2002 Iowa Legislative Summaries

BILL INDEX

HF 2009
Assessor Allowed To Be Candidate For Public Office
HF 2035
Revisions In The Property Rehabilitation Credit
HF 2078-A
Venture Capital - Iowa Capital Investment Board, Iowa Capital Investment Corporation, Iowa Fund Of Funds And Contingent Tax Credits
HF 2078-B
S Corporations - Federal Tax Deduction
HF 2116-A
Update Of References To The Internal Revenue Code
HF 2116-B
Adoption Of Provision Permitting Accrual- Method Taxpayers To Use Installment Method For Reporting Capital Gains
HF 2116-C
Exempting 2002 Federal Rate Reduction Credit From State Income Tax
HF 2116-D
Reciprocal Tax Agreements
HF 2246
Delinquent Property Taxes
HF 2271
Tax Credits For Investments In Qualifying Businesses And Community-Based Seed Capital Funds
HF 2378
Enterprise Zone Program
HF 2472
Local Option Tax Polling Hours
HF 2584
Vineyards Classified As Agricultural Property
HF 2585-A
Sales By Legislative Service Bureau Exempt From Tax
HF 2585-B
Abated Tax Cannot Be Recovered From Retailer's Customers
HF 2586
Tax Credits For Equity Investments In Venture Capital Funds
HF 2592
Deferment Of Taxable Income For Start-Up Businesses
HF 2622-A
Urban Revitalization Property Tax Exemption
HF 2622-B
Administrative Wage Assignment
HF 2622-C
Director's Power To Audit Claims Amended
HF 2622-D
Department Empowered To Enter Into Certain Agreements With Indian Tribes
HF 2622-E
Exemption Of Withdrawals From Retirement Plans Of Guard Or Reserve Members
HF 2622-F
Withholding Threshold Changes
HF 2622-G
Contractors' Exempt Purchases Of Equipment, Supplies and Building Materials
HF 2622-H
ATM Surcharges
HF 2622-I
Community Action Agency Exemption
HF 2622-J
Sales And Use Tax Thresholds
HF 2622-K
Local Option Tax Estimate Date
HF 2622-L
Protest of Disallowed Property Tax Credits (Homestead and Military Service)
HF 2622-M
Disabled Veteran Homestead Property Tax Credit
HF 2622-N
Military Service Property Tax Exemption For Coast Guard
HF 2622-O
War Veterans Property Tax Exemption (Bingo)
HF 2622-P
BioFuel
HF 2622Q
Transportation Reports (Motor Fuel)
HF 2622-R
Airport Imposed Fees On Vehicle Rental
HF 2622-S
Extension Of Time For War Veterans, Religious, Literary, and Charitable Societies To Claim Property Tax Exemption
HF 2622-T
Payroll Deduction Of Insurance Premiums
HF 2622-U
Abatement Of Property Taxes (Religious Institution)
HF 2622-V
Abatement Of Sales And Use Tax Owed By Foundaries
HF 2625
Enterprise Zone Income Tax Credits For Cooperatives
SF 335
Farm Deer - Elk
SF 2305-A
Express Companies Tax
SF 2305-B
Exemption of Payments To Beneficiaries That Were Included In Decedent Employee's Estate
SF 2305-C
Elimination Of References To Specific Income Tax Withholding Forms
SF 2305-D
Executive Search Agencies No Longer Licensed
SF 2305-E
Nonprofit Private Educational Institution
SF 2305-F
Consolidated Sales Tax Returns
SF 2305-G
"User" Of Services Is Clearly Liable For Payment Of Tax
SF 2305-H
Motor Fuel LPG Tax Rate
SF 2305-I
Motor Fuel Transportation Reports
SF 2305-J
Motor Fuel Tax Refunds
SF 2305-K
Special Reserve Fund
SF 2318
The Phase In Of The Reduction In The State's Gross Premiums Tax Rate For Insurance Companies And Associations
SF 2321-A
Department Must Collect Economic Commerce Data
SF 2321-B
Electronic Commerce Exemption Made Permanent
SF 2321-C
Multistate Discussion Of Sales Tax Simplification

02 HF 2009- ASSESSOR ALLOWED TO BE CANDIDATE FOR PUBLIC OFFICE


Prior Law

An assessor was not allowed to engage in any activities that would interfere with the full time duties required of an assessor.

New Provisions

An assessor may be a candidate for public office. If elected, the assessor must resign before the term of office to which elected begins.

Sections Amended

Section 1 of House File 2009 amends § 441.17(1), Code Supplement 2001.

Effective Date

April 8, 2002.

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02 HF 2035 - REVISIONS IN THE PROPERTY REHABILITATION CREDIT

Prior Law

The Property Rehabilitation Credit was available only for taxpayers subject to the individual income tax or taxpayers subject to the corporate income tax. In addition, the tax basis of a particular property that was rehabilitated for purposes of the credit was reduced by those rehabilitation expenses that were used to compute the credit. Thus, if the initial basis of a property was $200,000 and $400,000 in qualified rehabilitation costs were used in rehabilitating the property for a property rehabilitation credit of $100,000, the qualified rehabilitation costs of $400,000 could not be used to increase the basis of this property for purposes of depreciation.

New Provisions

The Property Rehabilitation credit statutes were amended so that taxpayers who are subject to the franchise tax on financial institutions and taxpayers who are subject to the premiums receipt tax for insurance companies are now eligible for the credit.

The provision for reducing the basis of a rehabilitated property by the qualified rehabilitation costs used to compute the property rehabilitation credit is revised so the basis of the rehabilitated property is reduced by the amount of the property rehabilitation credit. Thus, in the example shown above, the basis of the property is reduced by the amount of the credit. Therefore, the basis of the property in the example which was $200,000 before rehabilitation is increased by the $400,000 in qualified rehabilitation costs and reduced by the amount of the credit of $100,000 which leaves the basis of the rehabilitated property as $500,000 instead of $200,000 under the prior law.

Section Amended

Section 1 of House File 2035 amends Section 404A.1, subsection 1, and section 2 of this bill amends section 404A.2, Code 2001. Section 3 of House File 2035 amends Section 422.60, Code 2001, by adding new subsection 4. A. Section 4 of the Act creates new section 432.12A.

Effective Date

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

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02 HF 2078-A - VENTURE CAPITAL - IOWA CAPITAL INVESTMENT BOARD, IOWA CAPITAL INVESTMENT CORPORATION, IOWA FUND OF FUNDS AND CONTINGENT TAX CREDITS

Prior Law

None.

New Provisions

An Iowa capital investment corporation is created which will organize the Iowa fund of funds which will be managed by a private venture fund manager. The board of directors of this corporation will be selected by a special committee which is chosen by the Iowa economic development board. The manager of this fund will make investments in private seed and venture capital funds who have made a commitment to consider equity investments in businesses located within Iowa. Private investors, who are expected to be Iowa banks, insurance companies, utilities and other investors, will contribute up to $100 million into the Iowa fund of funds. 5% of these funds shall be invested in programs directed at investment in rural Iowa. These investors will be guaranteed a certain rate of return on these investments.

The oversight of the Iowa capital investment corporation will be done by an Iowa capital investment board. The board will consist of five voting members, appointed by the Governor subject to confirmation by the Senate, and two nonvoting members, who are appointed by the legislature.

The board will issue up to $100 million of contingent tax credits for these investments made to the Iowa fund of funds at the same time the investment is made. These contingent tax credits will be issued through tax credit certificates which are only redeemable if the rate of return guaranteed to investors is not achieved. The tax credit certificates cannot be redeemed until five years after it is issued. The tax credit certificate can be transferred, and the board is responsible for tracking these transfers. Any tax credit in excess of the tax liability may be credited to the tax liability for the following seven years or until depleted, whichever is earlier. If the investment is made by a partnership, limited liability company, S corporation, estate or trust electing to have the income taxed directly to the individual, the credit is based on the pro rata share of the individual's earnings from the partnership, limited liability company, S corporation, estate or trust. No more than $20 million of tax credits can be redeemed in any fiscal year. The credit can be used against individual income, corporation income, franchise tax, insurance premium tax and the moneys and credits tax.

The board will notify the Department of Revenue and Finance of the amount of tax credit, if any, that can be redeemed, along with the tax period in which the credit can be redeemed.

Section Amended

Sections 1-9 of House File 2078, creates new Iowa Code Sections 15E.221 through 15E.229.

Effective Date

February 28, 2002

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02 HF 2078-B - S CORPORATIONS - FEDERAL TAX DEDUCTION

Prior Law

Resident shareholders of S corporations who elect to apportion income within and without Iowa are taxed upon the greater of apportioned income using the single sales factor or distributions received from the S corporation reduced by 50% of the federal taxes paid by the shareholder on the S corporation income. The 50% deduction relates only to the S corporation apportionment credit computed on Form IA134, and is separate from the deduction for 100% of federal taxes paid available to all individual income tax filers.

New Provisions

Resident shareholders of S corporations who elect to apportion income within and without Iowa are taxed upon the greater of apportioned income using the single sales factor or distributions received from the S corporation reduced by 100% of the federal taxes paid by the shareholder on the S corporation income. This 100% deduction relates to the S corporation apportionment credit computed on Form IA134.

Section Amended

Section 10 of House File 2078 amends section 422.8, subsection 2, paragraph b, Code Supplement 2001.

Effective Date

Retroactive to January 1, 2002 for tax years beginning on or after that date.

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02 HF 2116-A - UPDATE OF REFERENCES TO THE INTERNAL REVENUE CODE

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, 2001. The Iowa provision for innocent spouse includes an incorrect reference to a section of the Internal Revenue Code.

New Provisions

The primary reference to the Internal Revenue Code was amended to January 31, 2002 to include the federal income tax changes in the Economic Growth and Tax Relief Reconciliation Act of 2001(P.L. 107-16) and the changes in the Tax Relief For Victims of Terrorist Attacks (H. R. 2884). 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. The references to the Internal Revenue Code in the various statutes for the Iowa research activities credits are updated to January 1, 2002 so the federal changes in the research activities credit are considered to have been adopted for Iowa tax purposes. The Iowa provision for innocent spouse is amended to correct the reference.

Section Amended

Section 1 and section 2 of House File 2116 amend section 15.335, subsection 4 and section 15A.9, subsection 8, paragraph e, Code Supplement 2001. Section 3 amends section 422.3, subsection 5, Code Supplement 2001. Section 7 amends section 422.10, subsection 3, Code Supplement 2001. Section 8 amends section 422.21, unnumbered paragraph 7, Code 2001. Section 9 amends section 422.33, subsection 5, paragraph d, Code Supplement 2001.

Effective Date

Sections 1 through 3, section 7 and section 9 are retroactive to January 1, 2001, for tax years beginning on or after that date. Section 8 is retroactive to January 1, 2002, for tax years beginning on or after that date.

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02 HF 2116-B - ADOPTION OF PROVISION PERMITTING ACCRUAL-METHOD TAXPAYERS TO USE INSTALLMENT METHOD FOR REPORTING CAPITAL GAINS

Prior Law

Individual taxpayers who were using the accrual method of accounting could not use the installment method for reporting capital gains in the year of the sale or exchange to the extent the sale or exchange occurred in a tax year beginning in the 2001 calendar year. Thus, if an individual using accrual accounting had a capital gain in 2001 that was reported on the installment method for federal tax purposes, the entire capital gain was to be reported on the 2001 Iowa return.

New Provisions

The installment method for reporting capital gains for accrual accounting taxpayers is adopted for Iowa individual income tax purposes for tax years beginning on or after January 1, 2002. However, if a taxpayer on the accrual method of accounting reported the entire capital gain on the 2001 Iowa return which was reported on the installment method for federal tax purposes, any additional installments from that capital gain are not to be reported on subsequent Iowa individual income tax returns.

Section Amended

Section 4 of House File 2116 amends §422.7, subsection 37, Code Supplement 2001, by adding a new unnumbered paragraph.

Effective Date

Retroactive to January 1, 2002, for tax years beginning on or after that date.

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02 HF 2116-C - EXEMPTING 2002 FEDERAL RATE REDUCTION CREDIT FROM STATE INCOME TAX

Prior Law

The federal rebate received in 2001 from the federal rate reduction credit authorized in the Economic Growth and Tax Relief Reconciliation Act of 2001, was not included as part of the federal income tax refund for Iowa income tax purposes. The legislation for administering the federal rebate from the rate reduction credit did not impact tax years other than tax years beginning in the 2001 calendar year.

New Provisions

For purposes of the federal tax deduction for tax years beginning in the 2002 calendar year, the deduction is not to be reduced by a federal income tax refund received in the tax year to the extent the refund received in 2002 is due to the rate reduction credit from the federal Economic Growth and Tax Relief Reconciliation Act of 2001. Thus, individual taxpayers who receive federal income tax refunds in the 2002 calendar year will not have to include the portion of those refunds that are attributable to the rate reduction credit.

Section Amended

Section 6 of House File 2116 amends §422.9, Code Supplement 2001, by adding new subsection 7.

Effective Date

Retroactive to January 1, 2002, for tax years beginning in the 2002 calendar year.

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02 HF 2116-D - RECIPROCAL TAX AGREEMENTS

Prior Law

The Director of the Department of Revenue and Finance had the authority to enter into reciprocal tax agreements with tax administration agencies of other states. The only state with which the Department had a reciprocal agreement was the state of Illinois.

New Provisions

The Department cannot enter into reciprocal tax agreements unless the Iowa General Assembly and the Governor approve the agreements. A reciprocal agreement in effect on or after January 1, 2002, such as the agreement with Illinois, cannot be terminated unless the legislature and the governor approve the termination.

Section Amended

Section 5 of House File 2116 amends §422.8, subsection 5, Code 2001.

Effective Date

The termination provisions of section 5 of HF 2116 apply retroactively to the termination of reciprocal agreements in effect on or after January 1, 2002.

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02 HF 2246 - DELINQUENT PROPERTY TAXES

Prior Law

Property taxes became delinquent October 1 and April 1.

New Provisions

If the last day of September or March is a Saturday or Sunday, the taxes become delinquent on the second business day of October or April.

Sections Amended

Section 6 of House File 2246 amends § 445.37, Code Supplement 2001.

Effective Date

July 1, 2002.

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02 HF 2271 - TAX CREDITS FOR INVESTMENTS IN QUALIFYING BUSINESSES AND COMMUNITY-BASED SEED CAPITAL FUNDS

Prior Law

None

New Provisions

A tax credit is allowed equal to 20% of an individual's equity investment in a qualified business. A tax credit is also allowed equal to 20% of a taxpayer's equity investment in a community-based seed capital fund. The determination of a qualified business or a community-based seed capital fund is made by the Iowa capital investment board. A tax credit certificate is issued by the Iowa capital investment board for those qualifying investments.

The aggregate amount of tax credits issued for all years cannot exceed $10 million. The amount of tax credits issued for the fiscal years ending June 30, 2003 and June 30, 2004 is limited to $3 million for each of these years. The amount of tax credits issued for the fiscal year ending June 30, 2005 is limited to $4 million. The maximum amount of a tax credit for an investor in any one qualifying business is $50,000. Each year, an investor and all affiliates of an investor shall not claim tax credits for more than five different investments in five different qualifying businesses.

The tax credit for an equity investment in a qualified business is available only to individual income taxpayers, and cannot be claimed by a partnership, limited liability company, S corporation, estate or trust electing to have income taxed directly to the individual.

The tax credit for an equity investment in a community-based seed capital fund is available for individual income, corporation income, franchise, insurance premium and moneys and credits tax. For equity investments in a community-based seed capital fund, the credit is available to a partnership, limited liability company, S corporation, estate or trust which elects to have income taxed directly to an individual. The credit claimed by the individual is based upon the pro rata share of the individual's earnings from the partnership, limited liability company, S corporation, estate or trust.

The tax credit shall not be redeemed during any tax year beginning prior to January 1, 2005. The tax credit shall not be claimed prior to the third tax year following the tax year in which the investment is made. Any tax credit in excess of the tax liability can be credited to the tax liability for the following five years or until depleted, whichever is earlier.

Section Amended

Sections 1-6 of House File 2271, creates new Iowa Code Sections 15E.41 through 15E.46. Section 7 creates new Code Section 422.11F. Section 8 amends Code Section 422.33 by creating new subsection 12, Code Supplement 2001. Section 9 amends Code Section 422.60 by creating new subsection 4, Code Supplement 2001.

Effective Date

Retroactive to January 1, 2002 for tax years beginning on or after that date.

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02 HF 2378 - ENTERPRISE ZONE PROGRAM

Prior Law

The eligible housing business tax credit available to eligible businesses who build or rehabilitate homes in an enterprise zone was available for individual income, corporation income, and franchise taxpayers.

The eligible development business investment tax credit which is available to eligible businesses who make investments directly related to construction, expansion or rehabilitation of building space in an enterprise zone was not available for retail businesses locating in a building space.

New Provisions

The eligible housing business tax credit is now also available to offset insurance premiums tax, along with individual income, corporation income, and franchise tax.

The eligible development business investment tax credit can be allowed even if building space is made available to retail businesses. The credit is computed on a pro rata share of the total investment based on the percentage of the building that is leased to nonretail businesses.

Section Amended

Section 3 of House File 2378 amends Code Section 15E.193B, subsection 6, paragraph a, Code Supplement 2001. Section 4 of House File 2378 amends Code Section 15E.193C, subsections 2, 5, and 10, Code Supplement 2001.

Effective Date

April 30, 2002

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02 HF 2472 - LOCAL OPTION TAX POLLING HOURS

Prior Law

Iowa Code section 49.73 governed which allows the commissioner to shorten the polling hours for local option elections conducted in a city of 3,500 or less.

Under Iowa Code section 422E.4(b), election cost were to be apportioned among school districts within the county on a pro rata basis in proportion to the number of registered voters in each school district and the total number of registered voters in all of the school districts within the county.

New Provisions

The new language amends Iowa Code section 49.73(b) to clarify that this authority of the commissioner to shorten polling hours applies to local option elections. It applies new language that allows the shortened polling hours to govern local option elections in unincorporated areas of any counties and it also requires that all local option polling places have the same hours.

The formula for apportioning election costs to the district set forth in Iowa Code section 422E.2(4)(b) is changed. The new language states: "Election costs shall be apportioned among school districts within the county on a pro rata basis in proportion to the number of registered voters in each school district who reside within the county and the total number of registered voters within the county. " (Emphasis added)

Section Amended

Section 37 of House File 2472 amends section 49.73(1)(b), Code 2001. Section 111 of House File 2472 amends section 422E.2(4)(b), Code Supplement 2001.

Effective Date

January 1, 2003, and applies to elections held on or after that date.

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02 HF 2584 - VINEYARDS CLASSIFIED AS AGRICULTURAL PROPERTY

Prior Law

Property was classified according to its primary use.

New Provisions

Vineyards and any buildings used in connection with the vineyard are to be classified as agricultural property. This is true even though the primary use of the property may be other than agricultural.

Sections Amended

Section 1 of House File 2584 amends § 441.21, Code Supplement 2001, by adding a new subsection 12.

Effective Date

May 6, 2002. Retroactive to assessment years beginning on or after January 1, 2002.

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02 HF 2585-A - SALES BY LEGISLATIVE SERVICE BUREAU EXEMPT FROM TAX

Prior Law

Nearly all sales of tangible personal property or taxable services by subdivisions of Iowa state government were taxable, including sales by the legislative service bureau and its legislative information office.

New Provisions

The legislative service bureau and its legislative information office may sell exempt from tax tangible personal property consisting of mementos and other items relating to Iowa history and historic sites, the General Assembly, and the State Capitol. These sales must occur on premises under the control of the legislative council, at the state capitol, or on other state property.

Section Amended

Section 1 of House File 2585 amends Chapter 2 of the Code 2001 by adding new section 2.67.

Effective Date

Effective upon enactment which occurred April 22, 2002.

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02 HF 2585-B - ABATED TAX CANNOT BE RECOVERED FROM RETAILER'S CUSTOMERS

Prior Law

The director was required to abate any state sales or use tax and any local option sales tax owed by a retailer who failed to collect any of those taxes from purchasers of access to online computer services because of erroneous written advice given the retailer by the department. The abatement was on behalf of the retailer, so the Department could collect any abated tax from customers who purchased access service from the retailer.

New Provisions

If the director abates a sales or use tax owed by a retailer because of the retailer's reliance on the department's erroneous written advice, the department cannot subsequently recover the abated tax from the retailer's customers. If tax owed by a retailer has been abated and then paid by that retailer's customer, the department is obligated to refund the tax paid to the customer. The customer need not file a claim for refund to receive the refund. These new provisions are retroactive for sales and use tax due on charges paid on or after January 1, 1996, for on-line computer access service. The department must complete payment of the refunds by October 1, 2002. There is no monetary limit on the amount of refunds which must be paid.

Section Amended

Section 2 of House File 2585 amends section 421.60, subsection 2, paragraph m, subparagraphs (2) and (3), Code 2001.

Effective Date

Upon enactment, which was April 22, 2002; applies retroactively to January 1, 1996.

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02 HF 2586 - TAX CREDITS FOR EQUITY INVESTMENTS IN VENTURE CAPITAL FUNDS

Prior Law

None

New Provisions

A tax credit is allowed equal to 6% of a taxpayer's equity investment in a venture capital fund. The venture capital fund must be a private seed and venture capital partnership or entity fund that has been certified by the Iowa capital investment fund. A tax credit cannot be allowed if the investor already received a tax credit for an investment in a community-based seed capital fund as defined in 2002 Iowa Acts, House File 2271. A tax credit certificate is issued by the Iowa capital investment board for those qualifying investments.

The aggregate amount of tax credits issued cannot exceed $5 million. A taxpayer shall not redeem a tax credit certificate and related tax credit prior to the third tax year following the tax year in which the investment was made, so the tax credit shall not be redeemed during any tax year beginning prior to January 1, 2005. The tax credit for an equity investment in a venture capital fund is available for individual income, corporation income, franchise, insurance premium and moneys and credits tax. The credit is available to a partnership, limited liability company, S corporation, estate or trust which elects to have income taxed directly to an individual. The credit claimed by the individual is based upon the pro rata share of the individual's earnings from the partnership, limited liability company, S corporation, estate or trust.

Any tax credit in excess of the tax liability can be credited to the tax liability for the following five years or until depleted, whichever is earlier. The tax credit cannot be carried back to a prior tax year.

Section Amended

Section 1 of House File 2586 creates new Code Section 15E.51. Section 2 creates new Code Section 422.11G. Section 3 amends Code Section 422.33, Code Supplement 2001, by creating new subsection 13. Section 4 amends Code Section 422.60, Code Supplement 2001, by adding new subsection 5.

Effective Date

Retroactive to January 1, 2002 for tax years beginning on or after that date.

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02 HF 2592 - DEFERMENT OF TAXABLE INCOME FOR START-UP BUSINESSES

Prior Law

None

New Provisions

A tax deferment is available to "start-up" businesses beginning operations during the first tax year for which a deferment of taxable income is claimed.

The start-up business must have its commercial domicile in Iowa, and must be at least 25% funded by venture capital monies. Also, the start-up business must not have any delinquent taxes or other debt outstanding to the state of Iowa.

A start-up business cannot include an existing business that relocates from another state or from another location in Iowa, and cannot include a newly created business that is the result of a merger of two or more businesses. A start-up business cannot include a newly created subsidiary, or a new business of a corporation, and cannot include a previously existing business that has been dissolved and reincorporated.

The start-up business must apply to the Department for approval of the tax deferment. If approved, the taxable income for the first three years that the start-up business is in operation is deferred. If the deferment is approved, the start-up business shall pay taxes on the deferred taxable income in five equal annual installments during the five tax years following the three years of deferment. A taxpayer receiving a deferment shall file an Iowa tax return for each year in which the deferment is approved. If the taxpayer has a net loss during a tax year during the three-year period, the loss may be applied to any deferred taxable income during that period.

For purposes of assessing penalty and interest, the tax on any deferred taxable income is not due and payable until the tax years in which the annual installments are due.

Section Amended

Sections 1 of House File 2592 creates new Iowa Code Section 422.24A.

Effective Date

Retroactive to January 1, 2002 for tax years beginning on or after that date.

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02 HF 2622-A - URBAN REVITALIZATION PROPERTY TAX EXEMPTION

Prior Law

If a claim for exemption was filed after the February 1 filing deadline, the exemption was limited to the number of years remaining in the exemption schedule selected.

New Provisions

The exemption may be allowed for the total number of years in the exemption schedule selected if a claim for exemption is filed within two years of the February 1 filing deadline.

Sections Amended

Section 1 of House File 2622 amends § 404.4, Code Supplement 2001.

Effective Date

May 6, 2002. Retroactive to January 1, 2001.

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02 HF 2622-B - ADMINISTRATIVE WAGE ASSIGNMENT

Prior Law

There was no prior law to allow for wage assignment.

New Provisions
This bill creates a new provision of the Iowa Code, section 421.17B. This provision applies to only employee/employer relationships and allows for an employer to assign wages of an employee directly to the department for payment of an outstanding liability owed to the state of Iowa. This collection tool is used as a last resort after the exhaustion of the debtor's administrative remedies and after other collection tools have failed or would not be effective. The statute allows the debtor to challenge the wage assignment based on mistake of fact.

Section Amended

Section 2 of House File 2622 creates new section 421.17B.

Effective Date

July 1, 2002

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02 HF 2622-C - DIRECTOR'S POWER TO AUDIT CLAIMS AMENDED

Prior Law

The Department was obligated to audit all claims by state agencies and organizations and to preaudit all accounts submitted for the issuance of warrants in the same fashion.

New Provisions

The Department sets the rules and procedures for preauditing of claims by individual agencies and organizations. The Department reserves the right to refuse to accept in-complete or incorrect claims and to review, preaudit, or audit claims as determined to be necessary by the director.

Section Amended

Section 3 of House File 2622 amends section 421.31, subsection 3, Code 2001.

Effective Date

July 1, 2002

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02 HF 2622-D - DEPARTMENT EMPOWERED TO ENTER INTO CERTAIN AGREEMENTS WITH INDIAN TRIBES

Prior Law

The Department was not empowered by statute to enter into any agreement with an Indian tribe to collect taxes or fees in Indian country.

New Provisions

The department may enter into an agreement with the governing body of an Indian tribe which provides that the department will collect, distribute, or refund in Indian country any tax or fee imposed by the state and administered by the department or will collect or distribute any tax or fee imposed by tribal ordinance. The department may charge a fee for its services of collecting or distributing a tax or fee imposed by tribal ordinance.

Section Amended

Section 4 of House File 2622 amends Chapter 421 of the Code 2001 by adding new section 421.47.

Effective Date

July 1, 2002

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02 HF 2622-E - EXEMPTION OF WITHDRAWALS FROM RETIREMENT PLANS OF GUARD OR RESERVE MEMBERS

Prior Law

None.

New Provisions

If a national guard member or member of the military reserve is called to active state or federal duty and makes a withdrawal from a qualified retirement account of the member, the amount of the withdrawal is not subject to Iowa income tax or state tax penalty. Note that the amount of the withdrawal would be taxable for federal income tax purposes and the withdrawal may be subject to federal penalty for early withdrawal, depending on the age of person making the withdrawal.

Section Amended

Section 5 of House File 2622 amends §422.7, Code Supplement 2001, by adding new subsection 38.

Effective Date

Retroactive to January 1, 2002, for tax years beginning on or after that date.

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02 HF 2622-F - WITHHOLDING THRESHOLD CHANGES

Prior Law

Previously, Iowa Code section 422.16(2) specified the frequency of report and remittance of withholding tax based on withholding thresholds.

New Provisions

The change amends this Code section and rescinds the withholding thresholds to be dictated by statute. Instead, the withholding thresholds may be dictated by department rule. This method of governing the withholding thresholds is preferred because it allows the department more flexibility in amending the threshold requirements based on department need, budget and available resources. In essence, due to budget reductions, the resources are not available to process the volume of monthly filers and deposit their tax revenues. Consequently, granting the department the ability to change the thresholds will allow the number of monthly filers to be reduced. Conversely, there will be an increase the number of filers in the semi-monthly and quarterly periods.

Section Amended

Section 6 of House File 2622 amends section 422.16(2), Code 2001.

Effective Date

July 1, 2002

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02 HF 2622-G - CONTRACTORS' EXEMPT PURCHASES OF EQUIPMENT, SUPPLIES AND BUILDING MATERIALS

Prior Law

A building contractor's purchases of construction materials, supplies, and equipment for use in the performance of a construction contract with certain governmental entities and private nonprofit corporations were not exempt from sales or use tax. The entities and nonprofit corporations filed claims for refund for the sales or use tax paid by the contractor on construction materials, supplies, or equipment used in the performance of a construction con-tract of which the entity or nonprofit corporation was the sponsor.

New Provisions

The right of a governmental entity or nonprofit corporation to claim a refund of taxes paid by a contractor remains unimpaired. However, a contractor purchasing construction materials, supplies, or equipment for use in a building contract with a governmental entity or nonprofit corporation which has a right to claim a refund of tax paid, a "designated exempt entity", can now purchase that property exempt from Iowa sales or use tax if the contractor presents certain documentation to the retailer of the materials, supplies, or equipment.

The designated exempt entity shall issue an authorization letter and an exemption certificate to the contractor and/or subcontractor, which will specify the construction project and will be available only for that project.

Section Amended

Section 7 of House File 2622 amends section 422.42, subsections 15 and 16, Code Supplement 2001. Section 10 amends section 422.47, Code Supplement 2001, by adding new subsection 5.

Effective Date

January 1, 2003 for construction contracts entered into on or after that date.

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02 HF 2622-H - ATM SURCHARGES

Prior Law

The taxable "service charges of all financial institutions"
included services charges assessed against checking accounts with regard to nonproprietary ATM transactions.

New Provisions

Taxable service charges of a financial institution do not include surcharges assessed with regard to nonproprietary ATM transactions.

Section Amended

Section 8 of House File 2622 amends section 422.43, subsection 11, Code Supplement 2001.

Effective Date

July 1, 2002, repealed June 30, 2003.

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02 HF 2622-I - COMMUNITY ACTION AGENCY EXEMPTION

Prior Law

Previously, community action agencies did not have a specific exemption from Iowa sales and use tax.

New Provisions

The change amends Iowa Code section 422.45 by adding a new subsection (63) to provide for an exemption from Iowa sales and use tax for on purchases of tangible personal property and services by a community action agency that is used for the purpose of the community action agency.

Section Amended

Section 9 of House File 2622 amends section 422.45, Code Supplement 2001, by adding new subsection (63).

Effective Date

July 1, 2002

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02 HF 2622-J - SALES AND USE TAX THRESHOLDS

Prior Law

The frequency of filing returns and remittances for sales and use tax was determined by statutory thresholds.

New Provisions

The change amends Iowa Code sections 422.54 and 423.13 to provide the department and the department of management the authority to change the statutory thresholds by department rule. The changing of the thresholds allows the department more flexibility in amending the threshold requirements based on department need, budget and available resources. In essence, due to budget reductions, the resources may not be available to process the volume of filers and deposit tax revenues as required by statute. Consequently, granting the department the ability to change the thresholds will allow the number of monthly filers to be reduced. Conversely, there will be an increase in the number of filers in the semi-monthly and quarterly periods.

Section Amended

Section 11 of House File 2622 amends section 422.54(1) and section 14 amends section 423.13, Code 2001

Effective Date

J uly 1, 2002

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02 HF 2622-K - LOCAL OPTION TAX ESTIMATE DATE

Prior Law

Under previous law, the Director had to have estimates of regular local option and school local option taxes out to jurisdictions by July 15 of each year.

New Provisions

The new law amends Iowa Code sections 422B.10 and 422E.3 to grant the Director until August 15 to get the estimates of regular and school additional time

Section Amended

Sections 12 and 13 of House File 2622 amends sections 422B.10 and 422E.3, Code 2001.

Effective Date

July 1, 2002

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02 HF 2622-L - PROTEST OF DISALLOWED PROPERTY TAX CREDITS (HOMESTEAD AND MILITARY SERVICE)

Prior Law

Prior law was sufficient in stating that if a claim for homestead credit or military service exemption was disallowed by the director and not appealed to the state board of tax review or appealed to and upheld by the state board of tax review but no petition for judicial review filed, the disallowed credit became a lien on the property if still in the hands of the claimant.

New Provisions

The language was changed simply for purposes of clarification. It now states that if a claim is disallowed by the director and not appealed to the state board of tax review or appealed to the state board of tax review and thereafter upheld upon final resolution, including judicial review, the disallowed credit becomes a lien on the property if still in the hands of the claimant.

Sections Amended

Section 15 of House File 2622 amends § 425.7(3), Code Supplement 2001, and section 17 amends § 426A.6, Code 2001.

Effective Date

July 1, 2002.

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02 HF 2622-M - DISABLED VETERAN HOMESTEAD PROPERTY TAX CREDIT

Prior Law

The disabled veteran property tax credit was allowable only if the annual income of the veteran and the veteran's spouse was not more than $25,000.

If the appropriation for the disabled veteran homestead tax credit program was not fully funded, the political subdivision was required to extend to the taxpayer only that portion of the credit that was funded (Section 25B.7--state mandate funding).

New Provisions

The income maximum for this credit was increased to $35,000.

Section 35 of House File 2622 states that section 25 B.7 does not apply to the section dealing with the amendment to the disabled veteran tax credit. As a result, the political subdivision must grant the full amount of the credit to the taxpayer even if there is insufficient funding for the program.

Sections Amended

Section 16 of House File 2622 amends § 425.15, Code 2001. Section 35 will not be codified.

Effective Date

May 6, 2002. Retroactive to January 1, 2002.

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02 HF 2622-N - MILITARY SERVICE PROPERTY TAX EXEMPTION FOR COAST GUARD

Prior Law

The statute did not specifically list members of the Coast Guard as being eligible for the exemption even though they were. Because of this, there was some question as to their eligibility.

New Provisions

For clarification purposes, Coast Guard members were added to the Code as being eligible for the military service property tax exemption.

Sections Amended

Section 18 of House File 2622 amends § 426A.11(3), Code Supplement 2001.

Effective Date

July 1, 2002.

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02 HF 2622-O - WAR VETERANS PROPERTY TAX EXEMPTION (BING0)

Prior Law

The property of a war veterans organization was exempt from tax if devoted entirely to its own use and not held for pecuniary profit.

New Provisions

The exemption is not to be disallowed if the property is used for the operation of bingo games provided that all of the proceeds, in excess of expenses, are used for the legitimate purposes of the organization.

Sections Amended

Section 19 of House File 2622 amends § 427.1(5), Code Supplement 2001.

Effective Date

July 1, 2002.

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02 HF 2622-P - BIOFUEL

Prior Law

None.

New Provisions

Biofuel is defined as an oxygenated product derived from soybean oil, vegetable oil, or animal fats that can be used in diesel engines or aircraft; any biofuel product is a special fuel; and a person who blends two or more special fuel products or sells 100% biofuel is required to obtain a blender's license, keep records, and file a monthly return with the department.

Sections Amended

Section 20 of House File 2622 amends § 452A.2, Code Supplement 2001, by adding new subsection 1A; section 21 amends § 452A.6, Code 2001; section 22 amends § 452A.8(3), Code 2001; section 23 amends § 452A.9, Code 2001; section 24 amends § 452A.15(1), Code 2001; section 27 amends § 452A.60, Code 2001; and section 28 amends § 452A.62(2), Code 2001.

Effective Date

July 1, 2002.

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02 HF 2622-Q - TRANSPORTATION REPORTS (MOTOR FUEL)

Prior Law

Persons transporting motor fuel or special fuel or operating storage facilities or refineries in Iowa were required to file reports with the department but there was no penalty for failure to do so. These reports are used by the department to track fuel movements.

Persons operating storage facilities at nonterminal locations were not required to file reports with the department.

New Provisions

A penalty of $100 for the first violation and an additional $100 for each subsequent violation occurring within the same calendar year is imposed for failure to file the required reports.

Persons operating storage facilities at nonterminal locations are required to file reports accounting for all motor fuel, alcohol, and special fuel that is delivered into, stored within, withdrawn from, or sold from the facility.

Sections Amended

Section 25 of House File 2622 amends § 452A.15, Code 2001, by adding new subsection 2A and section 26 amends § 452A.15, Code 2001, by adding new subsection 4.

Effective Date

July 1, 2002.

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02 HF 2622-R - AIRPORT IMPOSED FEES ON VEHICLE RENTAL

Prior Law

Under previous law, optional airport fees were considered not part of the mandatory charges for rental of a vehicle.

New Provisions

The change amends Iowa Code section 516D.3(6) to classify airport fees, whether optional or mandatory, which are imposed for rental of a vehicle, as not being part of the mandatory rental charge.

Section Amended

Section 29 of House File 2622 amends section 516D.3(6) paragraphs (a) and (b), Code 2001.

Effective Date

July 1, 2002

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02 HF 2622-S - EXTENSION OF TIME FOR WAR VETERANS, RELIGIOUS, LITERARY, AND CHARITABLE SOCIETIES TO CLAIM PROPERTY TAX EXEMPTION

Prior Law

War veterans associations (Code section 427.1, subsection 5) and religious, literary, and charitable societies (Code section 427.1, subsection 8) were required to file a claim for property tax exemption by February 1.

New Provisions

The time for these associations and societies to file a claim for property tax exemption is extended to October 1 for the 2002 assessment year.

Sections Amended

Section 30 of House File 2622 being only for the 2002 assessment year will not be codified.

Effective Date

May 6, 2002.

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02 HF 2622-T - PAYROLL DEDUCTION OF INSURANCE PREMIUMS

Prior Law

Iowa Code section 70A.17 provided for payroll deduction for the payment of insurance for state officers or employees.

New Provisions

Iowa Code section 70A.17 is repealed.

Section Amended

Section 31 of House File 2622 repeals section 10A.17, Code 2001.

Effective Date

July 1, 2002

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02 HF 2622-U - ABATEMENT OF PROPERTY TAXES (RELIGIOUS INSTITUTION)

Prior Law

The filing deadline for a religious institution to claim a property tax exemption in the 2000 assessment year was April 15.

New Provisions

The board of supervisors of a county having a population based on the latest federal census of more than 180,000 but not more than 200,000 shall abate the property taxes payable during the 2001-2002 fiscal year of a religious institution that failed to file a claim for exemption. The religious institution is required to file a claim for exemption with the county board of supervisors by October 1, 2002.

Sections Amended

Section 32 of House File 2622 will not be codified as it is for one year only (the 2000 assessment year claim / taxes payable in the 2001-2002 fiscal year).

Effective Date

May 6, 2002. Retroactive to taxes payable in the 2001-2002 fiscal year.

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02-HF 2622-V - ABATEMENT OF SALES AND USE TAX OWED BY FOUNDARIES

Prior Law

Unpaid state sales and use tax and local option sales tax owed by foundries located in Lee or Jefferson County Iowa remained due and owing and were not abated. Taxes paid by those foundries on certain transactions could not be refunded.

New Provisions

The Director shall abate unpaid sales and use tax owed by any foundry in Lee or Jefferson County on its purchases of tangible personal property used by the foundry to make patterns, molds, or dies. If tax owed is to be abated, a purchase must have occurred between July 1, 1997 and May 6, 2002. If a foundry has paid sales or use tax which could have been abated if the tax had remained unpaid, that tax is eligible for refund. Any claim for refund must be filed before October 1, 2002, and claims paid will be limited to twenty-five thousand dollars in the aggregate. If claims for more than that amount are filed, the claims shall be prorated.

Section Amended

Section 33 of House File 2622 is uncodified.

Effective Date

Upon enactment, May 6, 2002.

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02 HF 2625 - ENTERPRISE ZONE INCOME TAX CREDITS FOR COOPERATIVES

Prior Law

Eligible businesses approved by the Department of Economic Development may claim an investment tax credit up to 10% of their new investment. Eligible businesses involved in the production of value-added agricultural products, including cooperatives described in section 521 of the Internal Revenue Code which are required to file an Iowa income tax return and whose project primarily involves the production of ethanol, could receive a refund of all or a portion of an unused investment tax credit. A tax credit certificate would be issued directly to the cooperative which could be used on the Iowa income tax return of the cooperative, subject to a overall cap of $4 million per year for refunds of unused credits.

New Provisions

The section 521 cooperatives who are required to file an Iowa income tax return may elect to transfer all or a portion of its unused investment tax credit to its members. The amount of tax credit transferred and claimed by a member shall be based upon the pro rata share of the member's earnings in the cooperative. The tax credit certificates would be issued to the members of the cooperative, instead of just issuing a certificate to the cooperative, and can be claimed on the member's Iowa income tax return. The total refunds of unused credits are still limited to $4 million per year.

A provision was also included which specifically states that a cooperative organized under section 501 of the Iowa Code and filing as a partnership for federal tax purposes can have the investment tax credit claimed by the individual partners based on the partner's share of income in the partnership.

Section Amended

Section 47 of House File 2625 amends section 15.333, subsections 1 and 2, Code Supplement 2001. Section 48 of House File 2625 amends section 15E.193C, subsection 7, paragraph a, Code Supplement 2001.

Effective Date

Retroactive to January 1, 2002 for tax years beginning on or after that date.

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02 SF 335 - FARM DEER--ELK

Prior Law

Previously, farm deer were not considered to be livestock for the purposes of Iowa sales tax. Consequently, the sale of the farm deer for breeding and the sale of food for agricultural production of these animals were not exempt from tax pursuant to Iowa Code section 422.42(14).

New Provisions

The new language sets forth a new definition of livestock to include farm deer. This language also sets forth a new exemption in Iowa Code section 422.45(16) which provides for an exemption for the sale of feed, feed supplements and additives when used for consumption by farm deer or bison.

This bill also provides for a refund of sales tax paid on the purchase of feed, feed supplements, and additives when used for consumption by farm deer or bison. The person who paid the sales tax can claim the tax for sales occurring between April 1, 1995, and March 6, 2002. The total aggregate of refunds allowed is limited to fifty thousand dollars and shall not be allowed unless refund claims are filed prior to October 1, 2002.

Section Amended

Senate File 335 amends section 422.42, Code Supplement 2001, by adding new subsections (3)(a) and (6)(a) and section 422.45, Code Supplement 2001, by adding new subsection (16).

Effective Date

Effective March 6, 2002 and applies retroactively to April 1, 1995.

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02 SF 2305-A - EXPRESS COMPANIES TAX

Prior Law

Obsolete. Express companies have not operated in Iowa for over 40 years.

New Provisions

Iowa Code Chapter 436 pertaining to the taxation of express companies was repealed as were references to chapter 436 in other parts of the Code.

Sections Amended

Section 1 of Senate File 2305 amends § 331.401(1)(k), Code 2001; section 2 amends § 331.512(8), Code 2001, by striking the subsection; section 3 amends § 420.207, Code 2001; section 10 amends § 427A.1(1)(h), Code Supplement 2001; section 11 amends § 427B.17(5), Code 2001; section 12 amends § 429.1, Code 2001; section 13 amends § 441.21(5), (9), and (10), Code Supplement 2001; section 14 amends § 441.73(1), Code 2001; and section 23 repeals chapter 436, Code 2001.

Effective Date

July 1, 2002.

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02 SF 2305-B - EXEMPTION OF PAYMENTS TO BENEFICIARIES THAT WERE INCLUDED IN DECEDENT EMPLOYEE'S ESTATE

Prior Law

Under the previous law, only installment payments received by a beneficiary from an annuity of a deceased employee was exempt from income tax if the installment payments had been included in the deceased employee's estate for Iowa inheritance tax purposes.

New Provisions

The word "installment " is deleted in part of the statute so that both installment payments and lump sum payments from an annuity received by the beneficiary of a deceased employee are excluded from the beneficiary's net income to the extent the installment payments and lump sum payments are include in the deceased employee's estate for Iowa inheritance tax purposes. In addition, this change makes the income tax statute consistent with the inheritance tax statute.

Section Amended

Section 4 of Senate File 2305 amends §422.7, subsection 4, Code Supplement 2001.

Effective Date

This provision is applicable on July 1, 2002 for installment payments or lump sum payments received on or after July 1, 2002.

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02 SF 2305-C - ELIMINATION OF REFERENCES TO SPECIFIC INCOME TAX WITHHOLDING FORMS

Prior Law

Under the previous law, the fraud statute for the filing of false or fraudulent returns for income tax withholding included references to specific periodic returns and deposit forms. Thus, the statute had references to semi-monthly, monthly and quarterly deposit forms and returns.

New Provisions

References to semi-monthly, monthly and quarterly income tax withholding returns and deposit forms have been deleted.

Section Amended

Section 5 of Senate File 2305 amends §422.25, subsection 5, Code 2001.

Effective Date

This provision is applicable on July 1, 2002 for false and fraudulent income tax withholding returns and deposit forms received on or after July 1, 2002.

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02 SF 2305-D - EXECUTIVE SEARCH AGENCIES NO LONGER LICENSED

Prior Law

Executive search agencies were licensed by the State, and the services of "licensed" executive search agencies were subject to Iowa sales and use tax. The requirement of a license to operate an executive search agency was later rescinded.

New Provisions

The word "licensed' is stricken from the statutory phrase "licensed executive search agencies", and the services of "executive search agencies" are subjected to tax.

Section Amended

Section 6 of Senate File 2305 amends section 422.43, subsection 11, unnumbered paragraph 1, Code Supplement 2001.

Effective Date

July 1, 2002

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02 SF 2305-E - NONPROFIT PRIVATE EDUCATIONAL INSTITUTION

Prior Law

Previously, Iowa Code section 422.45(3) allowed for private educational institutions to be exempt from Iowa sales and use tax regardless if the institutions were nonprofit organizations under IRC 501(c)(3).

New Provisions

The new language requires private educational institutions to be nonprofit entities under IRC 501 (c)(3).

Section Amended

Section 7 of Senate File 2305 amends section 422.45(3), Code Supplement 2001.

Effective Date

July 1, 2002

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02 SF 2305-F - CONSOLIDATED SALES TAX RETURNS

Prior Law

Previously, Iowa Code section 422.51(5) allowed for parent and subsidiary corporations to apply for the opportunity to submit consolidated returns. This statute stated that such a return must be filed in accordance with department rules and liability for the tax obligation is joint and several.

New Provisions

The new language of this statute is more definitive. It sets forth the form and manner which form must be filed. The requirements are: the form must be titled "schedule of consolidated business locations"; the form must be filed with a quarterly sales tax return that shows the taxpayer's consolidated permit number; it must include the permit number for each Iowa business location; the state sales tax amount by business location; and the amount of state sales tax due on goods consumed that are not assigned to a specific business location.

Consolidated quarterly sales tax returns that are not accompanied by the "schedule of consolidated business locations" are considered incomplete and subject to penalty. The penalties are set out in section 421.27.

Section Amended

Section 8 of Senate File 2305 amends section 422.51(5), Code 2001.

Effective Date

July 1, 2002

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02 SF 2305-G - "USER" OF SERVICES IS CLEARLY LIABLE FOR PAYMENT OF TAX

Prior Law

The applicable section of the Code did not state with complete clarity that unpaid use tax is payable by the user of a service as well as the user of tangible personal property.

New Provisions

The section is amended to insert language stating that unpaid use tax is payable by the user of a service. This makes the section consistent with section 423.2 which imposes Iowa use tax on services and makes the user of a service liable for the tax until paid.

Section Amended

Section 9 of Senate File 2305 amends section 423.14, Code 2001.

Effective Date

July 1, 2002

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02 SF 2305-H - MOTOR FUEL LPG TAX RATE

Prior Law

House File 716, enacted by the 2001 Iowa General Assembly, established the tax rate for motor fuel as a variable rate beginning July 1, 2002. The tax rate for motor fuel was based on the amount of ethanol blended gasoline sold in the previous calendar year. The tax rate for liquefied petroleum gas was treated as the same rate as regular gasoline.

New Provisions

The tax rate for liquefied petroleum gas is reestablished at 20¢ per gallon.

Sections Amended

Section 15 of Senate File 2305 amends § 452A.3(3), Code Supplement 2001, and section 16 amends § 452A.3, Code Supplement 2001, by adding new subsection 3A.

Effective Date

July 1, 2002.

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02 SF 2305-I - MOTOR FUEL TRANSPORTATION REPORTS

Prior Law

Transportation reports were not required to be filed by electronic transmission.

New Provisions

The director is given the authority to require by rule that transportation reports be filed by electronic transmission the same as other fuel tax reports in chapter 452A.

Sections Amended

Section 17 of Senate File 2305 amends § 452A.15, Code 2001, by adding new subsection 4.

Effective Date

July 1, 2002.

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02 SF 2305-J - MOTOR FUEL TAX REFUNDS

Prior Law

Claims for motor fuel tax refunds were required to be filed within 1 year from the date the tax was paid.

New Provisions

The time period for claiming a motor fuel tax refund was extended from 1 to 3 years.

Sections Amended

Section 18 of Senate File 2305 amends § 452A.17(3)(a), Code Supplement 2001; section 19 amends § 452A.19, Code 2001; section 20 amends § 452A.21, Code 2001; and section 21 amends § 452A.72, Code 2001.

Effective Date

July 1, 2002.

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02 SF 2305-K - SPECIAL RESERVE FUND

Prior Law

Iowa Code Sections 422.101, 422.102, 422.103 and 422.104 set up a special reserve fund in 1977. Estimated payments for corporation income tax totaling $25 million were to be credited to this fund, which would have been used to pay refund claims if the Department did not prevail in litigation involving the constitutionality of the single sales factor. In 1978, the United State Supreme Court ruled in favor of the Department in Moorman Manufacturing Co. v. Bair, 437 U.S. 267 (1978), so refunds did not have to be paid. The monies in the special reserve fund were transferred to the general fund.

New Provisions

Iowa Code Sections 422.101, 422.102, 422.103 and 422.104 are repealed as being obsolete.

Section Amended

Section 22 of Senate File 2305 repeals Code Sections 422.101 through 422.104, Code Supplement 2001.


Effective Date

July 1, 2002

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02 SF 2318 - THE PHASE IN OF THE REDUCTION IN THE STATE'S GROSS PREMIUMS TAX RATE FOR INSURANCE COMPANIES AND ASSOCIATIONS

Prior Law

Under the previous law, the state's gross premiums tax rate on sales of life insurance, health insurance and other types of insurance was two percent. The premiums tax was imposed on the sales of insurance policies sold by a company or association in a calendar year.

New Provisions

For life and health insurance companies and associations, the gross premiums tax rate is reduced from two percent to one percent over a three-year period. Thus, the rate is 1.75% for the 2003 calendar year, 1.50% for the 2004 calendar year, and 1.25% for the 2005 calendar year. The rate is 1% for the 2006 year and for subsequent calendar years. In the case of other insurance companies and associations, the gross premiums tax rate is also reduced over a three-year period from 2004 through 2006. Therefore, the rate is 1.75% for the 2004 calendar year, 1.50% for the 2005 calendar year, and 1.25% for the 2006 calendar year. The rate is 1% for the 2007 calendar year and for subsequent calendar years. The state auditor and the department of revenue & finance are to study the impact this Act may have on the general fund, especially the impact on the 2005-2006 fiscal year and a report is to be made to the legislative council and its fiscal committee by August 15, 2002.

Section Amended

Section 1 of Senate File 2318 amends section 135.20, Code 2001. Section 2 amends section 432.1, subsection 1, paragraph a, Code 2001. Sections 3 and 5 add new subsections to section 432.1, Code 2001. Section 4 amends section 432.1 subsection 2, Code 2001. Section 6 amends section 432.1, subsection 4, Code 2001. Section 7 amends section 432.2, Code 2001. Section 8 amends section 514B.31, Code 2001.

Effective Date

Section 9 of the Act which provides for a report by the department and state auditor was applicable on enactment on May 9, 2002. The rest of the Act is applicable on July 1, 2002.

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02 SF 2321-A - DEPARTMENT MUST COLLECT ECONOMIC COMMERCE DATA

Prior Law

The Department was not required to collect data about the amount of electronic commerce in Iowa.

New Provisions

The Department must collect valid Iowa-specific data about the amount of electronic commerce in Iowa and use this data when estimating gains and losses in tax revenues from electronic commerce. This data must be delivered to the General Assembly in the form of an annual report no later than February 1 of each year.

Section Amended

Section 1 of Senate File 2321 amends Chapter 421 of the Code by enacting a new section 421.70.

Effective Date

Effective upon enactment, May 10, 2002. Repealed March 1, 2005.

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02 SF 2321-B - ELECTRONIC COMMERCE EXEMPTION MADE PERMANENT

Prior Law

For the purposes of Iowa sales and use tax law a transaction was not taxable if the substance of the transaction was delivered to the purchaser digitally, electronically, or utilizing cable, or by radio waves, microwaves, satellites, or fiber optics. This exemption was scheduled for repeal December 31, 2002.

New Provisions

The provisions of the Code, which repeal the exemption, are stricken from the Code. The exemption is made permanent.

Section Amended

Section 2 of Senate File 2321 amends section 422.43, subsection 15, unnumbered paragraph 2, Code Supplement 2001, by striking the paragraph. Section 3 of Senate File 2321 amends section 423.1, subsection 13, unnumbered paragraph 2, Code Supplement 2001, by striking the paragraph.

Effective Date

Effective upon enactment, May 10, 2002.

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02 SF 2321-C - MULTISTATE DISCUSSION OF SALES TAX SIMPLIFICATION

Prior Law

Iowa law did not authorize anyone to meet with delegates from other states to discuss joint efforts to reduce the burden of complying with state sales and use tax laws.

New Provisions

Four delegates shall be appointed to discuss multi-state sales and use tax simplification. Those delegates will discuss with delegates from other states the advisability of entering into an agreement to simplify and modernize the multi-state collection of sales and use tax. The delegates shall then recommend a course of action to the General Assembly based on the success or failure of those discussions.

Section Amended

Section 4 of Senate File 2321 is uncodified.

Effective Date

May 10, 2002, repealed March 1, 2005.

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