credit equal to six and one=half seven percent of the 1 6 federal earned income credit provided in section 32 of the 1 7 Internal Revenue Code. Any credit in excess of the tax 1 8 liability is nonrefundable refundable. 1 9 COORDINATING AMENDMENTS 1 10 Sec. 2. Section 422.11, Code 2007, is amended to read as 1 11 follows: 1 12 422.11 FRANCHISE TAX CREDIT. 1 13 The taxes imposed under this division, less the credits 1 14 allowed under sections section 422.12 and 422.12B, shall be 1 15 reduced by a franchise tax credit. A taxpayer who is a 1 16 shareholder in a financial institution, as defined in section 1 17 581 of the Internal Revenue Code, which has in effect for the 1 18 tax year an election under subchapter S of the Internal 1 19 Revenue Code, or is a member of a financial institution 1 20 organized as a limited liability company under chapter 524 1 21 that is taxed as a partnership for federal income tax 1 22 purposes, shall compute the amount of the tax credit by 1 23 recomputing the amount of tax under this division by reducing 1 24 the taxable income of the taxpayer by the taxpayer's pro rata 1 25 share of the items of income and expense of the financial 1 26 institution and subtracting the credits allowed under sections 1 27 section 422.12 and 422.12B. This recomputed tax shall be 1 28 subtracted from the amount of tax computed under this division 1 29 after the deduction for credits allowed under sections section 1 30 422.12 and 422.12B. The resulting amount, which shall not 1 31 exceed the taxpayer's pro rata share of the franchise tax paid 1 32 by the financial institution, is the amount of the franchise 1 33 tax credit allowed. 1 34 Sec. 3. Section 422.11A, Code 2007, is amended to read as 1 35 follows: 2 1 422.11A NEW JOBS TAX CREDIT. 2 2 The taxes imposed under this division, less the credits 2 3 allowed under sections section 422.12 and 422.12B, shall be 2 4 reduced by a new jobs tax credit. An industry which has 2 5 entered into an agreement under chapter 260E and which has 2 6 increased its base employment level by at least ten percent 2 7 within the time set in the agreement or, in the case of an 2 8 industry without a base employment level, adds new jobs within 2 9 the time set in the agreement is entitled to this new jobs tax 2 10 credit for the tax year selected by the industry. In 2 11 determining if the industry has increased its base employment 2 12 level by ten percent or added new jobs, only those new jobs 2 13 directly resulting from the project covered by the agreement 2 14 and those directly related to those new jobs shall be counted. 2 15 The amount of this credit is equal to the product of six 2 16 percent of the taxable wages upon which an employer is 2 17 required to contribute to the state unemployment compensation 2 18 fund, as defined in section 96.19, subsection 37, times the 2 19 number of new jobs existing in the tax year that directly 2 20 result from the project covered by the agreement or new jobs 2 21 that directly result from those new jobs. The tax year chosen 2 22 by the industry shall either begin or end during the period 2 23 beginning with the date of the agreement and ending with the 2 24 date by which the project is to be completed under the 2 25 agreement. An individual may claim the new jobs tax credit 2 26 allowed a partnership, subchapter S corporation, or estate or 2 27 trust electing to have the income taxed directly to the 2 28 individual. The amount claimed by the individual shall be 2 29 based upon the pro rata share of the individual's earnings of 2 30 the partnership, subchapter S corporation, or estate or trust. 2 31 Any credit in excess of the tax liability for the tax year may 2 32 be credited to the tax liability for the following ten tax 2 33 years or until depleted, whichever is the earlier. For 2 34 purposes of this section, "agreement", "industry", "new job", 2 35 and "project" mean the same as defined in section 260E.2 and 3 1 "base employment level" means the number of full=time jobs an 3 2 industry employs at the plant site which is covered by an 3 3 agreement under chapter 260E on the date of that agreement. 3 4 Sec. 4. Section 422.11C, subsection 2, unnumbered 3 5 paragraph 1, Code 2007, is amended to read as follows: 3 6 The taxes imposed under this division, less the credits 3 7 allowed under sections section 422.12 and 422.12B, shall be 3 8 reduced by an ethanol blended gasoline tax credit for each tax 3 9 year that the taxpayer is eligible to claim the tax credit 3 10 under this section. In order to be eligible, all of the 3 11 following must apply: 3 12 Sec. 5. Section 422.11D, subsection 1, Code 2007, is 3 13 amended to read as follows: 3 14 1. The taxes imposed under this division, less the credits 3 15 allowed under sections section 422.12 and 422.12B, shall be 3 16 reduced by a historic preservation and cultural and 3 17 entertainment district tax credit equal to the amount as 3 18 computed under chapter 404A for rehabilitating eligible 3 19 property. Any credit in excess of the tax liability shall be 3 20 refunded as provided in section 404A.4, subsection 3. 3 21 Sec. 6. Section 422.11E, subsection 1, Code 2007, is 3 22 amended to read as follows: 3 23 1. The taxes imposed under this division, less the credits 3 24 allowed under sections section 422.12 and 422.12B, shall be 3 25 reduced by an assistive device tax credit. A small business 3 26 purchasing, renting, or modifying an assistive device or 3 27 making workplace modifications for an individual with a 3 28 disability who is employed or will be employed by the small 3 29 business is eligible, subject to availability of credits, to 3 30 receive this assistive device tax credit which is equal to 3 31 fifty percent of the first five thousand dollars paid during 3 32 the tax year for the purchase, rental, or modification of the 3 33 assistive device or for making the workplace modifications. 3 34 Any credit in excess of the tax liability shall be refunded 3 35 with interest computed under section 422.25. In lieu of 4 1 claiming a refund, a taxpayer may elect to have the 4 2 overpayment shown on the taxpayer's final, completed return 4 3 credited to the tax liability for the following tax year. If 4 4 the small business elects to take the assistive device tax 4 5 credit, the small business shall not deduct for Iowa tax 4 6 purposes any amount of the cost of an assistive device or 4 7 workplace modifications which is deductible for federal tax 4 8 purposes. 4 9 Sec. 7. Section 422.11F, Code 2007, is amended to read as 4 10 follows: 4 11 422.11F INVESTMENT TAX CREDITS. 4 12 1. The taxes imposed under this division, less the credits 4 13 allowed under sections section 422.12 and 422.12B, shall be 4 14 reduced by an investment tax credit authorized pursuant to 4 15 section 15E.43 for an investment in a qualifying business or a 4 16 community=based seed capital fund. 4 17 2. The taxes imposed under this division, less the credits 4 18 allowed under sections section 422.12 and 422.12B, shall be 4 19 reduced by investment tax credits authorized pursuant to 4 20 sections 15.333 and 15E.193B, subsection 6. 4 21 Sec. 8. Section 422.11G, Code 2007, is amended to read as 4 22 follows: 4 23 422.11G VENTURE CAPITAL FUND INVESTMENT TAX CREDIT. 4 24 The tax imposed under this division, less the credits 4 25 allowed under sections section 422.12 and 422.12B, shall be 4 26 reduced by a venture capital fund investment tax credit 4 27 authorized pursuant to section 15E.51. 4 28 Sec. 9. Section 422.11H, Code 2007, is amended to read as 4 29 follows: 4 30 422.11H ENDOW IOWA TAX CREDIT. 4 31 The tax imposed under this division, less the credits 4 32 allowed under sections section 422.12 and 422.12B, shall be 4 33 reduced by an endow Iowa tax credit authorized pursuant to 4 34 section 15E.305. 4 35 Sec. 10. Section 422.11I, subsection 1, unnumbered 5 1 paragraph 1, Code 2007, is amended to read as follows: 5 2 The taxes imposed under this division, less the credits 5 3 allowed under sections section 422.12 and 422.12B, shall be 5 4 reduced by a soy=based cutting tool oil tax credit. A 5 5 manufacturer, as defined in section 428.20, is eligible to 5 6 receive a soy=based cutting tool oil tax credit which is equal 5 7 to the costs incurred by the manufacturer during the tax year 5 8 for the purchase and replacement costs relating to the 5 9 transition from using nonsoy=based cutting tool oil to using 5 10 soy=based cutting tool oil. The costs eligible for the credit 5 11 are limited to those costs meeting all of the following 5 12 requirements: 5 13 Sec. 11. Section 422.11J, Code 2007, is amended to read as 5 14 follows: 5 15 422.11J TAX CREDITS FOR WIND ENERGY PRODUCTION AND 5 16 RENEWABLE ENERGY. 5 17 The taxes imposed under this division, less the credits 5 18 allowed under sections section 422.12 and 422.12B, shall be 5 19 reduced by tax credits for wind energy production allowed 5 20 under chapter 476B and for renewable energy allowed under 5 21 chapter 476C. 5 22 Sec. 12. Section 422.11K, Code 2007, is amended to read as 5 23 follows: 5 24 422.11K ECONOMIC DEVELOPMENT REGION REVOLVING FUND 5 25 CONTRIBUTION TAX CREDIT. 5 26 The taxes imposed under this division, less the credits 5 27 allowed under sections section 422.12 and 422.12B, shall be 5 28 reduced by an economic development region revolving fund 5 29 contribution tax credit authorized pursuant to section 5 30 15E.232. 5 31 Sec. 13. Section 422.11L, Code 2007, is amended to read as 5 32 follows: 5 33 422.11L WAGE=BENEFITS TAX CREDIT. 5 34 The taxes imposed under this division, less the credits 5 35 allowed under sections section 422.12 and 422.12B, shall be 6 1 reduced by a wage=benefits tax credit authorized pursuant to 6 2 section 15I.2. 6 3 Sec. 14. Section 422.11M, Code 2007, is amended to read as 6 4 follows: 6 5 422.11M AGRICULTURAL ASSETS TRANSFERRED TO BEGINNING 6 6 FARMERS. 6 7 The taxes imposed under this division, less the credits 6 8 allowed under sections section 422.12 and 422.12B, shall be 6 9 reduced by an agricultural assets transfer tax credit as 6 10 allowed under section 175.37. 6 11 Sec. 15. Section 422.11N, subsection 3, unnumbered 6 12 paragraph 1, Code 2007, is amended to read as follows: 6 13 The taxes imposed under this division, less the credits 6 14 allowed under sections section 422.12 and 422.12B, shall be 6 15 reduced by an ethanol promotion tax credit for each tax year 6 16 that the taxpayer is eligible to claim the tax credit under 6 17 this section. In order to be eligible, all of the following 6 18 must apply: 6 19 Sec. 16. Section 422.11O, subsection 2, unnumbered 6 20 paragraph 1, Code 2007, is amended to read as follows: 6 21 The taxes imposed under this division, less the credits 6 22 allowed under sections section 422.12 and 422.12B, shall be 6 23 reduced by an E=85 gasoline promotion tax credit for each tax 6 24 year that the taxpayer is eligible to claim the tax credit 6 25 under this subsection. In order to be eligible, all of the 6 26 following must apply: 6 27 Sec. 17. Section 422.11P, subsection 2, unnumbered 6 28 paragraph 1, Code 2007, is amended to read as follows: 6 29 The taxes imposed under this division, less the credits 6 30 allowed under sections section 422.12 and 422.12B, shall be 6 31 reduced by the amount of the biodiesel blended fuel tax credit 6 32 for each tax year that the taxpayer is eligible to claim a tax 6 33 credit under this subsection. 6 34 Sec. 18. Section 422.11Q, Code 2007, is amended to read as 6 35 follows: 7 1 422.11Q IOWA FUND OF FUNDS TAX CREDIT. 7 2 The taxes imposed under this division, less the credits 7 3 allowed under sections section 422.12 and 422.12B, shall be 7 4 reduced by a tax credit authorized pursuant to section 15E.66, 7 5 if redeemed, for investments in the Iowa fund of funds. 7 6 Sec. 19. Section 422.11R, Code 2007, is amended to read as 7 7 follows: 7 8 422.11R SOY=BASED TRANSFORMER FLUID TAX CREDIT. 7 9 The taxes imposed under this division, less the credits 7 10 allowed under sections section 422.12 and 422.12B, shall be 7 11 reduced by a soy=based transformer fluid tax credit allowed 7 12 under chapter 476D. 7 13 This section is repealed December 31, 2008. 7 14 Sec. 20. Section 422.11S, subsection 1, Code 2007, is 7 15 amended to read as follows: 7 16 1. The taxes imposed under this division, less the credits 7 17 allowed under sections section 422.12 and 422.12B, shall be 7 18 reduced by a school tuition organization tax credit equal to 7 19 sixty=five percent of the amount of the voluntary cash 7 20 contributions made by the taxpayer during the tax year to a 7 21 school tuition organization, subject to the total dollar value 7 22 of the organization's tax credit certificates as computed in 7 23 subsection 7. The tax credit shall be claimed by use of a tax 7 24 credit certificate as provided in subsection 6. 7 25 Sec. 21. Section 422.12, subsection 2, unnumbered 7 26 paragraph 1, Code 2007, is amended to read as follows: 7 27 A tuition credit equal to twenty=five percent of the first 7 28 one thousand dollars which the taxpayer has paid to others for 7 29 each dependent in grades kindergarten through twelve, for 7 30 tuition and textbooks of each dependent in attending an 7 31 elementary or secondary school situated in Iowa, which school 7 32 is accredited or approved under section 256.11, which is not 7 33 operated for profit, and which adheres to the provisions of 7 34 the federal Civil Rights Act of 1964 and chapter 216. As used 7 35 in this subsection, "textbooks" means books and other 8 1 instructional materials and equipment used in elementary and 8 2 secondary schools in teaching only those subjects legally and 8 3 commonly taught in public elementary and secondary schools in 8 4 this state and does not include instructional books and 8 5 materials used in the teaching of religious tenets, doctrines, 8 6 or worship, the purpose of which is to inculcate those tenets, 8 7 doctrines, or worship. "Textbooks" includes books or 8 8 materials used for extracurricular activities including 8 9 sporting events, musical or dramatic events, speech 8 10 activities, driver's education, or programs of a similar 8 11 nature. Notwithstanding any other provision, all other 8 12 credits allowed under this section and section 422.12B shall 8 13 be deducted before the tuition credit under this subsection. 8 14 The department, when conducting an audit of a taxpayer's 8 15 return, shall also audit the tuition tax credit portion of the 8 16 tax return. 8 17 Sec. 22. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES. 8 18 This Act, being deemed of immediate importance, takes effect 8 19 upon enactment and applies retroactively to January 1, 2007, 8 20 for tax years beginning on or after that date. 8 21 EXPLANATION 8 22 This bill increases the state earned income tax credit from 8 23 6.5 percent to 7 percent of the federal tax credit and makes 8 24 the state earned income tax credit refundable like the federal 8 25 earned income tax credit. 8 26 Because the bill makes the state tax credit refundable, 8 27 numerous coordinating amendments are made to other tax credits 8 28 that specify that the earned income tax credit is to be taken 8 29 before those other tax credits. 8 30 The bill takes effect upon enactment and applies 8 31 retroactively to January 1, 2007, for tax years beginning on 8 32 or after that date. 8 33 LSB 2247XC 82 8 34 mg:sc/gg/14
Text: SSB1353            Text: SSB1355