2001 Iowa Legislative Summaries

BILL TOPIC INDEX

SALES & USE TAX

HF 1 Temporary Suspension of Sales Tax on Energy
HF 705-A Delivery Charges of Certain Energy
HF 705-B Phase-Out of Tax on Sale of Energy
HF 715-A Enterprise Zone—Refunds
HF 715-C Technical Advice
HF 715-D Tax Gap Costs
HF 715-G Construction Contractor’s Right of Refund for Additional Tax Paid
HF 715-H Sales Tax Permits—Good for More Than One Location
HF 715-I Hotel/Motel Election Notice
HF 715-J Local Option and Motor and Special Fuel
HF 715-K Local Option Continuation Provision
HF 715-L Local Option Contractor Refunds
HF 715-M Services Exempt from Sales Tax are Also Exempted from Use Tax
HF 715-N Amending References to the EPC Charge
HF 723 Agricultural Irrigation Equipment
HF 736-A Tax Specifically Imposed on "Bundled Service Contracts"
HF 736-B Incorporation of the Federal Mobile Telecommunications Sourcing Act into Iowa Law
HF 736-C Proceeds Used for Educational, Religious, or Charitable Purposes
HF 736-D Educational Institution--Definition
HF 736-E Art Centers
HF 736-F Amended Definition of "Retailer Maintaining a Place of Business in this State"
HF 736-G "Communication Service" Subjected to Use Tax
HF 736-H Vehicles—Business Transfers
HF 736-I New Limitations Regarding Assessments, Claims for Refunds, and Record-keeping for EPC Purposes
HF 739 Application of SILO Tax to Bonds

 

CORPORATE & INDIVIDUAL INCOME & FRANCHISE TAXES

HF 310 Changes in Child Support Recovery
HF 349-A Investment Tax Credit
HF 349-B Eligible Housing Investment Tax Credit
HF 349-C Eligible Housing Business Refund
HF 349-D Eligible Development Business
HF 707 Warehouse of Goods by Foreign Corporations
HF 715-F Gains from Sale of Municipal Bonds
HF 716-A Investment Tax Credit—Value Added Agriculture
HF 716-B Ethanol Blended Gasoline Tax Credit
HF 737 Keep Iowa Beautiful Income Tax Checkoff
HF 757 Exemption of Federal Rebate from State Income Tax
SF 140-A Update of References to the Internal Revenue Code
SF140-B No Adoption of Provision Permitting Accrual Method Taxpayer to use Installment Method for Reporting Capital Gains
SF 140-C Change Income Threshold for Filing by Dependents
SF 141 Allocation of ACE Program Costs to Age Program Job Credits
SF 350 Deduction for Vehicle Registration Fees for Older Vehicles

 

PROPERTY TAXES

HF 656 Square Foot Tax in Manufactured Home Community
HF 712 Family Farm One-time Filing/Homestead Penalties
HF 713 Family Farm & Ag. Land Credit Date Changes
HF 715-B Property Tax Exemptions
HF 736-J Property Tax Exemption ((Uniform Filing Date)
HF 736-K Real Estate Transfer Tax
SF 372 Real Estate Transfer Tax/Declarations of Value
SF 449 Indian Housing Property Tax Exemption
SF 453 Tax List Disposal/Electronic Payment of Taxes
SF 519 Low-Income Housing Assessment
SF 520 Tax Exemption for Methane Gas Conversion Property

 

INHERITANCE—FIDUCIARY & ESTATE TAXES

HF 715-O Inheritance Tax Rate—Fraternal Organizations
HF 736-L Inheritance Tax—Pension Distributions
HF 736-M Inheritance Tax—Pension Distributions—Decedent/Nonresident
SF 523 Reporting for Inheritance Tax—Estate Must Be $25,000

 

MOTOR FUEL

HF 716-C Motor Fuel Variable Tax Rates
HF 736-N Motor Fuel Tax, Denatured Alcohol and Racing Fuel

 

MISCELLANEOUS

HF 715-E Cigarette Tax (Minimum Price/Suspension)
SF 276 Insurance Producer
SF 500 Insurance Commissioner Reporting

 

TEMPORARY SUSPENSION OF SALES TAX ON ENERGY (01 HF 1)

Prior Law

Sales tax was imposed on the sale of natural gas, fuel and electricity to residential customers for heating.

New Provisions

House File 1, section1, provided a temporary suspension of state sales tax and local option tax on the gross receipts from the sale of metered gas to residential customers which were billed during March and April of 2001. This bill also provided a temporary suspension of state sales tax and local option tax on the gross receipts from the sale of propane and heating oils and kerosene used for heating purposes and where delivery occurred beginning February 5, 2001 through March 31, 2001.

House File 1, section 2 of this law provided a yearly phase-out of one percent per year beginning January 1, 2002 and ending December 31, 2005 on the sale of metered natural gas, metered electricity and fuels, including propane and heating oils to residential customers for use as energy for residential dwellings, apartment units, and condominiums used for human occupancy. This phase-out was for state sales tax only. Local option taxes are not effected by this law.

Due to several grammatical discrepancies and the need for clarification on several aspects of section 2, the legislature amended section 2 of House File 1. The amendment to this section can be found in House File 705, section 2.

Section Amended

House File 1 enacts Iowa Code sections 422.45(60) and (61), section 2 was amended by House File 705, section 2, 2001 Iowa Acts.

Effective Date

February 5, 2001

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CHANGES IN CHILD SUPPORT RECOVERY (O1 HF 310)

Prior Law

The child support recovery unit could not obtain information from official juvenile court records or official adoption records relating to paternity of a child, support of a child or the termination of parental rights of a child without a court order. The entire amount of a judgment for accrued support, notwithstanding compliance with a periodic payment plan or regardless of the date of entry of the judgment, was not immediately available for setoff against a debtor’s federal income tax refund, other federal nontax payment or other setoffs provided under section 421.17, subsection 21 of the 2001 Iowa Code.

New Provisions

The bill authorizes the disclosure of certain official juvenile court records or official adoption records relating to paternity, support or the termination of parental rights to the child support recovery unit, upon request, without a court order. Provides that , unless the periodic payment plan for retroactive modification provisions apply to an order, and notwithstanding a payor’s compliance with a periodic payment plan, the entire amount of an accrued support order is due and owing on the date of entry of a judgment and is delinquent for the purposes of tax refund setoff and for other available federal payment setoffs.

Sections Amended

Sections 1 of House File 310 adds new subsection 3A to section 232.147, Code 2001. Section 2 of House File amends section 252B.5, subsection 4, Code 2001. Section 3 of House File 310 amends section 600.16A by adding new subsection 4A , Code 2001.

Effective Date

The Act was applicable upon enactment which was on April 25, 2002.

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INVESTMENT TAX CREDIT (01 HF 349-A)

Prior Law

An investment tax credit of ten percent of the cost of machinery and equipment and cost on improvement to real property was available to an eligible business, provided that a partial property tax exemption for the actual value added by improvement to real property was allowed.

New Provisions

The requirement that a partial property tax exemption be allowed for the actual value added by improvement to real property was eliminated.

Section Amended

Section 1 of House File 349 amends section 15.333, subsection 1, Code 2001.

Effective Date

Effective May 16, 2001, and applies retroactively for tax years beginning on or after January 1, 2001.

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ELIGIBLE HOUSING INVESTMENT TAX CREDIT (01 HF 349-B)

Prior Law

Eligible housing businesses were entitled to an investment credit of 10% of the new investment which is directly related to the building or rehabilitating of homes in an enterprise zone. The credit would be taken based on a maximum of $120,000 for each single-family home or for each unit of a multiple dwelling.

New Provisions

The maximum amount for which the investment credit can be taken has risen to $140,000 of value for each single-family home or for each unit of a multiple dwelling.

Section Amended

Section 3 of House File 349 amends section 15E193B, subsection 6, paragraph a, Code 2001.

Effective Date

Effective May 16, 2001, and applies retroactively for tax years beginning on or after January 1, 2001.

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ELIGIBLE HOUSING BUSINESS REFUND (01 HF 349-C)

Prior Law

Current Iowa Code section 15E.193(6)(b) allowed for a refund of sales, services and use taxes to be claimed by eligible businesses under the "New Jobs and Income Act" found in Iowa Code section 15.326. The department had determined that an eligible business must have a written construction contract.

New Provisions

This amendment expands "eligible businesses" to include eligible businesses acting as contractors and subcontractors.

Section Amended

Section 4 of House file 349 amends Code section 15E.193B, subsection b, paragraph a, Code 2001. Section 8 of House File 349 provides for a retroactive application.

Effective Date

Effective May 16, 2001 and retroactive to July 1, 1998.

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ELIGIBLE DEVELOPMENT BUSINESS (01 HF 349-D)

Prior Law

None

New Provisions

Tax incentives are available to eligible development businesses. An eligible development business includes a developer or development contractor that constructs, expands, or rehabilitates a building space with a minimum capital investment of at least $500,000 in a part of a city or county in which there is a designated enterprise zone. The capital investment requirement of $500,000 can be reduced by as much as $250,000 in cases where an eligible development business purchases a vacant building suitable for industrial use, or rehabilitates a building space that has been in an enterprise zone for at least 5 years. The building space cannot be occupied by a retail business.

The eligible development business must complete its project within 3 years from the time it receives approval from the department of economic development. Prior to applying for assistance, the eligible development business shall enter into an agreement with at least one business for purposes of locating the business in all or a portion of the building for at least 5 years.

The eligible business may claim a tax credit of 10% of the new investment that is directly related to the construction, expansion or rehabilitation of building space to be used for manufacturing, processing, cold storage, distribution or office facilities. New investment includes the purchase price of land and the cost of improvements to real property. The tax credit may be claimed in the tax year in which the construction, expansion or rehabilitation is completed. The investment credit can reduce the individual income, corporation income, franchise or insurance premiums tax.

Any credit in excess of the tax liability may be credited to the tax liability for the following seven years or until depleted, whichever occurs earlier. If the business is a partnership, S corporation, limited liability company, or estate or trust electing to have the income taxed directly to the individual, the individual may claim the tax credit based on the pro rata share of earnings.

The eligible business also receives the sales, services and use tax refund set forth in Section 15.331A that is available for other eligible business operating in an enterprise zone. Also, cities or counties for which an eligible enterprise zone is certified may exempt from all property taxation all or a portion of the value added to the property by the eligible development business.

If the development business receives incentives and fails to maintain the requirements to be an eligible development business, the business is subject to repayment of all or a portion of the incentives it has received. The value of incentives to be recovered includes penalty and interest. If within 5 years of the completion of the project the development business sells or leases any space to a retail business, the development business shall proportionally refund any tax credits, refund or exemptions which were previously claimed.

If the eligible business was also involved in an enterprise zone program under section 15E193, the investment credit, sales service and use tax refund, and property tax exemption cannot be claimed on the same investment under both the enterprise zone program and the eligible development business program.

Sections Amended

Section 5 of House File 349 creates new section 15E.193C, Code 2001, and Section 7 of House File 349 amends section 15E196 by adding new subsection 7, Code 2001.

Effective Date

Effective May 16, 2001, and applies retroactively for tax years beginning on or after January 1, 2001.

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SQUARE FOOT TAX IN MANUFACTURED HOME COMMUNITY (01 HF 656)

Prior Law

A manufactured home community, although not defined by statute, was a term used to describe a land-leased community.

New Provisions

A manufactured home community is defined to mean the same as a land-leased community. Homes in these communities are taxed on the basis of square footage.

Section Amended

Section 11 of House File 656 amends § 435.1, Code 2001.

Effective Date

July 1, 2001.

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DELIVERY CHARGES OF CERTAIN ENERGY (01 HF 705-A)

Prior Law

Tax was imposed on the delivery charges for the delivery of electricity or natural gas.

New Provisions

House File 705, section 1 provides an exemption from sales tax on the gross receipts from delivery charges for natural gas or electricity if the sale, furnishing, service, or use of the electricity or natural gas is exempt from tax under Iowa Code chapter 422 or 423.

Section Amended

House File 705, section 1 enacts Code section 422.45(2)(A)

Effective Date

July 1, 2001

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PHASE-OUT OF TAX ON SALE OF ENERGY (01 HF 705-B)

Prior Law

State and local option taxes were imposed on the sale of natural gas, electricity and fuels to residential customers used as energy in residential dwellings, apartment units, and condominiums.

New Provisions

House File 705, section 2 provides a yearly phase-out of one percent per year beginning January 1, 2002 on the sale of metered natural gas, metered electricity and fuels, including propane and heating oils to residential customers for use as energy for residential dwellings, apartment units, and condominiums used for human occupancy for state sales tax purposes.

Phase-out is scheduled as follows:

  1. If the date of the utility billing or meter reading cycle of the residential customer for the sale, furnishing, or service of metered gas and metered electricity is on or after January 1, 2002, through December 31, 2002, or if the sale, furnishing, or service of fuel for purposes of residential energy and the delivery of the fuel occurs on or after January1, 2002, through December 31, 2002, the rate of tax is four percent of the gross receipts.

  2. If the date of the utility billing or meter reading cycle of the residential customer for the sale, furnishing, or service of metered gas and metered electricity is on or after January 1, 2003, through December 31, 2003, or if the sale, furnishing, or service of fuel for purposes of residential energy and the delivery of the fuel occurs on or after January1, 2003, through December 31, 2003, the rate of tax is three percent of the gross receipts.

  3. If the date of the utility billing or meter reading cycle of the residential customer for the sale, furnishing, or service of metered gas and metered electricity is on or after January 1, 2004, through December 31, 2004, or if the sale, furnishing, or service of fuel for purposes of residential energy and the delivery of the fuel occurs on or after January1, 2004, through December 31, 2004, the rate of tax is two percent of the gross receipts.

  4. If the date of the utility billing or meter reading cycle of the residential customer for the sale, furnishing, or service of metered gas and metered electricity is on or after January 1, 2005, through December 31, 2005, or if the sale, furnishing, or service of fuel for purposes of residential energy and the delivery of the fuel occurs on or after January1, 2005, through December 31, 2005, the rate of tax is one percent of the gross receipts.

  5. If the date of the utility billing or meter reading cycle of the residential customer for the sale, furnishing, or service of metered gas and metered electricity is on or after January 1, 2006, or if the sale, furnishing, or service of fuel for purposes of residential energy and the delivery of the fuel occurs on or after January1, 2006, the rate of tax is zero percent of the gross receipts.

As indicated above, tax on metered energy sales is governed by the billing or metered reading date and tax on fuel sales is governed by delivery date of the fuel to the customer.

It is also important to note that local option tax is still imposed.

Section Amended

House File 705 , section 2 amends Code section 422.45. subsection 61, as enacted by 2001 Iowa Acts, House File 1, section 2.

Effective Date

July 1, 2001

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WAREHOUSE OF GOODS BY FOREIGN CORPORATION (01 HF 707)

Prior Law

None

New Provisions

A foreign corporation is not required to file a corporation income tax return if its only activities in Iowa are the storage of goods for a period of sixty consecutive days or less in a warehouse for hire located in Iowa, provided that the foreign corporation transports or causes a carrier to transport such goods to that warehouse and that none of these goods are delivered or shipped to a purchaser in Iowa.

These foreign corporations still have nexus in Iowa due to storing goods in a public warehouse, but the law change relieves them of filing an Iowa return since they have no Iowa sales, and their apportionment factor would be 0%.

Section Amended

Section 1 of House File 707 amends section 422.36 by adding new subsection 6, Code 2001.

Effective Date

Effective April 30, 2001, and applies retroactively for tax years beginning on or after January 1, 2001.

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FAMILY FARM ONE-TIME FILING / HOMESTEAD PENALTIES (01 HF 712)

Prior Law

A person filing a false claim to obtain the homestead property tax credit was guilty of a fraudulent practice.

If a homestead credit was disallowed and the claimant failed to give the assessor written notice that the property was no longer used as a homestead, a civil penalty equal to 50% of the amount of the credit was assessed against the claimant.

An annual application for the family farm property tax credit was required to be filed each year between July 1 and October 15.

New Provisions

In addition of being guilty of a fraudulent practice for filing a false claim for homestead credit, the claimant is subject to a penalty of 25% of the amount of the credit.

The civil penalty for failure to notify the assessor that the property is no longer used as a homestead is changed from 50% to 5% of the amount of the disallowed credit.

If a claim for the family farm credit is filed by November 1, 2001, or thereafter, and approved, further filing is not required provided the claimant owns the property on July 1 of subsequent years and the designated person actively engaged in farming the property remains the same. If the ownership changes, the new owner must refile for the credit and if the designated person changes, the owner must refile for the credit. A 5% penalty is imposed if the owner fails to notify the assessor in writing of a change in the designated person.

Sections Amended

Section 1 of House File 712 amends § 425.7, subsection 3, unnumbered paragraph 2, Code 2001; section 2 amends § 425A.4, subsection 1, Code 2001; section 3 amends § 425A.4, Code 2001, by adding new subsections 3 and 4; section 4 amends § 425A.8, Code 2001, by adding a new unnumbered paragraph; and section 5 repeals § 425.14, Code 2001.

Effective Date

July 1, 2001. Applies to homestead credit and family farm credit claims filed on or after July 1, 2001.

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FAMILY FARM & AG. LAND CREDIT DATE CHANGES (01 HF 713)

Prior Law

The county auditor was required to certify claims for the family farm property tax credit to the department of revenue and finance by March 1 of each year and to certify claims for the agricultural land tax credit by June 1 of each year.

The department was required to notify the county auditors of the pro rata percentage for agricultural land tax credit claims by August 1 of each year and to pay the claims by August 15.

New Provisions

The county auditor is required to certify claims for the family farm and agricultural land property tax credits to the department by April 1 of each year.

The department is required to notify the county auditors of the pro rata percentage for agricultural land tax credit claims by June 15 of each year and to pay the claims by July 15.

Sections Amended

Section 2 of House File 713 amends § 425A.5, Code 2001; section 3 amends § 426.6, unnumbered paragraph 1, Code 2001; and section 4 amends § 426.7, Code 2001.

Effective Date

July 1, 2001.

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ENTERPRISE ZONE-REFUNDS (01 HF 715-A)

Prior Law

Iowa Code section 15.331A allows an eligible enterprise zone business or a supporting business to apply for a refund of sales or use tax paid for any goods, wares, or merchandise, or services rendered, furnished, or performed, including water, sewer, gas, and electric utility services used in the fulfillment of a written contract relating to the construction or equipping of a facility within an economic development area. To be eligible an application for refund must be filled within six months of the project being completed.

New Provisions

Allows a business to apply for a refund of taxes paid with one year of the project completion.

Section Amended

Section 1 of House File 715 amends section 15.331A, subsection 2, Code 2001.

Effective Date

July 1, 2001

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PROPERTY TAX EXEMPTIONS (01 HF 715-B)

Prior Law

The governing body of a city or county, by resolution, could authorize the filing of late claims for an urban revitalization property tax exemption. However, it was unclear as to whether the exemption could be allowed for the entire number of years as established in the original exemption schedule or only the number of years remaining in the schedule once the late claim was filed.

A revocation or modification of a property tax exemption by the director was applicable to the tax year in which the application for revocation or modification of the exemption was made by the taxpayer or taxing district.

Fixtures used for cooking, refrigeration, or freezing of value-added agricultural products, used in value-added agricultural processing or used in direct support of value-added agricultural processing were subject to tax as real property.

Section 427B.19A, subsection 1, provides for full funding of the industrial machinery, equipment and computers property tax replacement amount, but subsection 2 provided for proration of the fund if the amount appropriated was insufficient to pay all replacement tax claims. Theses two subsections were in conflict with one another.

House File 769, enacted by the 1999 Iowa General Assembly, permitted condominiums included in a horizontal property regime for which a declaration was recorded prior to January 1, 1999, and which were used for human habitation, to be classified as residential real estate through the assessment year beginning January 1, 2004.

New Provisions

It is clarified that an urban revitalization property tax exemption may be allowed for the number of years remaining in the exemption schedule once the late application for exemption is filed.

It is clarified that a revocation or modification of a property tax exemption initiated by the director is applicable to the tax year in which the director's motion to revoke or modify the exemption is filed.

Fixtures used for cooking, refrigeration, or freezing of value-added agricultural products, used in value-added agricultural processing or used in direct support of value-added agricultural processing are exempt from tax.

It is clarified that the industrial machinery, equipment and computers property tax replacement amount is to be fully funded unless the appropriation is limited by action of the general assembly.

Senate File 2005, enacted by the 2000 Iowa General Assembly, required condominiums that are used for human habitation to be classified as residential real estate under all circumstances making the sunset provision included in the previous year’s legislation obsolete.

Sections Amended

Section 2 of House File 715 amends § 404.4, unnumbered paragraph 2, Code 2001; section 20 amends § 427.1(16), Code 2001; section 21 amends § 427A.1, Code 2001, by adding new subsection 3A; section 22 amends § 427B.19A, subsection 2, Code 2001; and section 23 amends § 427B.19B, Code 2001 and section 26 amends § 499B.11(2), Code 2001, by striking the subsection.

Effective Date

Section 21 is effective May 3, 2001 and applies retroactively to January 1, 2000. The other sections are effective July 1, 2001.

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TECHNICAL ADVICE (01 HF 715-C)

Prior Law

Iowa Code section 421.17(16) allows the director to request any state department or institution for technical advice and data which may be of value in connection with the work of assessment and taxation.

New Provisions

This Code provision is amended to allow the director to request any state agency and institution for technical advice and data which may be of value in the work of the department and not just limited to assessment and taxation.

Section Amended

Section 3 of House File 715 amends Code section 421.17, subsection 16, Code 2001.

Effective Date

July 1, 2001

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TAX GAP COSTS (01 HF 715-D)

Prior Law

Iowa Code section 421.17(22A) allowed the department to contract with vendors to create or administer systems or programs which identify nonfilers of returns or nonpayers of taxes administered by the department. The law allowed the fees incurred with such vendors to be limited to contractually agreed to fees which could be paid from tax, penalty, interest and fees actually collected.

New Provisions

This Code provision is amended to allow for the payment and reimbursement of costs incurred by the department and not just costs incurred under the contract. In addition, this amendment also requires that the director must report on an annual basis to the legislative fiscal bureau and the chairpersons and ranking members of the Ways and Means committees on the amount of costs incurred and paid during the previous fiscal year.

Section Amended

Section 4 of House File 715 amends Code section 421.17, subsection 22A, Code 2001.

Effective Date

July 1, 2001

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CIGARETTE TAX (MINIMUM PRICE/SUSPENSIONS) (01 HF 715-E)

Prior Law

There were persons selling cigarettes in Iowa who could not be held to the minimum pricing requirements because they did not meet the definition of a retailer or wholesaler.

It was unclear as to what permit-issuing authority a request for a suspension or revocation of a cigarette permit was to be brought before.

New Provisions

Provides that any person that does not meet the definition of a retailer or wholesaler but who is engaged in the business of selling cigarettes in this state to a retailer or final consumer shall be considered a retailer and subject to the minimum pricing requirements.

Clarifies that a request for a cigarette permit suspension or revocation must be made to the authority that issued the permit. Cities and counties issue permits to retailers and the department issues permits to distributors, manufacturers, wholesalers, and vendors.

Sections Amended

Section 5 of House File 715 amends § 421B.2(6), Code 2001, by adding a new unnumbered paragraph; and section 25 amends § 453A.2(4), Code 2001.

Effective Date

July 1, 2001.

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GAINS FROM SALE OF MUNICIPAL BONDS (01 HF 715-F)

Prior Law

While there was no specific provision, any gains from the sale of obligations of the state and any of its political subdivisions were subject to individual, corporation, and franchise tax.

New Provisions

Any gains from the sale of obligations of the state and any of its political subdivisions are subject to Iowa individual, corporation and franchise tax unless the law which authorized these obligations specifically exempts from tax the gains on the sale of these obligations.

Sections Amended

Section 6 of House File 715 amends section 422.7 by adding new subsection 36, Code 2001. Section 7 of House File 715 amends section 422.35 by adding new subsection 18, Code 2001. Section 10 of House File 715 amends section 422.61, subsection 3, paragraph b, Code 2001.

Effective Date

Effective May 3, 2001, and applies retroactively for tax years beginning on or after January 1, 2001.

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CONSTRUCTION CONTRACTOR'S RIGHT OF REFUND FOR ADDITIONAL TAX PAID (01 HF 715-G)

Prior Law

Construction contractors could apply for a refund of any additional tax which they paid as a result of the increase in the sales and use tax rate from four to five percent. The refund was applicable to "goods, wares, or merchandise" purchased by a contractor and incorporated into an improvement to real estate in fulfillment of a contractor's obligation under a written construction contract. The construction contract in question must have been fully executed prior to July 1, 1992, and the claim for refund must have been filed within one year of the date the tax was paid.

New Provisions

The right to apply for this refund is abolished.

Section Amended

Section 8 of House File 715 amends § 422.47 Code 2001, by striking subsection 2.

Effective Date

July 1, 2001.

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SALES TAX PERMITS - GOOD FOR MORE THAN ONE LOCATION (01 HF 715-H)

Prior Law

The original address assigned to a sales tax permit was the only location at which the owner of the permit was authorized to transact business.

New Provisions

In addition to the above location, a sales tax permit may be used for the transaction of business at any place of relocation within the state of Iowa so long as the owner of the permit at the place of relocation was its owner when the original address was assigned.

Section Amended

Section 9 of House File 715 amends § 422.53, subsection 3, Code 2001.

Effective Date

July 1, 2001.

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HOTEL/MOTEL ELECTION NOTICE (01 HF 715-I)

Prior Law

Iowa Code section 422A.1 did not provide for notification to the director of the election results, only notice of imposition, revision ,or repeal of the tax.

New Provisions

This Code provision is amended to require that within ten days of an election regarding the imposition, repeal, or change in the rate of the hotel and motel tax, the county auditor shall give written notice by sending a copy of the abstract of votes from the favorable election to the director.

Section Amended

Section 12 of House File 715 amends Code section 422A.1, Code 2001.

Effective Date

July 1, 2001

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LOCAL OPTION AND MOTOR AND SPECIAL FUEL (01 HF 715- J)

Prior Law

Iowa Code sections 422B.8 and 422E.3 provided that regular local option and school local option tax would not to be imposed on the sale of motor and special fuel as defined in Iowa Code section 452A.

New Provisions

These Code provisions are amended to limit that exception. Under this new provision, regular local option and school local option tax will be imposed on the purchase of fuel unless the fuel tax is paid on the transaction and a refund has not or will not be allowed.

Sections Amended

Sections 13 and 16 of House File 715 amend Code sections 422B.8, unnumbered paragraph 1 and 422E.3, subsection 2, Code 2001.

Effective Date

July 1, 2001

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LOCAL OPTION CONTINUATION PROVISION (01 HF 715-K)

Prior Law

Current Iowa Code chapter 422B did not provide for the continuation of a local option tax which was voted to be reimposed within a jurisdiction. In many jurisdictions, the local option tax was due to sunset prior to the tax being reimposed due to statutorily required imposition and repeal dates. This caused a temporary and unwanted lapse in the tax.

New Provisions

This Code provision is amended to provide for the statutory imposition and repeal dates to be disregarded and for the local option tax to continually be imposed without disruption if voted on by a local option jurisdiction.

Section Amended

Section 14 of House File 715 amends Iowa Code section 422B.9 subsection 1, paragraph a, Code 2001.

Effective Date

July 1, 2001

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LOCAL OPTION CONTRACTOR REFUNDS (01 HF 715-L)

Prior Law

Current Iowa Code section 422B.11 allows contractors a refund of local option tax to be filed with the department within 6 months from the date the tax is paid on goods, wares, or merchandise which are incorporated into an improvement to real estate.

New Provisions

This Code provision is amended to lengthen the statutory period for filing the refund with the department to one year from the date the tax is paid.

Section Amended

Section 15 of House File 715 amends Code section 422B.11, subsection 9, paragraph a, Code 2001.

Effective Date

July 1, 2001

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SERVICES EXEMPT FROM SALES TAX ARE ALSO EXEMPTED FROM USE TAX (01 HF 715-M)

Prior Law

Services exempted from sales tax were not exempted, as a group, from use tax.

New Provisions

All taxable services, including the rental of tangible personal property, the rendering, furnishing or performing of which are exempt from sales tax, are specifically exempted from use tax.

Section Amended

Section 17 of House File 715 amends § 423.4, subsection 4, Code 2001.

Effective Date

July 1, 2001.

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AMENDING REFERENCES TO THE EPC CHARGE (01 HF 715-N)

Prior Law

Several sections of the chapter of the Code which imposes the environmental protection charge on petroleum diminution refer to the charge as a "tax" and the person who pays the charge as a "taxpayer".

New Provisions

Those sections are amended. References to the "tax" on petroleum diminution are replaced with references to the "charge" on petroleum diminution. A reference to a "taxpayer" is replaced with a reference to a "person against whom it [the petroleum diminution charge] is assessed".

Sections Amended

Section 18 of House File 715 amends section 424.10, subsection 2, Code 2001.. Section 19 of House File 715 amends section 424.13, subsection 2, Code 2001..

Effective Date

July 1, 2001.

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INHERITANCE TAX RATE-FRATERNAL ORGANIZATIONS (01 HF 715-O)

Prior Law

Iowa Code section 450.10, subsection (4) sets forth the organizations that are subject to an inheritance tax rate of 15%. This subsection referenced societies organized for profit but did not specify what types of societies would qualify. In addition, this subsection also required that all entities under this subsection be organized either under the laws of this state or of any other state, territory, province or country.

New Provisions

House File 715, subsection 24 amended this Code provision by clarifying that the societies include fraternal and social organizations which do not qualify for exemption under sections 170(c) and 2055 of the Internal Revenue Code. In addition, the amendment strikes the language that they be organized either under the laws of this state or of any other state, territory, province, or country. This language was stricken in other subsections several years ago as being unnecessary due to it being presumed as and organization being organized under a state or federal law unless specified. Consequently, this language was stricken for uniformity.

Section Amended

Section 24 of House File 715 amends Iowa Code section 450.10(4)

Effective Date

Estates of decedents on or after July 1, 2001

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INVESTMENT TAX CREDIT – VALUE ADDED AGRICULTURE (0 HF 716-A)

Prior Law

An eligible business whose project primarily involves value-added agricultural products may have unused investment tax credit refunded. The eligible business may elect to have all or a portion of any unused tax credit refunded. This did not apply to businesses who were not required to file an Iowa tax return and were not part of the Iowa tax structure.

New Provisions

An eligible business now includes a cooperative described in Section 521 of the Internal Revenue Code which is not required to file an Iowa corporation income tax return, and whose project primarily involves the production of ethanol. Cooperatives described in Section 521 of the Internal Revenue Code are tax exempt cooperatives, and are not required to file an Iowa corporation return if they have no federal taxable income. These 521 cooperatives will now be eligible for the $4 million of unused credit available to be refunded on an annual basis.

The department of economic development shall require that these cooperatives submit a list of its members and the share of each member’s interest in the cooperative. A tax credit certificate will be issued by the department of economic development to each member on the list. The members can then claim the investment tax credit on their individual income tax returns.

Section Amended

Section 1 of House File 716 amends section 15.333, subsection 1 and 1A, Code Supplement 1999, as amended by 2000 Iowa Acts, chapter 1213, Section 1.

Effective Date

Effective for tax years beginning on or after July 1, 2001.

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ETHANOL BLENDED GASOLINE TAX CREDIT (01 HF 716-B)

Prior Law

None

New Provisions

An income tax credit is available to service stations at which more than 60% of the total gallons of gasoline sold and dispensed through one or more metered pumps by the taxpayer is ethanol blended gasoline. The taxpayer must be a retail dealer. The tax credit shall be calculated separately for each service station site operated by the taxpayer. The amount of the tax credit is 2 ½ cents multiplied by the total number of gallons of ethanol blended gasoline sold through all metered pumps located at that service station during the tax year in excess of 60% of all gasoline sold during the tax year.

Any credit in excess of the tax liability may be refunded or, in the alternative, credited to the tax liability for the following year. For partnerships, limited liability companies, S corporations, estates and trusts where income is taxed directly to the individual, the credit can be claimed based on the pro rata share of the individual’s earnings.

Sections Amended

Section 2 of House File 716 creates a new section, 422.11C, Code 2001.

Section 3 of House File 716 amends section 422.33 by adding new subsection 11, Code 2001.

Effective Date

Effective for tax years beginning on or after January 1, 2002.

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MOTOR FUEL VARIABLE TAX RATES (01 HF 716-C)

Prior Law

The tax rate for motor fuel, other than ethanol blended gasoline, was 20¢ per gallon and the tax rate for ethanol blended gasoline was 19¢ per gallon.

New Provisions

The tax rate is to vary based on the number of gallons of ethanol blended gasoline distributed statewide in comparison to the total number of gallons of motor fuel distributed. The department is to determine the percentage based on the number of gallons distributed between January 1 and December 31 of each year. The rates apply for the period beginning the following July 1 and ending June 30 of each year. The tax rates vary from 19¢ for ethanol blended gasoline and 20¢ for motor fuel, if the distribution percentage is 50% or less, to 20¢ for ethanol blended gasoline and 21¢ for motor fuel depending on the distribution percentage. See chart below.

Ethanol %

Ethanol Tax

Gasoline Tax

00-50

19.0

20.0

50-55

19.0

20.1

55-60

19.0

20.3

60-65

19.0

20.5

65-70

19.0

20.7

70-75

19.0

21.0

75-80

19.3

20.8

80-85

19.5

20.7

85-90

19.7

20.4

90-95

19.9

20.1

95-100

20.0

20.0

Sections Amended

Section 4 of House File 716 strikes § 452A.3(1), Code 2001, and inserts in lieu thereof new subsections 1 and 1A; and section 5 amends § 452A.3(2)(b), Code 2001, by striking the paragraph.

Effective Date

July 1, 2001. Applicable for the tax period beginning July 1, 2002.

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AGRICULTURAL IRRIGATION EQUIPMENT (01 HF 723)

Prior Law

Current Iowa Code section 422.45 would not be exempt from sales and use tax due to it not being an implement of husbandry.

New Provisions

Iowa Code section 422.45 is amended to provide an exemption from Iowa sales and use tax on the sale or rental of irrigation equipment, to a contractor or farmer, whether installed above or below ground, if the use of the equipment is primarily for agriculture production.

This exemption is retroactive to April 1, 1995 and refunds are provided in this provision. However, refunds are limited. Refunds of taxes, interest, or penalties for sales occurring between April 1, 1995, and May 18, 2001, shall be limited to twenty-five thousand dollars in the aggregate. Refund claims must be filed prior to October 1, 2001, notwithstanding any other provision of law. If the amount of claims totals more than twenty-five thousand dollars in the aggregate, the department of revenue and finance shall prorate the twenty-five thousand dollars among all claimants in relation to the amounts of the claimants' valid claims.

Sections Amended

Section 1 of House File 723 amends Code section 422.45 by providing a new subsection 26A. Section 2 provides for refunds and section 3 provides an effective date and retroactive application.

Effective Date

Effective May 18, 2001 and retroactive to April 1, 1995.

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TAX SPECIFICALLY IMPOSED ON "BUNDLED SERVICE CONTRACTS" (01 HF 736-A)

Prior Law

"Bundled service contracts" were subject to Iowa sales tax. Bundled service contracts are agreements which provide for a retailer's performance of services, one or more of which is a taxable service and one or more of which is not, in return for a consumer's payment of one lump sum, with no separate statement to the consumer of which part of the payment is attributable to any one service which is part of the agreement. The Director did not have the power to enter into agreements with groups of retailers regarding how bundled service contracts were to be taxed.

New Provisions

The gross receipts from bundled service contracts are specifically subjected to Iowa sales tax. For the purpose of administering the tax on bundled service contracts, the Director may enter into agreements with retailers, groups, or organizations of retailers of bundled service contracts. An agreement can impose sales tax only on the receipts from that portion of a contract which is attributable to taxable services provided under the contract.

Section Amended

Section 1 of House File 736 amends § 422.43, Code 2001, by adding new subsection 16.

Effective Date

July 1, 2001.

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INCORPORATION OF THE
FEDERAL MOBILE TELECOMMUNICATIONS SOURCING ACT
INTO IOWA LAW (01 HF 736-B)

Prior Law

The federal Mobile Telecommunications Sourcing Act, 4 U.S.C. § 116 et seq., was not a part of Iowa law. Tax was imposed only on "communication service" which was furnished in Iowa. Mobile telecommunication services furnished outside of Iowa were not subject to tax.

New Provisions

All provisions of the federal Mobile Telecommunications Sourcing Act are incorporated by reference in Iowa statute law. The Director is empowered to enter into agreements consistent with this Act. A sales tax of five percent is imposed upon all mobile telecommunications services which the Act allows Iowa to tax, even if the mobile telecommunication service is not furnished in Iowa.

Section Amended

Section 1 of House File 736 amends § 422.43, Code, 2001, by adding new subsection 17.

Effective Date

July 1, 2001.

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PROCEEDS USED FOR EDUCATIONAL, RELIGIOUS, OR CHARITABLE PURPOSES (01 HF 736-C)

Prior Law

Iowa Code section 422.45(3) provided for an exemption from sales and use tax on gross receipts from sales of educational, religious or charitable activities, except the gross receipts from the games of skill, games of chance, raffles and bingo, where the entire proceeds are expended for educational, religious or charitable purposes. The exemption is disallowed on the amount of gross receipts only to the extent they are not expended for educational, religious or charitable purposes

New Provisions

The new provision implements the department’s policy in this area. The new language of this subsection provides for an exemption from sales and use tax on proceeds from sales to the extent that such proceeds are used or donated to a governmental entity, a private educational institution, or an organization exempt under Internal Revenue Code section 501(c)(3) and to the extent that such proceeds are used for a religious, educational or charitable purpose.

This new provision requires that the if the user of funds is not a government entity or private educational institution, then the user must be:

This new section provides a definition of what constitutes a "charitable purpose" as follows: "A charitable act is an act done out of goodwill, benevolence, and a desire to add or improve the good of humankind in general or any class or portion of humankind, with no pecuniary profit inuring to the person performing the service or giving the gift."

The original language regarding games of skill, chance, raffles and bingo remains the same.

Section Amended

Section 2 of House File 736 amends Iowa Code section 422.45(3)(2001)

Effective Date

July 1, 2001

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EDUCATIONAL INSTITUTION - DEFINITION (01 HF 736-D)

Prior Law

Iowa Code section 422.45(8) provided for an exemption from sales and use tax on sales of tangible personal property and services for use by a nonprofit private educational institution.

New Provisions

The amendment implements the department’s policy in this area and also narrows the exemption as well. A new definition regarding what constitutes "educational institution" states:

"Educational institution" means an institution which primarily functions as a school, college, or university with students, faculty, and an established curriculum. The faculty of an educational institution must be associated with the institution and the curriculum must include basic courses which are offered every year. "Educational institution" includes an institution primarily functioning as a library.

Section Amended

Section 3 of House File 736 amends Code section 422.45, subsection 8, Code 2001.

Effective Date

January 1, 2002

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ART CENTERS (01 HF 736-E)

Prior Law

In the past art centers were not exempt from Iowa sales tax unless they could be classified as a private educational institution as provided in Iowa Code section 422.45(8).

New Provisions

This amendment provides a new exemption from sales and use tax for art centers. This provision provides for an exemption on the sales of goods, wares, or merchandise, or from services performed, rendered, or furnished to a nonprofit private art center to be used in the operation of the art center.

Section Amended

Section 4 of House File 736 amends Code section 422.45, Code 2001, by adding a new subsection.

Effective Date

July 1, 2001

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AMENDED DEFINITION OF "RETAILER MAINTAINING
A PLACE OF BUSINESS IN THIS STATE'' (01 HF 736-F)

Prior Law

For the purposes of use tax law, the definition of the term "retailer maintaining a place of business in this state" did not include a retailer whose only presence in Iowa was by way of tangible personal property leased to a lessee of the retailer.

New Provisions

The definition of "retailer maintaining a place of business within this state" is amended to include any retailer leasing tangible personal property to a lessee in Iowa. The presence of a representative or place of business in this state is not necessary to require a retailer to collect Iowa use tax.

Section Amended

Section 5 of House File 736 amends § 423.1, subsection 10, Code 2001.

Effective Date

July 1, 2001 for lease payments due on or after that date.

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"COMMUNICATION SERVICE" SUBJECTED TO USE TAX (01 HF 736-G)

Prior Law

The gross receipts from any "Communication service" were subject to Iowa sales tax, but the "purchase price" of any communication service was not subject to Iowa use tax.

New Provisions

Communication service is subjected to Iowa use tax. This is done by defining "tangible personal property", the use of which is subject to use tax, to include "communication service" when furnished to consumers or users in Iowa.

Section Amended

Section 6 of House File 736 amends § 423.1, subsection 12, Code 2001.

Effective Date

July 1, 2001 for services billed on or after that date.

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VEHICLES - BUSINESS TRANSFERS (01 HF 736-H)

Prior Law

This exemption provision allowed for certain business transfers of vehicles to be exempt from Iowa use tax. However, this provision did not include an exemption for transfers involving limited liability companies and liquidations of corporations.

New Provisions

This amendment allows for an exempt transfer of a vehicle or vehicles subject to registration which was owned by a sole proprietorship, partnership, or limited liability company (LLC) to a "new" corporation when the transfer is to continue the business of the sole proprietorship, partnership or LLC and ownership remains the same. In addition, the transfer is also exempt from tax when the transfer is from a corporation to a sole proprietorship, partnership, or LLC for the purpose of continuing the business and the ownership remains the same.

In addition, this amendment also provides an exempt transfer of vehicles subject to registration due to corporate liquidation. To be exempt, the transfer must be a transfer from the corporation to a stockholder and within three months of the transfer to the stockholder, the stockholder must transfer the vehicle to a sole proprietorship, partnership, or LLC with incidence of the ownership of the sole proprietorship, partnership, or LLC remaining the same as in the corporation.

Section Amended

Section 7 of House File 736 amends Code section 423.4, subsection 9, Code 2001.

Effective Date

July 1, 2001

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NEW LIMITATIONS REGARDING ASSESSMENTS,
CLAIMS FOR REFUNDS, AND RECORDKEEPING FOR EPC PURPOSES (01 HF 736-I)

Prior Law

The Department had five years after the filing of a return to assess any additional environmental protection charge due. A claim for refund could be filed within five years of the date upon which the charge payment for which the refund was claimed became due. Depositors were required to keep "invoices and other records" for a period of five years.

New Provisions

The periods for assessments, claims for refund, and record-keeping are reduced to three years. This is the same statute of limitations for sale/use tax and motor fuel tax.

Sections Amended

Section 8 of House File 736 amends § 424.10, subsections 1 and 3, Code 2001. Section 9 of House File 736 amends § 424.12, Code 2001. Section 10 amends § 424.15, unnumbered paragraph 1, Code 2001.

Effective Date

July 1, 2001.

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PROPERTY TAX EXEMPTIONS (UNIFORM FILING DATE) (01 HF 736-J)

Prior Law

Property tax exemption claims were required to be filed by April 15 for religious and charitable use, natural conservation areas, mobile home park storm shelters, and forest and fruit-tree reservations, by June 30 for impoundment structures, and by March 1 for historic property rehabilitation.

New Provisions

A uniform date of February 1 is established for filing property tax exemption claims for religious and charitable use, natural conservation areas, mobile home park storm shelters, forest and fruit-tree reservations, impoundment structures, and historic property rehabilitation.

Sections Amended

Section 11 of House File 736 amends § 427.1(14), unnumbered paragraph 1, Code 2001; section 12 amends § 427.1(20), Code 2001; section 13 amends § 427.1(22), unnumbered paragraph 2, Code 2001; section 14 amends § 427.1(30), Code 2001; section 15 amends § 427.16(2), Code 2001; section 16 amends § 427C.3, Code 2001; and section 17 amends § 427C.7, Code 2001.

Effective Date

Sections 11-17 take effect January 1, 2002 and apply to claims filed on or after that date.

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REAL ESTATE TRANSFER TAX (01 HF 736-K)

Prior Law

There was no statutory means of collecting unpaid real estate transfer tax once the instrument of conveyance had been recorded.

There was no statutory authority for a person who overpaid the real estate transfer tax to be refunded the amount of overpayment.

New Provisions

Permits the county recorder to collect any tax found to be owing after the instrument of conveyance has been recorded. Authorizes the director of revenue and finance to collect the tax in the same manner as income taxes if the county recorder is unable to collect the tax. If the director collects the tax, the county is to be paid its proportionate share.

A person who has overpaid the tax may file a claim for refund with the state appeal board for the amount of overpayment made to the state and may file a claim for refund with the county board of supervisors for the amount of overpayment made to the county.

Sections Amended

Section 18 of House File 736 amends § 428A.8, Code 2001, by adding a new unnumbered paragraph; and section 19 amends § 428A.9, Code 2001, by adding a new section.

Effective Date

July 1, 2001.

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INHERITANCE TAX-PENSION DISTRIBUTIONS (01 HF 736-L)

Prior Law

Iowa Code section 450.4(5) only allowed for an exemption from inheritance tax on distributions of employee pension or retirement plans that were made in installment payments.

New Provisions

This amendment allows for an exemption from Iowa inheritance tax regardless of how the distributions from an employee pension or retirement plan is made. Now the distribution can qualify for distribution whether it is made in lump sum or in installment payments.

Section Amended

Section 20 of House File 736 amends Code section 450.4, subsection 5, Code 2001.

Effective Date

July 1, 2001

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INHERITANCE TAX-PENSION DISTRIBUTIONS - NONRESIDENT DECEDENT (01 HF 736-M)

Prior Law

There was no exemption from Iowa inheritance tax for distributions from an employee pension or retirement plan based on the decedent being a nonresident of Iowa at the time of death.

In addition, previous law provided that distributions from annuities purchased for employee pensions and retirement plans were not exempt from Iowa inheritance tax unless they were subject to Iowa income tax.

New Provisions

New subsection 7 provides for an exemption from Iowa inheritance tax on installment or lump sum distributions from an employee pension or retirement plan if the decedent is a nonresident of Iowa at the time of death.

New subsection 8 provides that distributions from annuities purchased for employee pensions and retirement which are exempt from Iowa income tax under Iowa Code section 422.7(31) are also exempt from Iowa inheritance tax.

Sections Amended

Section 21 of House File 736 amends Code section 450.4, Code 2001, by adding new subsections 7 and 8.

Effective Date

July 1, 2001

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MOTOR FUEL TAX (01 HF 736-N)

Prior Law

There were no definitions for "denatured alcohol" and "racing fuel" and ethanol blended gasoline was not specifically included in the definition of "motor fuel".

The tax was required to be paid on alcohol by the manufacturer when it was sold to a licensed supplier within a terminal.

Fuel used in racing was not specifically listed as a use for which the tax paid was subject to refund.

New Provisions

Definitions are provided for "denatured alcohol" and "racing fuel" and ethanol blended gasoline is included in the definition of "motor fuel".

The tax is required to be paid on alcohol by the licensed supplier when it is withdrawn from a terminal.

A refund is allowed for the tax paid on fuel used for racing.

Sections Amended

Section 22 of House File 736 amends § 452A.2, Code 2001, by adding new subsections 4A and 18A; section 23 amends § 452A.2(17)(a), Code 2001; section 24 amends § 452A.3(5)(a), Code 2001, by adding a new unnumbered paragraph; and section 25 amends § 452A.17(1)(a), Code 2001, by adding new subparagraph 10.

Effective Date

July 1, 2001.

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KEEP IOWA BEAUTIFUL INCOME TAX CHECKOFF (01 HF 737)

Prior Law

None

New Provisions

Provides for new checkoff on individual income tax returns to the Keep Iowa Beautiful fund that is created in the office of the state treasurer. Taxpayers may designate a checkoff amount of $1 or more on the Iowa individual income tax return. Once the checkoff is made on a return, it is irrevocable. Amounts owed to the department of revenue and finance, accounts owed by the taxpayer with the state and the political checkoff are to be satisfied before this checkoff is allowed. Note that this checkoff is subject to repeal after three tax years, if less money is raised by this checkoff than either the fish and wildlife checkoff or the state fair checkoff. The Department of Revenue and Finance is to certify the total amount designated to this checkoff to the state treasurer by January 31st on income tax returns that were due in the preceding calendar year. The state treasurer is then to credit the amount designated to the keep Iowa beautiful fund.

Section Amended

Section 2 of House File 737 adds section 422.12A to Chapter 422, Code 2001.

Effective Date

Retroactively applicable to January 1, 2001, for tax years beginning on or after that date.

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APPLICATION OF SILO TAX TO BONDS (01 HF 739)

Prior Law

Current Iowa Code section 422E.1(3) only allowed revenue from school infrastructure local option (SILO) tax to be used for school infrastructure purposes and school infrastructure bonds as defined in the subsection.

New Provisions

Code section 76.4 is amended to allow for revenues from SILO to be used in the payment of other bonds as well as SILO bonds.

Section Amended

Section 1 of House File 739 amends Code sections 76.4, Code 2001.

Effective Date

July 1, 2001

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EXEMPTING 2001 FEDERAL REBATE FROM STATE INCOME TAX

Prior Law

None

New Provisions

For purposes of the federal tax deduction for tax years beginning in the 2001 calendar year, the deduction is not to be reduced by the federal rebate received in 2001 from the advanced refund of the rate reduction credit from the federal Economic Growth and Tax Relief Reconciliation Act of 2001. Thus, individual taxpayers who received federal rebates in the 2001 calendar year will not have to include those rebates in the federal income tax refunds that are to be reported on the 2001 Iowa income tax returns the individuals will file in the 2002 year.

Note that legislation may be proposed in the 2002 session of the General Assembly to deal with the rate reduction credit in the 2002 tax year for taxpayers who do not receive a federal rebate in the 2001 calendar year, but receive a tax benefit on their 2001 Iowa returns.

Section Amended

Section 1 of House File 757 amends section 422.9, Code 2001, as amended by 2001 Iowa Acts, Senate File 350 by adding new subsection 6.

Effective Date

The revision is retroactively applicable to January 1, 2001, for tax years beginning on or after that date and before January 1, 2002.

 

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UPDATE OF REFERENCES TO THE INTERNAL REVENUE CODE (01 SF 140-A)

Prior Law

The primary reference to the Internal Revenue Code and the references to the Internal Revenue Code in the various statutes for the research activities credit were amended through January 1, 2000.

New Provisions

The primary reference to the Internal Revenue Code and the references to the Internal Revenue Code in the various statutes for the research activities credit are updated through January 1, 2001 so the federal income tax changes made in the 2000 calendar year are adopted for Iowa income tax purposes. No major tax legislation was enacted by Congress in 2000, although there were several acts enacted in the year that included some tax provisions. Therefore, to the extent that those federal tax provisions affected net incomes for individual taxpayers and to the extent that the federal changes affected taxable incomes of corporate taxpayers, those federal changes are considered to be incorporated into Iowa income tax law. A provision related to the addition of taxable income of trusts is repealed as that provision was determined to be obsolete.

Sections Amended

Section 1 and section 2 of Senate File 140 amend section 15.335, subsection 4 and section 15A.9, subsection 8, paragraph e, Code 2001. Section 3 of the Act amends section 422.3, subsection 5, Code 2001. Section 4 of the Act strikes subsection 6 of section 422.7, Code 2001. Section 6 of the Act amends section 422.10, subsection 3, Code 2001. Section 8 of the Act amends section 422.33, subsection 5, paragraph d, Code 2001.

Effective Date

Sections 1 through 4, section 6 and section 8 are retroactively applicable to January 1, 2000, for tax years beginning on or after that date.

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N0 ADOPTION OF PROVISION PERMITTING ACCRUAL-METHOD TAXPAYERS TO USE INSTALLMENT METHOD FOR REPORTING CAPITAL GAINS (01 SF 140-B)

Prior Law

A provision in the Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170) provided that taxpayers who were using the accrual method of accounting were required to report certain capital gains in the year of the sale or exchange of the assets instead of reporting those gains on the installment method or in the tax years when the proceeds from the sale were received. This provision applied to sales or other dispositions of assets that occurred on or after December 17, 1999. This provision was adopted into Iowa income tax law when the Internal Revenue Code update bill (Chapter 1146 of 2000 Acts) was enacted in the 2000 session of the General Assembly and incorporated the federal income tax changes made in 1999 into Iowa income tax law.

New Provisions

Act section 2(a) of the Installment Tax Correction Act of 2000 (P.L. 106-573) repealed the above provision as of the effective date of December 17, 1999 of the previous Act. Therefore, for federal income tax purposes the provision that prohibited accrual accounting method taxpayers from reporting capital gains on the installment method was entirely negated. For Iowa income tax purposes, the Internal Revenue Code Update bill does not adopt the change in the Installment Tax Correction Act of 2000 for individual income tax purposes. Thus, individual taxpayers that use the accrual method of accounting are prohibited from using the installment method for reporting capital gains from the sales and disposition of assets to the extent the sales and dispositions occurred on or after December 17, 1999. Corporate taxpayers who are on the accrual method of accounting that have sales and dispositions of assets where they properly report the capital gains on the installment method on their federal returns can also use the installment method to report those capital gains on their Iowa income tax returns.

Section Amended

Section 5 of Senate File 140 adds new subsection 36 to Iowa Code section 422.7, Code 2001.

Effective Date

Retroactively applicable to January 1, 2000, for tax years beginning on or after that ate.

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CHANGE INCOME THRESHOLD FOR FILING BY DEPENDENTS (01 SF 140-C)

Prior Law

An individual claimed as a dependent on another taxpayer’s return was required to file an Iowa individual return if the individual’s net income was four thousand dollars or more.

New Provisions

Changes the net income threshold for filing an Iowa return for a dependent from four thousand dollars or more to five thousand dollars or more.

Section Amended

Section 7 of Senate File 140 amends paragraph b of subsection one of Iowa Code section 422.13, Code 2001.

Effective Date

Retroactively applicable to January 1, 2001, for tax years beginning on or after that date.

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ALLOCATION OF ACE PROGRAM COSTS TO ACE PROGRAM JOB CREDITS (01 SF 141)

Prior Law

The Accelerated Career Education (ACE) program is a training program administered by the Iowa Department of Economic Development to provide technical training in state community colleges for employees in highly skilled jobs in Iowa. The ACE training program was authorized by the 2000 General Assembly and is primarily financed from credits to the withholding tax payments of employers that have employees being trained in this program. Under the ACE program an employer is to enter into an agreement with a community college so the college can provide the technical training program for the employees of the employer. Under the provisions enacted in 2000, program costs could not be charged to a training program for an employer’s employees unless the program costs were incurred after the agreement for the training program had been signed by the employer and the community college providing the training.

New Provisions

The ACE program is revised so that program costs incurred before a training agreement was signed by the employer and the community college can be retroactively charged to the program if those program costs were incurred on or after July 1, 2000.

Section Amended

Section 1 of Senate File 141 amends section 260G.4 of the 2001 Iowa Code by adding new subsection 6 to this section.

Effective Date

The revision is retroactively applicable to July 1, 2000.

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INSURANCE PRODUCER (01 SF 276)

Prior Law

For purposes of the industrial machinery, equipment and computer exemption, an insurance company meant an insurer doing business in Iowa as an insurer or a licensed insurance agent under chapter 522 of the Iowa Code.

New Provisions

For purposes of the industrial machinery, equipment and computer exemption, an insurance company is defined as an insurer doing business in Iowa as an insurer or an insurance producer under chapter 522B of the Iowa Code.

Section Amended

Section 4 of Senate File 276 amends section 422.45, subsection 27, paragraph d, subparagraph (3), Code 2001.

Effective Date

January 1, 2002

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DEDUCTION FOR VEHICLE REGISTRATION FEES FOR OLDER VEHICLES (01 SF 350)

Prior Law

An itemized deduction was authorized for sixty percent of the registration fee for a motor vehicle classified as a multipurpose vehicle for model year 1992 or for earlier model years. A multipurpose vehicle is defined as a motor vehicle designed to carry not more than ten people and constructed on a truck chassis or with special features for occasional off road use. On the registration form for a vehicle that is a multipurpose vehicle the letters "MV" are printed next to the word style on this form. A SUV is an example of a multipurpose vehicle.

New Provisions

Changes the itemized deduction for registration fees of all older motor vehicles for Iowa income tax purposes to the extent that the motor vehicles are more than five model years old. In the case of a motor vehicle that is more than five model years old the part of the registration fee that is based on the value of the vehicle is 75% of the rate as fixed on the vehicle when the vehicle was new. In the case of a motor vehicle that is more than six model years old, the part of the registration fee that is based on the value of the vehicle is 50% of the rate as fixed when the vehicle was new. In the case of a 1994 model year or newer motor vehicle that is nine model years old or older, the registration fee is $35 and 60% of this fee is attributable to the value of the vehicle. In the case of a 1993 model year or older motor vehicle that has been titled in the same person’s name since the vehicle was new or the title to the vehicle was transferred prior to January 1, 2002, the part of the registration fee that was based on the value of the vehicle is 10% of the rate of the vehicle when the vehicle was new. In the case where the title of a 1993 or older motor vehicle is transferred to a new owner or is brought in the state on or after January 1, 2002, the deduction for the registration fee is 60% of the annual registration fees that follow: Motor vehicles for model year 1969 or older-$16; motor vehicles for model year 1970 through 1989-$23; and motor vehicles for model years 1990 through 1993-$27.

Section Amended

Section 22 of Senate File 350 amends paragraph g of subsection two of section 422.9, Code 2001. The annual registration fees for older motor vehicles are determined in Section 321.113 of the 2001 Code which is amended in section 4 of Senate File 350.

Effective Date

Applicable on January 1, 2002, for motor vehicle registration fees paid on or after January 1, 2002.

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REAL ESTATE TRANSFER TAX / DECLARATIONS OF VALUE (01 SF 372)

Prior Law

The department of revenue and finance was required to provide each county recorder with a device to be used by the recorder to evidence payment of the real estate transfer tax on the instrument of conveyance.

The declaration of value submitted to the county recorder was required to include the existence of any known private burial site situated on the property conveyed.

New Provisions

The devices are to be replaced by a method of documentation as approved by the department.

The location of burial sites on the property conveyed is not required to be included on the declaration of value.

Sections Amended

Section 19 of Senate File 372 amends § 428A.5, Code 2001; and section 28 amends § 566.35, subsection 2, Code 2001, by striking the subsection.

Effective Date

July 1, 2001.

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INDIAN HOUSING PROPERTY TAX EXEMPTION (01 SF 449)

Prior Law

None.

New Provisions

Property owned and operated by Indian housing authorities is exempt from tax. An exemption agreement must be signed by the board of supervisors or the city council, whichever applicable. A claim for exemption must be filed pursuant to Iowa Code § 427.1(14).

Section Amended

Section 1 of Senate File 449 amends § 427.1, Code 2001, by adding new subsection 33.

Effective Date

April 23, 2001. Applies to claims for exemption filed beginning with the 2002 assessment year.

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TAX LIST DISPOSAL / ELECTRONIC PAYMENT OF TAXES (01 SF 453)

Prior Law

None.

New Provisions

The county treasurer is required to dispose of the tax list after 10 years of receipt from the county auditor.

An electronic payment of property taxes must be received in the county treasurer's account on the first business day of the delinquency month to avoid an interest charge.

Sections Amended

Section 5 of Senate File 453 amends § 331.559, subsection 20, Code 2001; and section 7 amends § 445.37, Code 2001, by adding a new unnumbered paragraph.

Effective Date

July 1, 2001.

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INSURANCE COMMISSIONER REPORTING (01 SF 500)

Prior Law

In cases where insurance corporations paid taxes, fines, penalties or license fees in excess of the amount due, the commissioner of insurance shall have the power to refund to these insurance corporations any such excess. This was done by applying the overpayments toward any amounts already due or which may become due, until such overpayments have been fully refunded. The commissioner was required to certify to the department of revenue and finance the amount of any such credit to be applied to future taxes and notify the insurance company affected of this amount.

New Provisions

The requirement that the commissioner of insurance certify to the department of revenue and finance the amounts of credits applied to future taxes and to notify the insurance companies of these amounts has been eliminated.

Section Amended

Section 2 of Senate File 500 amends section 505.11, Code 2001.

Effective Date

Upon enactment, April 24, 2001

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LOW-INCOME HOUSING ASSESSMENT (01 SF 519)

Prior Law

Low-income housing properties were assessed at market value.

New Provisions

If the assessor uses the income approach to value these properties, the assessor is required to use the productive and earning capacity from the actual rents received and may not consider any tax credit equity or other subsidized financing as income in determining the assessed value.

Section Amended

Section 1 of Senate File 519 amends § 441.21, subsection 2, Code 2001.

Effective Date

July 1, 2001. Applicable to assessments made on or after January 1, 2002.

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TAX EXEMPTION FOR METHANE GAS CONVERSION PROPERTY (01 SF 520)

Prior Law

Property used in an operation connected with a publicly owned sanitary landfill to collect methane gas or other gases produced as a by-product of waste decomposition and to convert the gas to energy was exempt from tax.

A claim for exemption was required to be filed with the appropriate assessing authority by February 1 of each year.

New Provisions

Property used to collect waste under an agreement with a publicly owned sanitary landfill that otherwise would be collected by or deposited with the publicly owned sanitary landfill in order to decompose the waste to produce methane gas or other gases and to convert the gas to energy is exempt from tax. However, property used to decompose the waste and convert the waste to gas is not eligible for exemption.

The bill permits retroactive claims for tax exemption to be filed by July 1, 2001 pursuant to Iowa Code § 427.1(29) for the 1998, 1999, 2000, and 2001 tax years. It also permits claims to be filed for credit of the electric generation tax with the appropriate chief financial officer for the same tax years by July 1, 2001. If a claim for credit of the electric generation tax is allowed, the taxpayer is to receive a credit for those taxes. If a claim for the property tax exemption is allowed, no credit or refund is allowable. If a claim for electric generation tax credit or claim for property tax exemption is disallowed, the claimant may, within 15 days, apply to the director of revenue and finance for a hearing on the claim.

Sections Amended

Section 1 of Senate File 520 amends § 427.1(29), unnumbered paragraph 2, Code 2001; and section 2 provides for the filing of claims but will not be codified.

Effective Date

May 16, 2001. Applies retroactively to January 1, 1998 for taxes levied pursuant to § 437A.6. It is also retroactive to 1998 for the property tax exemption but the taxes due are unaffected by an approved claim.

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REPORTING FOR INHERITANCE ESTATE MUST BE $25,000 (01 SF 523)

Prior Law

Current Iowa Code chapters 450 and 633 which govern inheritance and probate require an estate to be $10,000, after deduction of liabilities before the estate must file an Iowa inheritance tax return.

New Provisions

This law amends several of these Code chapters to increase the amount for filing of an inheritance tax return to $25,000.

Sections Amended

Senate File 523 amends Code sections 450.4(1), 450.44, 633.356(1) and (3), Code 2001.

Effective Date

Effective for estates of decedents dying on or after July 1, 2001

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