2003 Iowa Legislative Summaries with Tax Implications

BILL

DESCRIPTION

HF 289

Property Tax Payments By Credit Card

HF 304

Agricultural Land Tax Credit Re-certification

HF 344

Motor Fuel Tax Refund

HF 534

Department of Administrative services

HF 576-A

Extended Time to File for "Enterprise Zone" Certification

HF 576-B

Enterprise Zone Changes

HF 601

Rules For Political Checkoff On Income Tax Return

HF 615

Industrial Property Tax Exemption (Urbandale)

HF 624

Expanded Definition Of "Farm Deer"

HF 636

Transfer Of Exemption From The Legislative Service Bureau To The Legislative Services Agency

HF 648

The Department’s New Duties Under The State Archives And Records Act

HF 654

New Exemption For Sand Handling And Core And Mold Making Equipment

HF 665

Taxation Of Property Leased From Departments Of Corrections And Human Services

HF 671

Recycling Property Tax Exemption

HF 674-A

Military Service Property Tax Exemption

HF 674-B

Income Tax Exemption For Active Duty Pay Of Persons In Nat. Guard Or Mil. Reserve Pursuant To Certain Military Orders

HF 674-C

Overnight Transportation, Meals And Lodging Expenses Of Persons In Nat. Guard Or Mil. Reserve

HF 674-D

Exemption Of Income From Military Student Loan Repayments

HF 674-E

Exemption Of Gratuity Payments For Deaths Of Individuals In Military Service

HF 674-F

Giving Certain Individuals In Military Service Additional Time To File Returns Or Perform Other Acts With The Department

HF 674-G

Certain Tax-Exempt Organization Of Past Or Present Members Of U.S. Armed Forces Can Have Less Than 75% of Membership From Past Or Present Armed Forces Members And Still Qualify For Exemption From Iowa Income Tax

HF 677

New Capital Investment Program

HF 681

Enterprise Zone Income Tax Credits-Cooperatives Involved In Value-Added Agriculture

HF 683-A

Amendments To New School Local Option Law

HF 683-B

Endow Iowa Tax Credit

HF 683-C

Increase In Funding For The Property Rehabilitation Tax Credit

HF 683-D

The Iowa Streamlined Sales Tax Act

HF 683-E

The Creation Of The Streamlined Sales Tax Advisory Council

HF 689

Ethanol Blended Gasoline Tax Credit-Retroactive Application

HF 692-A

Property Tax Reform

HF 692-B

The Creation Of Industrial Processing Exemption And Sales, Service, And Use Tax Study Committees

HF 692-C

University-Based Research Utilization Program Tax Credit

SF 94

Military Veteran Discharge Record Is Confidential

SF 275

Replacement Tax

SF 366-A

Inheritance Law—Definitions

SF 366-B

Inheritance-Taxable Estate

SF 366-C

Inheritance Tax-Valuation Date Of Property To Be Included In The Estate

SF 366-D

Records Of Deferred Estates

SF 366-E

Iowa Trust Code

SF 366-F

Inheritance Tax-Reciprocity Repealed

SF 375

Enforcement Enhancements Applicable To Tobacco Product Manufacturers

SF 401

Tobacco Retailers Training/Penalties

SF 441

Transfer Of Certain Tax Credits

SF 442-A

Update Of References To The Internal Revenue Code

SF 442-B

Decoupling From Bonus Depreciation

SF 442-C

Decoupling From Federal 5-Year NOL Carryback Provision

SF 444

Property Tax Exemption For Open Prairies And Wildlife Habitats

SF 445

School Local Option Tax

SF 453-A

Industrial Machinery, Equipment, & Computers Replacement Tax Phase-out And Repeal Of Personal Property Tax Replacement To Local Governments

SF 453-B

Franchise Tax Allocation

SF 453-C

Lottery As A Charter Agency

SF 458-A

Property Tax Appropriations

SF 458-B

Tax Credits For Investments In Qualifying Businesses And Community-Based Seed Capital Funds

SF 458-C

Tax Credits For Investments In Venture Capital Funds

SF 458-D

Eligible Enterprise Zone Housing Projects

SF 458-E

ATM Fees

SF 458-F

Corporate To Corporate Transfer

SF 458-G

Nonterminal Storage Facility Defined

SF 458-H Tobacco Compliance Employee Training Fund

  SF 458-I

The Phase In Of The Reduction In The State’s Gross Premium Tax Rate For County Mutual Insurance Associations And State Mutual Insurance Associations

 

PROPERTY TAX PAYMENTS BY CREDIT CARD - 03 HF 289

Prior Law: The statute made no reference to property taxes being paid with a credit card.

New Provisions: The change makes it clear that the county treasurer is authorized to accept credit cards in payment of property taxes.

Sections Amended: Section 4 of House File 289 amends § 331.553, subsection 5, Code 2003.

Effective Date: July 1, 2003.

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AGRICULTURAL LAND TAX CREDIT RECERTIFICATION - 03 HF 304

Prior Law: The statute does not provide a formula for correcting an erroneous certification of agricultural land property tax credits by the county auditor.

New Provisions:

The county auditor is required to re-certify the correct amount of agricultural land tax credits to the department by June 1, 2003, and to pay from its general fund the additional amount due to those taxpayers who did not receive their full credit in the 2002-2003 fiscal year. The department is to reimburse the county for the amount paid and such amount is to be deducted from the 2003-2004 agricultural land tax credit appropriation prior to the normal distribution.

Sections Amended: House File 304 will not be codified.

Effective Date: May 15, 2003.

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MOTOR FUEL TAX REFUND - 03 HF 344

Prior Law: Benefited fire districts were not entitled to a refund of tax paid on motor fuel.

New Provisions: Benefited fire districts are entitled to a refund of tax paid on motor fuel.

Sections Amended: House File 344 amends § 452A.17, subsection 1, paragraph a, subparagraph 3, Code 2003.

Effective Date: July 1, 2003.

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DEPARTMENT OF ADMINISTRATIVE SERVICES - 03 HF 534

Prior Law:

The Department was the "Department of Revenue and Finance" because of certain responsibilities for governmental financing (as opposed to revenue collection) which the Department was assigned when the office of Comptroller was abolished.

New Provisions:

House File 534 transfers the Department’s responsibilities for government financing to the newly created Department of Administrative Services. The Department is renamed the "Department of Revenue". House File 534 is not intended to impair the Department’s existing right to credit against tax refunds due or becoming due under section 422.73, Code 2003.

Section Amended:

Section 86 of house File 534 amends Code 2003 by adding new section 8A.504. Subsection 4 of Section 286 of House File 534 amends numerous Code 2003 sections by striking the words "director of revenue and finance"; "department of revenue and finance"; and "revenue and finance" and inserting in lieu thereof "director of "revenue"; "director of the department of administrative services"; "department of administrative services"; "department of revenue"; and "revenue" as is appropriate. Section 291 of House File 534 repeals sections and subsections 421.6; 421.17(21), (23), (24), (25), (26), (28), (29), (30), and (33); 421.31; 421.32; 421.33; 421.34; 421.35; 421.36; 421.37; 421.38; 421.39; 421.40; 421.41; 421.42; 421.43; 421.44; and 421.45; Code 2003.

Effective Date: July 1, 2003

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EXTENDED TIME TO FILE FOR "ENTERPRISE ZONE" CERTIFICATION - O3 HF 576-A

Prior Law:

A city or county which met certain "distress criteria" (e.g. low average weekly wage or high family poverty rate) could, at any time prior to July 1, 2003 apply to the Department of Economic Development requesting that the Department certify a part of the city or county as an "enterprise zone."

New Provisions:

The time for filing is extended to any time prior to December 1, 2003. Once an area is certified as an enterprise zone, businesses operating there are eligible for refunds, exemptions, and credits with regard to sales and use, property, personal and corporate income, insurance company, and franchise taxes.

Section Amended: Section 1 of House File 576 amends section 15E.192, subsection 3, paragraphs a and b, Code 2003.

Effective Date: May 15, 2003.

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ENTERPRISE ZONE CHANGES - 03 HF 576-B

Prior Law:

Eligible businesses which operate in enterprise zones were subject to repayment of tax incentives (such as the investment credit, additional research and development credit, new jobs credit from withholding and sales and use tax refunds) received if they did not meet the requirements of the enterprise zone program. This included making a capital investment of at least $500,000 creating at least 10 jobs, paying at least 90% of the average county or regional wage, and paying 80% of medical and dental insurance.

New Provisions:

Eligible businesses which operate in enterprise zones can also be subject to repayment of tax incentives if the business experiences a layoff within Iowa or closes any of its facilities within Iowa. In addition, the Department of Economic Development can reduce or eliminate these incentives before they are used if the business experiences a layoff within Iowa or closes any facilities within Iowa.

Section Amended: Section 2 of House File 576 amends section 15E.193 by adding new subsection 4, Code 2003.

Effective Date: July 1, 2003

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RULES FOR POLITICAL CHECKOFF ON INCOME TAX RETURN - 03 HF 601

Prior Law: The administrative rules for the political checkoff on the individual income tax return were the responsibility of the director of the department of revenue and finance, in cooperation with the director of the department of management and the ethics and campaign disclosure board.

New Provisions:

The total responsibility for promulgating rules for the political checkoff on the individual income tax return is given to the ethics and campaign disclosure board.

Section Amended: Section 5 of House File 601 amends section 56.20, Code 2003.

Effective Date: Section 5 is effective on July 1, 2003.

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INDUSTRIAL PROPERTY TAX EXEMPTION (URBANDALE) - 03 HF 615

Prior Law: The governing body of the city or county may give prior approval for a tax exemption on new construction of pending projects.

New Provisions:

No change was made in the existing statute. House File 615 permits the governing body of the city or county to give prior approval for a tax exemption after completion of the new construction.

Sections Amended: House File 615 will not be codified.

Effective Date: April 9, 2003. Applies to assessments made on or after January 1, 2003.

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EXPANDED DEFINIITON OF "FARM DEER" - 03 HF 624

Prior Law: The word "livestock" was defined to include "farm deer" for the purposes of Iowa sales and use tax law, but the term "farm deer" did not include whitetail or mule deer.

New Provisions: The definition of "livestock" is expanded to include whitetail and mule deer other than free-ranging whitetail or mule deer.

Sections Amended:

Section 4 of House File 624 enacts new Code subsection 170.1 which in turn amends by reference Code section 189A.2 which in turn amends by reference Code section 422.42 subsection 4, Code 2003.

Effective Date: Upon enactment on May 23, 2003.

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TRANSFER OF EXEMPTION FROM THE LEGISLATIVE SERVICE BUREAU TO THE LEGISLATIVE SERVICES AGENGY - 03 HF 636

Prior Law: Sales by the Legislative Service Bureau and its Legislative Information Office of mementos and other items relating to Iowa history and government on state property were exempt from Iowa sales tax only, not from Iowa use tax.

New Provisions:

The Legislative Service Bureau is combined with the Legislative Fiscal Bureau and the Legislative Computer Support Bureau into a single new agency called the Legislative Services Agency. The Legislative Service Bureau’s sales tax exemption is transferred to this new agency.

Sections Amended: Section 8 of House File 636 creates a new section 2E.8 in new Chapter 2E. Section 47 of House File 636 repeals existing section 2.67, Code 2003.

Effective Date: Upon enactment, April 14, 2003.

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THE DEPARTMENT’S NEW DUTIES UNDER THE STATE ARCHIVES AND RECORDS ACT - 03HF 648

Prior Law: The State Records Commission existed; its powers and duties were set out in chapter 304 of the Code. The Director of the Department was, ex officio, a member of the Commission.

New Provisions:

House File 648 repeals Chapter 304 of the Code. It then creates a new State Records Commission. The Director continues to be a member of the Commission. House File 648 modifies and reorganizes multiple aspects of the duties and responsibilities of the State Records Commission, the Department of Cultural Affairs, and state agency heads with regard to the creation, organization, maintenance, use, and final disposition of Iowa government records. House File 648 also creates the Iowa Historical Records Advisory Board and defines its duties, an action required by federal law.

Sections Amended: The State Archives and Records Act is set out in new chapter 304B.

Effective Date: July 1, 2003

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NEW EXEMPTION FOR SAND HANDLING AND CORE AND MOLD MAKING EQUIPMENT - 03 HF 654

Prior Law: There was no exemption from sales or use tax in favor of the sale or rental of core and mold making equipment or sand handling equipment directly and primarily used in the mold making process by a foundry.

New Provisions:

The sale, rental, or use of core and mold making equipment and sand handling equipment directly and primarily used in the mold making process by a foundry is exempt from Iowa tax.

Sections Amended: House File 654 amends Code section 422.45 by adding new subsection 64, Code 2003.

Effective Date: Upon enactment, retroactive to July 1, 1997. Refunds are limited to six hundred thousand dollars in the aggregate. Any claim for refund must be filed prior to October 1, 2003.

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TAXATION OF PROPERTY LEASED FROM DEPARTMENTS OF CORRECTIONS AND HUMAN SERVICES - 03 HF 665

Prior Law: All property owned by the state of Iowa was exempt from taxation regardless of its use.

New Provisions:

Property of the state that is leased to others, that are not exempt entities, by the departments of corrections and human services pursuant to Iowa Code §§ 904.302 (farming operations), 904.705 (forestry nurseries), and 904.706 (revolving farm fund), is subject to taxation for the term of the lease.

Sections Amended: Sections 1 and 2 of House File 665 amend § 427.1, subsection 1, Code 2003.

Effective Date: July 1, 2003. Applies to leases entered into on or after July 1, 2003.

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RECYCLING PROPERTY TAX EXEMPTION - 03 HF 671

Prior Law: The exemption was limited to property used to convert waste plastic, wastepaper products, and waste paperboard into new raw materials or products in a manufacturing operation.

New Provisions: The exemption was expanded to include property used to convert waste wood products into new raw materials or products.

Sections Amended: House File 671 amends § 427.1, subsection 19, unnumbered paragraph 8, Code 2003.

Effective Date: July 1, 2003. Applicable to assessment years beginning on or after January 1, 2004.

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MILITARY SERVICE PROPERTY TAX EXEMPTION - 03 HF 674-A

Prior Law:

Former members of the armed forces of the United States were required to have performed their military service within a designated war period to qualify for the military service property tax exemption. Former members of the United States reserves were required to have performed 20 years of their military service after January 28, 1973 or have completed at least 90 days of active federal service, other than training, to qualify for the exemption.

New Provisions:

Former members of the armed forces of the United States who did not perform their military service during the Korean War (June 25, 1950--January 31, 1955) but would have had they not opted to serve 5 years in the reserves would now qualify for the military service property tax exemption.

Sections Amended:

Section 4 of House File 674 amends § 35.1, subsection 2, paragraph b, Code 2003, by adding new subparagraph 5 and section 11, subsection 3, provides an effective date.

Effective Date: May 21, 2003.

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INCOME TAX EXEMPTION FOR ACTIVE DUTY PAY OF PERSONS IN NAT. GUARD OR MIL. RESERVE PURSUANT TO CERTAIN MILITARY ORDERS - 03 HF 674-B

Prior Law:

There was an income tax exemption for active duty pay received by a person in the national guard or the armed forces military reserve if the active duty pay was for service performed on or after August 2, 1990, pursuant to military orders for the Persian Gulf Conflict. There was also an income tax exemption for active duty pay received by a person in the national guard or armed forces military reserve for service performed on or after November 21, 1995 pursuant to military orders related to peacekeeping in Bosnia-Herzegovina.

New Provisions:

There is an income tax exemption for active duty pay received by a person in the national guard or armed forces military reserve for service performed on or after January 1, 2003, pursuant to military orders related to Operation Iraqi Freedom, Operation Noble Eagle, or Operation Enduring Freedom. The individual in the national guard or armed forces military reserve needs only to be called to active duty under the appropriate orders to qualify for the exemption of active duty pay. The individual does not have to be serving overseas to be eligible for the exemption, but can be serving in Iowa or elsewhere in the United States under the appropriate military orders and qualify for the exemption for active duty pay.

Note that if a person in the national guard or military reserve was called to active duty pursuant to military orders for an operation or purpose other than the operations specified above, the active duty pay is not exempt from Iowa income tax.

Section Amended: Section 5 of House File 674 amends Iowa Code section 422.7, Code 2003, by adding new subsection 39.

Effective Date: Section 5 takes effect upon enactment and applies retroactively to January 1, 2003, for tax years beginning on or after that date.

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OVERNIGHT TRANSPORTATION, MEALS AND LODGING EXPENSES OF PERSONS IN NATIONAL GUARD OR MILITARY RESERVE - 03 HF 674-C

Prior Law: There was no prior similar provision.

New Provisions:

Provides a deduction in computing net income of up to $1,500 in overnight travel expenses of individuals in the national guard and military reserve who travel away from home more than one hundred miles for the performance of services for the guard or reserve. For purposes of this deduction, overnight travel expenses include transportation expenses, meals and lodging expenses related to services for the national guard or the armed forces military reserve to the extent the expenses were not reimbursed.

If an overnight travel expense deduction of up to $1,500 was claimed in computing net income for an individual in the national guard or the armed forces military reserve,

the expenses claimed in the overnight travel deduction may not be claimed as a portion of the deduction for miscellaneous expenses pursuant to section 67 of the Internal Revenue Code and claimed under Iowa Code subsection 422.9(2) for Iowa income tax purposes.

Note that this provision is almost identical to a provision that was included in two military benefit bills passed in Congress earlier this year.

Sections Amended:

The second subsection in Section 5 of House File 674 amends Iowa Code section 422.7, Code 2003, by adding new subsection 40. Section 7 of House File 674 adds new paragraph j to subsection 422.9(2), Code 2003.

Effective Date: This provision is retroactively applicable to January 1, 2003, for tax years beginning on or after that date.

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EXEMPTION OF INCOME FROM MILITARY STUDENT LOAN REPAYMENTS - 03 HF 674-D

Prior Law: There was no prior similar provision.

New Provisions

Income realized from military loan repayments received by certain taxpayers that is included in the individual’s federal adjusted gross income is exempted from the individual’s net income for individuals on active duty service in the military. This exemption applies to income from loan repayments of individuals in the national guard or armed forces military reserve who are serving on active duty at the time of the loan repayments. This exemption also applies to individuals in the armed forces of the United States who are on active duty.

Sections Amended: The third subsection in Section 5 of House File 674 amends section 422.7, Code 2003, by adding new subsection 41.

Effective Date: This provision is retroactively applicable to January 1, 2003, for tax years beginning on or after that date.

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EXEMPTION OF GRATUITY PAYMENTS FOR DEATHS OF INDIVIDUALS IN MILITARY SERVICE
-
03 HF 674-E

Prior Law: There was no prior similar provision.

New Provisions:

The death gratuity is intended to provide an immediate cash payment of $6,000 to assist survivors of deceased members of the armed forces to meet their financial needs during the period immediately following a member’s death and before other survivor benefits, if any, are available. To the extent that a death gratuity payment is included in the income of a survivor of a deceased member of the armed forces for federal income tax purposes, the death gratuity payment is excluded for purpose of computing the survivor’s Iowa net income. The death gratuity payment is paid to the "eligible survivors" of members of the armed forces—including members of the reserve components of the armed forces—who die while on active duty, or while performing authorized travel directly to or from active duty for training or inactive-duty training, as well as to members of reserve officers’ training programs who die while performing annual training duty under orders for a period of more than 13 days or while performing authorized travel to or from that duty, to applicants for membership in a reserve officers’ training corps who die while attending field training or a practice cruise or while performing authorized travel to or from the place where such training or cruise is conducted, and to persons who die while traveling to or from, or while at, a place of acceptance for entry upon active duty who have been ordered or directed to go to that place and have been provisionally accepted for that duty or selected for service under the Military Selective Service Act.

Note that Congress has passed two military benefit bills this year that include a provision similar to the above provision.

Section Amended: Section 6 of House File 674 amends section 422.7, Code 2003, by adding new subsection 42.

Effective Date: This provision is effective upon enactment and applies retroactively to tax years ending after September 10, 2001.

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GIVING CERTAIN INDIVIDUALS IN MILITARY SERVICE ADDITIONAL TIME TO FILE RETURNS OR PERFORM OTHER ACTS WITH THE DEPARTMENT - 03 HF 674-F

Prior Law:

An Individual in the armed forces of the United States serving in an area designated as a combat zone or as a qualified hazardous duty area or a person serving in support of those forces was granted additional time to file returns with the department of revenue and finance or perform other acts related to the department. "Other acts related to the department" included filing claims for refund for any tax administered by the department, making tax payments other than withholding payments, filing appeals on the tax matters, filing other tax returns, and performing other acts described in the department’s rules. The additional time period allowed applied to the spouse of the individual described above to the extent the spouse filed jointly or separately on the combined return with the individual or when the spouse was a party to any matter for which the additional time period was allowed.

New Provisions:

An individual in military service who is given additional time to file returns or to perform other acts related to the department of revenue also includes an individual deployed outside the United States away from the individual’s permanent duty station while participating in an operation designated by the United States secretary of defense as a contingency operation as defined in 10 U.S.C. § 101(a) (13), or which became a contingency operation by the operation of law. The individual in the contingency operation is allowed the same time after ceasing to participate in such contingency operation as an individual in a combat zone or hazardous duty area was allowed after leaving the combat zone or hazardous duty area to file returns or perform other acts with the department.

Section Amended: Section 8 of House File 674 amends the second unnumbered paragraph of section 422.21, Code 2003.

Effective Date: This provision is effective as of May 21, 2003 and applies to any period for performing an act that has not expired before May 21, 2003.

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CERTAIN TAX-EXEMPT ORGANIZATION OF PAST OR PRESENT MEMBERS OF U.S. ARMED FORCES CAN HAVE LESS THAN 75% OF MEMBERSHIP FROM PAST OR PRESENT ARMED FORCES MEMBERS AND STILL QUALIFY FOR EXEMPTION FROM IOWA INCOME TAX - 03 HF 674-G

Prior Law:

A veteran’s organization was required to have 75% or more of its membership from past or present U. S. Armed Forces members to be considered to be an organization that was exempt from tax under Section 501(c)(19) of the Internal Revenue Code, and where no part of the net earnings of the organization inured to the benefit of any private shareholder or member. These organizations were also exempt from Iowa income tax except for income from unrelated business activities.

New Provisions:

The revision modifies eligibility criteria for veterans’ organizations by allowing ancestors or lineal descendents to be treated as members for purposes of the membership requirement that provides that substantially all members need to be past or present members of the U. S. Armed Forces in order for the organizations to maintain their tax-exempt status. This will assist some veterans’ organizations in retaining their tax-exempt status. Veterans’ organizations that meet the new membership requirements will continue to be exempt from Iowa income tax.

Note the above revision in the eligibility requirements for veterans’ organizations is included in the military tax bill that passed the U. S. House of Representatives in March of this year.

Section Amended: Section 9 of House File 674 amends section 422.34, subsection 2, Code 2003, by adding a new unnumbered paragraph.

Effective Date: This provision is effective on May 21, 2003, for tax years beginning after May 21, 2003.

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NEW CAPITAL INVESTMENT PROGRAM - 03 HF 677

Prior Law:

The new jobs and income program (NJIP) provided for an investment tax credit for eligible businesses approved by the Department of Economic Development who make a capital investment of at least $10 million and create at least 50 jobs. A waiver of these requirements could be requested under the NJIP program, but the minimum number of jobs to be created could not be less than 15 and the capital investment could not be less than $3 million. An investment tax credit of up to 10% of the new investment could be claimed under the NJIP.

New Provisions:

A new capital investment program has been adopted, which has been dubbed "NJIP Jr." The capital investment for eligible businesses approved by the Department of Economic Development must be at least $1 million. The rate of investment tax credit on new investment is based upon the number of new high-quality jobs created as follows:

The investment tax credit is a nonrefundable credit, with a seven year carryforward for any unused credit. If the business is a partnership, S corporation, limited liability company or estate or trust where the income is taxed directly to the individual, the individual may claim the tax credit based on the pro rata share of earnings from the pass-through entity. However, any eligible businesses under this program who is engaged in the production of value-added agricultural products or uses biotechnology related processes are eligible for a refund of any unused investment credit, which is subject to the $4 million cap already in place in Code section 15.333(2).

If the eligible business disposes of property for which an investment credit is claimed within 5 years of purchase, the income tax liability of the eligible business shall be increased by certain percentages, based on the time period when the property was disposed. In addition, if the eligible business experiences a layoff within Iowa or closes facilities in Iowa, the business may be subject to repayment of these tax credits, subject to the discretion of the Department of Economic Development.

These eligible businesses are also eligible for the sales and use tax refund and research activities credit that is available to businesses under the NJIP.

Also, the waiver provisions of the NJIP program were amended to eliminate the minimum capital investment requirement of $3 million.

Section Amended:

Sections 1-7 of House File 677 creates new Iowa Code Sections 15.381 through 15.387. Section 8 amends section 15.333, subsection 2, Code 2003. Section 9 amends section 15.337, Code 2003.

Effective Date: Retroactive to January 1, 2003, for tax years beginning on or after that date.

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ENTERPRISE ZONE INCOME TAX CREDITS – COOPERATIVES INVOLVED IN VALUE-ADDED AGRICULTURE - 03 HF 681

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 whose project primarily involves the production of ethanol, may elect to transfer all or a portion of its unused investment tax credit to its members. The Department of Economic Development issues tax credit certificates to the members of the cooperative who elect to receive a refund. The total amount of refunds of unused credits is limited to $4 million per year.

New Provisions:

All eligible businesses involved in the production of value-added agricultural products, including cooperatives described in Section 521 of the Internal Revenue Code, can elect to transfer all or a portion of its unused investment tax credit to its members. This option is no longer limited to just cooperatives engaged in the production of ethanol. Tax credit certificates are still issued by the Department of Economic Development, subject to the cap of $4 million per year.

Section Amended:

Section 1 of House File 681 amends section 15.333, subsection 1, Code 2003. Section 2 of House File 681 amends section 15.333, subsection 2, Code 2003.

Effective Date: July 1, 2003, for tax years beginning on or after that date.

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AMENDMENTS TO NEW SCHOOL LOCAL OPTION LAW - 03 HF 683-A

Prior Law:

These sections of this bill were passed to correct a few items set forth in the new school local option tax bill that were not previously amended but should have been. The school local option tax bill provided the following that needed correction:

  1. Statute did not specify the term for which a school district was to receive a supplemental amount nor did it provide a provision to opt out of the supplemental distribution;
  2. The prior law also did not define "statewide tax revenues per student";
  3. If the fund was insufficient to provide the necessary supplemental amounts for each district, the amount in the fund was distributed based on a proportional share of actual enrollment in the district to the actual enrollment in the county; and
  4. Under the previous law, a required certificate of need for certain projects were required for districts with less than two hundred fifty actual enrollment or less than one hundred actual enrollment in the high school.

New Provisions:

Under these new amendments the following changes in the school local option tax was made:

  1. A district that implemented the school local option tax prior to April 1, 2003 and is below the guaranteed student amount in its pro rata share shall receive a supplemental amount up to the guaranteed student amount for the term of the tax only. However, a district can opt out of receiving this supplemental and chose to receive its distribution based on Iowa Code section 422E.3, subsection 5, paragraph "d", in all subsequent years;
  2. Defines the term "Statewide tax revenues per student" as five hundred seventy-five dollars per student. And this provision requires that the general assembly review this amount annually to determine its appropriateness;
  3. If the fund is insufficient to provide the necessary supplemental amounts for each district, then the revenues in the fund will be distributed in the order of the district with the lowest sales tax capacity per student until the money is fully distributed. This may result in there being insufficient funds to assist some of the districts in meeting their guaranteed student amount; and
  4. Eliminates the two hundred fifty actual enrollments or less than one hundred actual enrollments in the high school criteria for requiring the certificate of need for certain projects for which the school local option money is expended.

Section Amended: House File 683, sections 20-25 amends section 422E.3A, as enacted by 2003 Iowa Acts, Senate File 445.

Effective Date: July 1, 2003.

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ENDOW IOWA TAX CREDIT - 03 HF 683-B

Prior Law: None

New Provisions:

An endow Iowa tax credit administered by the Department of Economic Development is available which is equal to 20% of a taxpayer’s endowment gift to a qualified community foundation. The gift must be for a permanent endowment fund established to benefit a charitable cause in Iowa. The Department of Economic Development is responsible for registering and authorizing the tax credits, and controlling the distribution of these tax credits.

The total amount of tax credits authorized cannot exceed $2 million, and the maximum amount of tax credits granted to a single taxpayer cannot exceed $100,000. Any tax credit in excess of the taxpayer’s tax liability can be carried forward for the following five years or until depleted, whichever occurs first. The endow Iowa tax credit cannot be authorized after December 31, 2005. The tax credit is not transferable.

The tax credit is available for individual income, corporation income, franchise tax, insurance premiums tax and moneys and credits tax. An individual can claim the credit for a gift made by a partnership, limited liability company, S corporation, estate, or trust electing to have the income taxed to the individual, based on the pro rata share of earnings from the pass-through entity.

Section Amended:

Section 83 of House File 683 creates new section 15E.305. Section 84 of House File 683 creates new section 422.11H. Section 85 of House File amends section 422.33 by adding new subsection 14. Section 86 of House File amends section 422.60 by adding new subsection 7. All changes are to the 2003 Code.

Effective Date: Retroactive to January 1, 2003, for tax years beginning on or after that date.

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INCREASE IN FUNDING FOR THE PROPERTY REHABILITATION TAX CREDIT - 03 HF 683-C

Prior Law:

The annual standing appropriation for the property rehabilitation credit was limited to two million, four hundred thousand dollars per fiscal year, starting with the fiscal year beginning on July 1, 2000.

New Provisions:

For the fiscal years beginning July 1, 2005, and July 1, 2006, an additional five hundred thousand of tax credits may be approved for rehabilitation projects located in cultural and entertainment districts that are certified by the department of cultural affairs, pursuant to section 303.3B of the Code as enacted in Division XII of House File 692 of the 2003 Acts. If any of the additional property rehabilitation credits allocated for projects In certified cultural and entertainment districts are not approved during a fiscal year, those credits may be carried over to the next fiscal year.

Section Amended: Section 90 of House File 683 amends section 404A.4, subsection 4, Code 2003.

Effective Date:This provision takes effect upon enactment, which was on June 19, 2003.

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THE IOWA STREAMLINED SALES TAX ACT - 03 HF 683-D

Prior Law:

Iowa sales and use tax law was not coordinated in any way with the sales and use tax law of other states. There was no effort to harmonize tax policies among the states relying on sales and use taxes for revenue either with regard to common definitions of frequently used terms, uniform sourcing of taxable transactions, uniform treatment of remote sellers, or any unified attempt at an agreement to simplify the collection and remittance of sales and use tax.

New Provisions:

Sections 94 through 203 of House File 683 rewrite Iowa sales and use tax law by combining Code chapter 422, division IV (sales tax), Code chapter 423 (use tax), and provisions of the Multistate Streamlined Sales and Use Tax Agreement (Agreement) into a new Code chapter 423. These steps are taken in order to allow Iowa to 1) eventually require remote sellers who compete with instate retailers and do not currently collect Iowa sales and use tax to collect and remit those taxes, 2) to provide an orderly procedure for Iowa‘s entry into the Agreement, and 3) to organize and simplify existing sales and use tax provisions of the Code.

Section 94 of House File 683 sets out the definitions applicable to the new Code chapter. These definitions are from the definitions used in the present sales and use tax statutes and from the Agreement and the Uniform Sales and Use Tax Administration Act (Act) which is part of the Agreement.

Sections 95 through 97 impose the sales tax, set out sales tax exemptions, almost all of which are also applicable to use tax, and provide for sales tax refunds. Almost all of the provisions of these sections are presently part of current sales tax law. Section 96 of the bill puts all exemptions in the same Code section as opposed to the current Code which locates exemptions in numerous places; e.g. many agriculture and processing-related exemptions are listed under the definition of "Retail sale" set out in division IV of existing chapter 422. Several exemptions are currently found in the Code but not in the portion of the Code related to taxation, and one exemption is not found in the Code at all but only in the Session Laws.

Sections 98 and 99 impose the use tax and provide for exemptions applicable only to use tax. All provisions of those sections are part of the current use tax statutes.

Sections 100 through 105 incorporate the Streamlined Act into Iowa statute law and authorize the director of revenue and finance to enter into the Agreement on behalf of the state; provide that entry into the Agreement does not amend or modify any law of the state; incorporate certain requirements which the Agreement must contain into Iowa law including: achieving more uniform tax rates; uniform standards for sourcing of transactions; uniform definitions; centralized and electronic registration of sellers; no change in a seller’s nexus status as a result of registration; monetary allowances for registering retailers; consumer privacy provisions; and a provision stating that the Agreement binds and benefits only its member states.

Sections 106 through 140 provide for the administration of the sales and use tax as it relates to retailers not registered under the Agreement. Those sections incorporate current sales and use tax provisions relating to retailers’ collections from customers and payment of tax to the Department of Revenue and Finance, penalties, filing of returns, and refunds. Sections 108 through 113 incorporate the sourcing rules set out in the Agreement. These rules establish which state is allowed to tax transactions having connections to more than one state. There are general sourcing rules and sourcing rules applicable only to certain specific types of transactions; among the latter are sourcing rules applicable to the rental of certain motor vehicles, trailers, semitrailers, and aircraft, and the furnishing of telecommunication services.

Sections 141 through 149 provide for the administration of the sales and use tax as it relates to retailers registered under the Agreement. In addition, the sections specify the benefits and obligations of retailers who register under the Agreement. They set out the differing means by which retailers registered under the Agreement can file returns and pay tax, including the manner in which the special categories of model 1, 2, and 3 sellers can do this. The sections also explain which registered sellers can use service providers or automated systems to collect and remit or calculate tax due.

Sections 150 through 203 of House File 683 contain a number of repealing, enacting, and coordinating amendments to the Code.

Section Amended:

House File 683 repeals Division IV of Code chapter 422 and existing chapter 423. It then adds a new Chapter 423 to the Code. A large number of sections in various Code chapters are amended because of the need for coordinating amendments for this large-scale rewriting of the Iowa sales and use ax statutes. On June 19, 2003, the Governor vetoed subsection 68 of section 96 of the House File. The vetoed language postponed the phase-out of the sales and use tax on residential utilities.

Effective Date: July 1, 2004.

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THE CREATION OF THE STREAMLINED SALES TAX ADVISORY COUNCIL - 03 HF 683-E

Prior Law: The Streamlined Sales Tax Advisory Council did not exist.

New Provisions:

Section 204 of House File 683 creates the Iowa Streamlined Sales Tax Advisory Council. Its basic purpose is to advise the Iowa streamlined sales and use tax delegation regarding the proposed Streamlined Sales and Use Tax Agreement, specifically and especially the Streamlined Sales and Use Tax Act’s potential effects on Iowa business. The Committee’s existence is ongoing; it reports its recommendations to the Governor and the General Assembly at the end of each calendar year. The Department of Revenue and Finance is to provide administrative support to the Council. The Director of the Department, after consulting with two groups, appoints the Council members. The Council’s membership is drawn from small, medium, and large Iowa businesses, the "retail community as a whole", "taxpayers as a whole", and the Department of Revenue. The Director can appoint additional council members as well.

Section Amended: Section 204 is not to be codified.

Effective Date: July 1, 2003.

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ETHANOL BLENDED GASOLINE TAX CREDIT – RETROACTIVE APPLICATION - 03 HF689

Prior Law:

The ethanol blended gasoline tax credit available for service stations for which more than 60% of the total gallons of gasoline sold is ethanol was only available for tax years beginning on or after January 1, 2002. Therefore, a taxpayer with a fiscal year ending in 2002 was not eligible for the ethanol blended gasoline tax credit.

New Provisions:

The ethanol blended gasoline tax credit is available for eligible taxpayers that have a fiscal year ending in 2002. The 60% requirement will be measured based on the total number of gallons of ethanol sold and dispensed through all metered pumps located at the taxpayer’s service station from January 1, 2002 until the beginning of the taxpayer’s next fiscal year.

Any refund claims filed by taxpayers with a fiscal year ending in 2002 for the ethanol blended tax credit must be filed prior to October 1, 2003. Any claims filed on or after October 1, 2003 will not be allowed, even though the normal three year statute of limitations for refund has not expired.

Section Amended: Section 2 of House File 689 amends 2001 Iowa Acts, chapter 123, section 6, subsection 2.

Effective Date: Retroactive to January 1, 2002.

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PROPERTY TAX REFORM - 03 HF 692-A

Prior Law:

Real property was assessed at market value with the market value for agricultural property, excluding dwellings, being based on productivity.

The growth limitation on assessed values was 4%.

The increase in assessed values for residential property and agricultural property were tied together so that any increase in one class would result in a rollback of values for the other class.

The director of revenue and finance was required to equalize assessments among classes of property every 2 years.

New Provisions:

Real property, other than land, is to be assessed on a value per square foot basis. The assessed value per square foot for an existing structure, including agricultural dwellings, is equal to the 2005 assessed value divided by the number of square feet. The assessed value per square foot for an existing structure purchased after January 1, 2005 is equal to the purchase price (adjusted for inflation) divided by the number of square feet. The assessed value per square foot of a structure constructed after January 1, 2005 is equal to the market value (adjusted for inflation) divided by the number of square feet. Additions to an existing structure that increase the square footage shall be valued by multiplying the assessed value per square foot by the increased square footage. If the addition substantially increases the square footage, the valuation of the addition shall be equal to its market value.

The assessed value per square foot for an existing agricultural structure that is not an agricultural dwelling is equal to the 2005 assessed value divided by the number of square feet. The assessed value per square foot for an existing structure purchased after January 1, 2005 and a structure constructed after January 1, 2005 is equal to the productivity value (adjusted for inflation) divided by the number of square feet. Additions to an existing structure that increase the square footage shall be valued by multiplying the assessed value per square foot by the increased square footage. If the addition substantially increases the square footage, the valuation of the addition shall be equal to its productivity value.

Definitions are provided for "annual inflation factor," "cumulative inflation factor," "newly constructed," "structure," and "residential property."

The director of revenue and finance, by August 15, 2007 and every 2 years thereafter, shall equalize the assessed value per square foot resulting from the application of the cumulative inflation factor.

A land tax is to be imposed beginning with the July 1, 2007 fiscal year.

The provisions of House File 692 are subject to legislative review at least once every 5 years.

A property tax implementation committee is to be established to make recommendations relating to the provisions of House File 692. The committee is to include 4 members of the general assembly, members from the department of revenue and finance, the department of management, counties, cities, school districts, assessors, commercial, residential, and agricultural property taxpayers, and other appropriate stakeholders. The chairpersons of the committee shall be those members of the general assembly appointed by the majority leader of the senate and the speaker of the house of representatives. The committee is to submit reports to the general assembly by October 31, 2003, 2004, and 2005.

Sections Amended: Sections 1 through 43 of House File 692 (Division I) amend Iowa Code chapters 441, 443, and 444, Code 2003.

Effective Date:

July 1, 2005. Applies to assessment years beginning on or after January 1, 2006 and applies to tax collections for fiscal years beginning on or after July 1, 2007.

The effective date for establishing the implementation committee is June 19, 2003.

The legislation is repealed on June 30, 2005.

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THE CREATION OF INDUSTRIAL PROCESSING EXEMPTION AND SALES, SERVICE, AND USE TAX STUDY COMMITTEES - 03 HF 692-B

Prior Law: Standing committees, constituted for the purpose of investigating and reporting on specific aspects of sales and use tax law, did not exist under Iowa law.

New Provisions:

On or before July 1, 2003, the Department shall initiate and coordinate the establishment of two separate committees and provide staffing assistance to those committees. The first committee is the Industrial Processing Exemption Study Committee. This Committee exists to make recommendations to the General Assembly regarding legislation and the administration of Iowa’s industrial processing exemption. The Committee members shall be drawn from government, business, "and other stakeholders." The Committee is to report annually to the General Assembly through January 1, 2013.

The second committee is the Iowa Sales, Services, and Use Tax Study Committee. This Committee studies major aspects of existing sales and use tax law including but not limited to retaining, eliminating and creating exemptions, tax simplification and consistency, implementing streamlined sales tax legislation, examining tax rates, and

comparing Iowa sales and use tax law to the law of other states. The Committee is to include representatives of farmers and other agricultural interests, retailers, contractors, taxpayers generally, and "other stakeholders". The Committee is to report to the General Assembly by January 1, 2004.

Section Amended: Sections 73, 74, and 75 of House File 692 do not amend or create any sections of the Code.

Effective Date: July 1, 2003.

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UNIVERSITY-BASED RESEARCH UTILIZATION PROGRAM TAX CREDIT - 03 HF 692-C

Prior Law: None

New Provisions:

A university-based research utilization program tax credit administered by the Department of Economic Development is available for purposes of encouraging the utilization of university-based research. A new or existing business that utilizes a technology developed by an employee at a university under the control of the Iowa Board of Regents may apply to the Department of Economic Development to participate in this program.

Once a business is approved under this program, tax credit certificates are issued by the Department of Economic Development to the business and to the university employee responsible for the technology utilized by the approved business. The tax credit certificates are issued after tax returns are filed by the approved business. For the 5 tax years following the tax year in which the business is approved, the Department of Revenue will notify the Department of Economic Development with information on the total amount of tax paid by these approved businesses.

The tax credits are issued as follows:

  1. A tax credit certificate equal to 30% of the tax liability of the approved business is issued to the approved business. The value of a certificate issued to an approved business for a tax year shall not exceed $225,000, and the total value over a five year period cannot exceed $600,000.
  2. A tax credit certificate equal to 10% of the tax liability of the approved business is issued to the university employee responsible for the technology used by the approved business. The value of the certificate issued to the university employee for a tax year shall not exceed $75,000, and the total value over a five year period cannot exceed $200,000.

In addition, the university where the technology was developed will receive funds equal to 30% of the tax liability of the approved business. The university share shall not exceed $225,000 per year per technology utilized, and the university share shall not exceed $600,000 per technology utilized over a five year period.

The Department of Economic Development shall notify the Department of Revenue when tax credit certificates are issued. The total amount of tax credit certificates authorized cannot exceed $2 million for the fiscal year beginning July 1, 2004. For the fiscal years beginning July 1, 2005 through July 1, 2010, not more than $10 million of tax credit certificates can be issued. No tax credit certificates can be issued for fiscal years beginning on or after July 1, 2010.

The tax credit is available for individual income and corporation income tax only. Any tax credit in excess of the taxpayer’s tax liability can be carried forward for the following five years or until depleted, whichever occurs first. The tax credit is not transferable. An individual can claim the credit of a partnership, limited liability company, S corporation, estate, or trust electing to have the income taxed to the individual, based on the pro rata share of earnings from the pass-through entity.

Section Amended:

Section 111 of House File 692 creates new section 262B.11. Section 112 of House File 692 creates new section 422.11H. Section 113 of House File amends section 422.33 by adding new subsection 14, Code 2003.

Effective Date: July 1, 2004, for fiscal years beginning on or after that date.

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MILITARY VETERAN DISCHARGE RECORD IS CONFIDENTIAL - 03 SF 94

Prior Law: The military service discharge record of a veteran recorded by the county recorder was a public record pursuant to Iowa Code § 22.7.

New Provisions: The military service discharge record of a veteran recorded by the county recorder is a confidential record.

Sections Amended:

Section 1 of Senate File 94 amends Iowa Code § 22.7 by adding new subsection 47, section 2 amends § 331.608 by adding new subsection 5A, and section 3 amend § 331.608, subsection 6, Code 2003.

Effective Date: July 1, 2003.

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RELACEMENT TAX - 03 SF 275

Prior Law: Nearly all of the provisions in Senate File 275 are new law rather than amendments to existing law. The following are the only significant changes to existing law:

The city of Waukee in Dallas County was a natural gas competitive service area.

The utility replacement tax task force was scheduled to end January 1, 2003.

New Provisions:

Definitions are added for "cogeneration facility," "new electric power generating plant," and "taxable value."

"Local amount" is defined for purposes of determining the local taxable value for a new electric power generating plant.

The natural gas competitive service area of which the city of Waukee is included is expanded to include the area within 2 miles of Waukee as of January 1, 1999, not including any part of the cities of Clive, Urbandale, or West Des Moines.

A new statewide natural gas delivery rate is established of .0111 per therm of natural gas delivered to or consumed by new electric generating plants. The natural gas delivered to new electric generating plants is not subject to the threshold recalculation for certain increases and decreases in taxable therms of natural gas.

A replacement transmission tax at increased rates is imposed on a municipal utility whose anticipated tax revenue exceeded its replacement transmission tax by more than $100,000 for tax year 1999.

A method for allocation of replacement generation tax incurred by a stand-alone new electric power generating plant is provided.

A method for allocation of gas delivery taxes on deliveries of natural gas to a new electric power generating plant is provided.

A method of allocation of replacement generation tax incurred by stand-alone electric generating plants of municipal utilities and municipal owners is provided.

The utility replacement tax task force is extended for 2 years through January 1, 2005.

The assessed value for gas and electric utility property is required to be adjusted annually.

A formula to determine the taxable value for property generating a replacement tax on an annual basis is provided as is and a method for determining the value if the property is generating tax for the first time.

Sections Amended:

Section 1 of Senate File 275 amends § 426B.2, subsections 1 and 3; section 2 amends § 437A.3 by adding new subsection 4A; section 3 amends § 437A.3, subsection 10, by adding a new unnumbered paragraph; section 4 amends § 437A.3, subsection 13, by adding a new unnumbered paragraph; section 5 amends § 437A.3, subsection 21, paragraph a, subparagraph 1, subparagraph subdivision am; section 6 amends § 437A.3 by adding new subsection 27A; section 7 amends § 437A.5, subsection 1, by adding new paragraph c; section 8 amends § 437A.5, subsection 6; section 9 amends § 437A.7 by adding new subsection 1A; section 10 amends § 437A.8, subsection 4, by adding new paragraph d; section 11 amends § 437A.15, subsection 3, paragraph a; section 12 amends § 437A.15, subsection 3, by adding new paragraph f; section 13 amends § 437A.15, subsection 7; section 14 amends § 437A.19, subsection 2, paragraph f; and section 15 provides an effective date. All amendments are to the 2003 Code.

Effective Date: May 1, 2003. Applies retroactively to tax years beginning on or after January 1, 2003.

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INHERITANCE LAW--DEFINITIONS - 03 SF 366-A

Prior Law:

Prior to this amendment, Iowa Code section 450.1 only provided definitions for the terms: "person"; "personal representative"; "Internal Revenue Code"; and "Real estate or real property". This Code section was also arranged differently.

New Provisions:

The changes to Iowa Code section 450.1 adds and defines the term "stepchild" to mean, the child of a person who was married to the decedent at the time of the decedent's death, or the child of a person to whom the decedent was married, which person died during the marriage to the decedent. The amendment of the Code section also included a rearrangement of the section to a more understandable format.

Section Amended: Senate File 366, section 1 amends section 450.1, Code 2003.

Effective Date: Effective for estates of decedents dying on or after July 1, 2003.

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INHERITANCE—TAXABLE ESTATE - 03 SF 366-B

Prior Law:

Under prior law all property of a decedent, whether a resident of Iowa or not and whether the property was tangible or intangible was to be included in the gross estate. Even tangible personal property owned by the decedent, but was located outside of Iowa must be included in the estate for Iowa tax purposes.

New Provisions:

Under this new law, the property to be included in the gross estate is more limited. The new law requires that any property or interest in the following that is transferred by a decedent owner in any manner must be included in the gross estate:

  1. Real estate and tangible personal property located in this state regardless of whether the decedent was a resident of this state at death; and
  2. Intangible personal property owned by a decedent domiciled in this state.

Consequently, under this new law tangible personal property that is located outside of Iowa would not be included in the taxable estate for Iowa inheritance tax.

Section Amended: Senate File 366, section 2 Amends section 450.2, Code 2003.

Effective Date: Effective for estates of decedents dying on or after July 1, 2003.

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INHERITANCE TAX-VALUATION DATE OF PROPERTY TO BE INCLUDED IN THE ESTATE - 03 SF 366-C

Prior Law: Under previous law, valuation of property to be included in the estate was at the date of death.

New Provisions:

Iowa Code section 450.3(2) was amended to reflect a change in the citation to the Internal Revenue Code. In addition, a sentence was added to value the estate property that is transferred based on the net market value on the date of transfer.

Section Amended: Senate File 366, section 3 amends section 450.3(2), Code 2003.

Effective Date: Effective for estates of decedents dying on or after July 1, 2003.

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RECORDS OF DEFERRED ESTATES - 03 SF 366-D

Prior Law:

Under the previous language of Iowa Code section 450.20 a separate record of a deferred estate must be kept by the department if the inheritance tax due on the estate was not paid within fifteen months from the date of death.

New Provisions:

The new amendment to Iowa Code section 450.20 provides that the record of the deferred estate must be kept by the department if the inheritance tax due on the estate has not been paid on or before the last day of the ninth month after the death of the decedent.

Section Amended: Senate File 366, section 4, amends section 450.20, Code 2003.

Effective Date: Effective for estates of decedents dying on or after July 1, 2003.

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IOWA TRUST CODE - 03 SF 366-E

Prior Law:

On July 1, 2000, the Iowa Trust Code became effective law in Iowa. The sections of the Iowa Trust Code (Iowa Code sections 633.1101 through 633.7107 set forth the law that governed the validity, enforceability and administration of Iowa trusts.

New Provisions:

The new language set forth in this bill provides numerous changes to the Iowa Trust Code including, but not limited to, oral trusts being invalid, validity of trusts, governing law and the validity of trusts, distributions, defines competency, notices, beneficial succession, and nonjudicial settlements.

Section Amended: Senate File 366, sections, 6 through 22 amends sections 633.1101 through 633.7107, Code 2003.

Effective Date: July 1, 2003

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INHERITANCE TAX-RECIPROCITY REPEALED - 03 SF 366-F

Prior Law: Pursuant to the previous language of Iowa Code section 450.91, Iowa provides an exemption from Iowa inheritance tax for tangible personal property for states that provided a reciprocal exemption for Iowa inheritance tax.

New Provisions: Repeals this section.

Section Amended: Senate File 366, section 23 repeals section 450.91, Code 2003.

Effective Date: Effective for estates of decedents dying on or after July 1, 2003.

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ENFORCEMENT ENHANCEMENTS APPLICABLE TO TOBACCO PRODUCT MANUFACTURERS - 03 SF 375

Prior Law: This is all new law in chapter 453D.

New Provisions:

Tobacco product manufacturers must provide certification to the director of revenue and the attorney general by April 30 of each year that the manufacturer is either a participating manufacturer or is in compliance with the requirements for a nonparticipating manufacturer.

The director of revenue is to publish on the department’s Web site a directory listing all tobacco product manufacturers that have provided current and accurate certification.

A penalty is imposed for affixing stamps to a package of cigarettes of a manufacturer not included in the directory and for selling or possessing cigarettes of a manufacturer not included in the directory.

A foreign nonparticipating manufacturer that is not registered to do business in Iowa must appoint an agent as a condition for having the nonparticipating manufacturer’s brand family included in the directory.

No later than 20 days after the end of each quarter each stamping agent and distributor is required to submit information as the director of revenue requests to facilitate compliance with chapter 453D.

The attorney general may require from a nonparticipating manufacturer proof of the establishment of an escrow fund and the amount of money in the fund.

Penalties are imposed for various violations of chapter 453D.

A determination by the attorney general not to include or to remove from the directory a brand family or tobacco product manufacturer is subject to review as prescribed by rule.

The director of revenue and the attorney general are responsible for adopting rules to implement chapter 453D.

A standing appropriation of $25,000 is made to the department of revenue annually for enforcement of chapter 453D and an appropriation of $50,000 is made to the department for the 2003-2004 fiscal year.

Sections Amended: Senate File 375 creates a new chapter 453D.

Effective Date: May 1, 2003.

The provision requiring the director of revenue to develop and publish on its Web site a directory listing of all tobacco product manufacturers that have provided current and accurate certification is applicable no later than 90 days after May 1, 2003.

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TOBACCO RETAILERS TRAINING / PENALTIES - 03 SF 401

Prior Law:

Only county health departments, city health departments, and cities could pursue penalties against retailers for the sale of cigarettes or tobacco products to a person under 18 years of age.

The penalty for a first violation was a fine of $300 and for subsequent violations permit suspension or revocation.

New Provisions:

The Iowa Department of Public Health is given the authority to pursue penalties against a retailer for the sale of cigarettes or tobacco products to a person under 18 years of age.

The alcoholic beverage division of the Department of Commerce is required to develop a tobacco compliance employee training program to familiarize the employees with state and federal laws.

The penalties for the sale of cigarettes or tobacco products to a person under 18 years of age are changed. Fines are included for second, third, and fourth violations.

Sections Amended:

Section 1 of Senate File 401 amends § 453A.2 by adding new subsection 5A; section 2 adds new section 453A.2A; section 3 amends § 453A.22, subsection 2; and section 4 amends § 453A.22 by adding new subsections 2A and 2B. All changes are to the 2003 Code.

Effective Date: April 11, 2003.

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TRANSFER OF CERTAIN TAX CREDITS - 03 SF 441

Prior Law:

The eligible housing business tax credit and the property rehabilitation tax credit were not transferable to any other taxpayer. Also, tax credit certificates were not required to be completed for the eligible housing business tax credit.

New Provisions:

Tax credit certificates are now issued by the Department of Economic Development for eligible businesses who qualify for the eligible housing business tax credit. The tax credit certificate must be attached to the tax return for the year in which the credit is claimed.

The eligible housing business tax credit can be transferred to any person or entity, if low-income housing tax credits authorized under section 42 of the Internal Revenue Code are used to assist in the financing of the housing development. The property rehabilitation tax credit can also be transferred to any person or entity.

For the eligible housing business tax credit, the transferee must, within 90 days of transfer, submit the transferred tax credit certificate to the Department of Economic Development with the transferee’s name, tax identification number, address, and the denomination that the replacement tax credit certificate will carry. Within 30 days of receiving the transferred tax credit certificate, the Department of Economic Development will issue a replacement tax credit certificate to the transferee.

For the property rehabilitation tax credit, the transferee must, within 90 days of transfer, submit the transferred tax credit certificate to the state historic preservation office in the Department of Cultural Affairs with the transferee’s name, tax identification number, address, and the denomination that the replacement tax credit certificate will carry. Within 30 days of receiving the transferred tax credit certificate, the state historic preservation office will issue a replacement tax credit certificate to the transferee.

The transferee can used the tax credit against individual income, corporation income, franchise tax and insurance premiums tax. Any consideration received for the transfer of the tax credit shall not be included as income for Iowa tax purposes, and any consideration paid for the transfer of the tax credit shall not be deductible for Iowa tax purposes.

Section Amended:

Section 1 of Senate File 441 amends section 15E.193B, subsection 8, Code 2003. Section 3 of Senate File 441 amends section 404A.4 by adding new subsection 5, Code 2003.

Effective Date: Retroactive to January 1, 2003, for tax years beginning on or after that date.

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UPDATE OF REFERENCES TO THE INTERNAL REVENUE CODE - 03 SF 442-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 31, 2002.

New Provisions:

The primary reference to the Internal Revenue Code was amended to January 1, 2003 to include the federal income tax changes in the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147). A second primary reference to the Internal Revenue Code was added for corporate income tax with the same January 1, 2003 date. 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 except the federal tax change for additional 30% first-year bonus depreciation for eligible property and the federal change that provides a five-year carryback for all net operating losses. These provisions are described in detail in other summaries. One of the major provisions of the federal legislation that was adopted was the $250 deduction for teachers and other educators for classroom materials that applied on 2003 returns.

The references to the Internal Revenue Code in the various statutes for the Iowa research activities credits are updated to January 1, 2003, so the federal changes in the research activities credit are considered to have been adopted for Iowa tax purposes.

Sections Amended:

Section 1 and section 2 of Senate File 442 amend section 15.335, subsection 4 and section 15A.9, subsection 8, paragraph e, Code 2003. Section 3 amends section 422.3, subsection 5, Code 2003. Section 7 amends section 422.10, subsection 3, Code 2003. Section 8 adds new subsection 6A to section 422.32, Code 2003. Section 9 amends section 422.33, subsection 5, paragraph d, Code 2003.

Effective Date: Sections 1 through 3, and sections 7 through 9 are retroactive to January 1, 2003, for tax years beginning on or after that date.

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DECOUPLING FROM BONUS DEPRECIATION - 03 SF 422-B

Prior Law:

The Job Creation and Worker Assistance Act of 2002 passed by Congress in March 2002 provided for a 30% "bonus depreciation" in Section 168(k) of the Internal Revenue Code for assets placed in service after September 10, 2001, and before September 11, 2004. The primary reference to the Internal Revenue Code in various statutes were amended through January 31, 2002, which did not include the provisions of the Job Creation and Worker Assistance Act of 2002.

New Provisions:

The primary reference to the Internal Revenue Code was amended to January 1, 2003. However, for individual, corporation and franchise tax purposes, the provisions relating to "bonus depreciation" were not adopted. Therefore, the MACRS (modified accelerated cost recovery system) method of depreciation without the "bonus depreciation" provision in Section 168(k) of the Internal Revenue Code must be used in computing depreciation for Iowa tax purposes for assets placed in service after September 10, 2001, and before September 11, 2004.

This adjustment will also result in a different basis of assets for Iowa tax purposes. Therefore, if a sale of disposition of "bonus depreciation" property occurs and the Iowa depreciation adjustment applied to this property in prior years, the amount of gain or loss on the sale or disposition of the asset reported on the federal return must be adjusted for Iowa purposes to account for the different basis.

For individual income tax purposes, to the extent that itemized deductions for federal tax purposes were computed on the basis of federal adjusted gross income with the "bonus depreciation" deduction, the itemized deductions for Iowa purposes are computed with federal adjusted gross income without the "bonus depreciation" adjustment.

In addition, for individual income tax purposes, to the extent tax preferences and adjustments for alternative minimum tax were computed on the basis of federal adjusted gross income with the "bonus depreciation" adjustment for federal tax purposes, the tax preferences and adjustments are computed without the "bonus depreciation" adjustment for Iowa alternative minimum tax purposes.

Section Amended:

Section 4 of Senate File 442 amends section 422.5, subsection 1, paragraph k, subparagraph 1, Code 2003. Section 5 amends section 422.7 by adding new subsection 39, Code 2003. Section 6 amends section 422.9, subsection 2, by adding new paragraph j, Code 2003. Section 10 amends section 422.35 by adding new subsection 19, Code 2003.

Effective Date: Retroactive to September 10, 2001, for tax years ending on or after that date.

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DECOUPLING FROM FEDERAL 5-YEAR NOL CARRYBACK PROVISION - 03 SF 442-C

Prior Law:

The Iowa net operating loss provisions were almost identical to the federal net operating loss provisions. Most net operating losses could be carried back two taxable years preceding the loss year. However, net operating losses from casualty or theft losses or net operating losses in a presidential declared disaster area could be carried back three years. In addition, net operating losses from the trade or business of farming could be carried back five years. All the net operating losses, that remained after being carried back or if not required to be carried back, could be carried forward twenty taxable years.

New Provisions:

The Job Creation and Worker Assistance Act of 2002 included a provision which provided a five-year carryback period for all net operating losses that arise in a tax year ending during 2001 or 2002 and not just net operating losses from the trade or business of farming. However, this provision was not adopted for Iowa income tax purposes. Senate File 442 included no amendments to subsection 3 of Iowa Code section 422.9, which provides statutory authority for any changes to Iowa net operating loss provisions.

Sections Amended: Not Applicable.

Effective Date: Not Applicable.

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PROPERTY TAX EXEMPTION FOR OPEN PRAIRIES AND WILDLIFE HABITATS - 03 SF 444

Prior Law:

Prior law remains unchanged with the exception that an additional requirement was added for open prairies and wildlife habitats to qualify for a property tax exemption.

New Provisions:

The board of supervisors must provide for certification that the property has adequate ground cover and that all noxious weeds are being controlled to prevent the spread of seeds.

Sections Amended: Sections 1 and 2 of Senate File 444 amend § 427.1, subsection 22, and section 3 amends § 427.1, subsection 24, Code 2003.

Effective Date: July 1, 2003. Applies to assessment years beginning on or after January 1, 2004.

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SCHOOL LOCAL OPTION TAX - 03 SF 445

Prior Law:

Under previous law, a tax up to one percent was imposed on sales within a jurisdiction approving the local option taxes. By virtue of a statutory formula the local option monies collected by the department were returned to the schools within the jurisdiction and the revenues were to be used for school infrastructure purposes only.

New Provisions:

This new law amends chapter 422E that implements school local option tax. This law makes extensive revisions of the tax. These revisions are listed as follows:

  1. The school local option tax will be automatically repealed as of December 31, 2022.
  2. Three new areas were added in which revenues from this tax can be expended: property tax relief; demolition work; and activities listed in Iowa Code sections 298.3 and 300.2.
  3. Amendments specify that the ballot for this tax must be substantially similar to the petition of the board of supervisors or motions of a school district or school districts requesting the election and include the rate of tax, imposition, repeal date, and the specific purpose or purposes for which the revenues will be expended.
  4. A revenue purpose statement must be submitted to indicate what projects the monies from the tax will be used. If a revenue purpose statement is not submitted then the new amendment sets forth the purposes and the order in which the revenues will be expended.
  5. Requires that a change in use of the revenues from the tax be subject to an election.
  6. Tax, penalties and interest from this tax are to be credited to Secure an Advanced Vision for Education Fund (SAVEF), as provided in section 422E.3A,
  7. Revenues from deposits of local option monies into the SAVEF will be distributed in a manner different from the previous school local option distribution. Under this new law, the department will annually compute a guaranteed school infrastructure amount by June 1, each year. The distribution is as follows:

    a. For jurisdictions that have an approved school local option tax that was voted in prior to April 1, 2003:

        1. Above guaranteed amount: the jurisdiction that has a per student capacity above the guaranteed amount will receive its pro rata share of local option under the normal formula; or
        2. Below the guaranteed amount: If a jurisdiction has a per student capacity below the guaranteed amount, the school district will receive it pro rate share and a supplement to bring the district up to the guaranteed school amount.

b. For jurisdictions that have approved a school local option tax that was approved after April 1, 2003: A school district is to receive its pro rata share not to exceed its guaranteed school infrastructure amount. If a district’s pro rata share is less than the guaranteed school infrastructure amount, then the district will receive a supplement to reach the guaranteed amount.

c. Continuation of the tax: A jurisdiction that has voted on and approved continuation of the school local option tax on or after April 1, 2003, shall receive the pro rate share under the old formula not to exceed the guaranteed amount and if the pro rata amount is less than the guaranteed amount, then the district will receive a supplemental amount to meet the guaranteed threshold.

  1. The law imposes limitations on spending for school districts that have less than one hundred actual enrollments in high school. Such a district must receive a certificate of need from the department of education to expend on a forbidden project. The law provides the factors to consider if a certificate of need is necessary.
  2. This law also allows a school district to enter into an Iowa Code chapter 28E agreement for the sharing of the revenues with another school district, a community college or area education agency.
  3. This law also repeals all school local option tax effective June 30, 2023.

Section Amended: Senate File 445 amends sections 422E.1-422E.4 and 422E.6, Code 2003.

Effective Date: May 30, 2003.

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INDUSTRIAL MACHINERY, EQUIPMENT, & COMPUTERS REPLACEMENT TAX PHASEOUT AND REPEAL OF PERSONAL PROPERTY TAX REPLACEMENT TO LOCAL GOVERNMENTS - 03 SF 453-A

Prior Law:

A standing appropriation of $67,737,000 was established for state reimbursement to local governments for personal property tax replacement (section 405A.8).

A standing unlimited appropriation was established for state reimbursement to local governments for industrial machinery, equipment, and computers tax replacement (section 427B.19A).

A city or county that failed to meet the filing deadline for the annual financial report to the department of management or auditor of state, respectively, had 5 ¢ per capita withheld from their 405A payment from the state until the report was filed.

State payment of tax replacement for the property tax on industrial machinery, equipment, and computers was scheduled to end in the 2005-2006 fiscal year.

A portion of the funds established in chapter 405A was transferred to the department of revenue and finance to pay litigation expenses incurred in defending property valuations.

Industrial machinery, equipment, and computers were required to be revalued by the assessor for any year in which there was insufficient funding for tax replacement.

New Provisions:

Chapter 405A (personal property tax replacement) was repealed.

$10,081,685 was appropriated to the industrial machinery, equipment, and computers tax replacement fund for the 2003-2004 fiscal year. This appropriation was increased to $11,281,685 by Senate File 458, section 37, Division IV.

Payments will be withheld from the homestead tax credit fund (425.1) rather than the personal property tax replacement fund (405A.8) for cities and counties that fail to meet the filing deadline for annual financial reports.

State payment of tax replacement for the property tax on industrial machinery, equipment, and computers is scheduled to end in the 2003-2004 fiscal year (2 years sooner).

Amounts needed to pay litigation expenses are to be transferred from only the homestead tax credit fund (section 425.1) and the agricultural land tax credit fund (section 426.1) since section 405A.8 was repealed.

The revaluation of 2001 assessment year industrial machinery, equipment, and computers required to be done in 2003 because of insufficient funding for the 2002-2003 fiscal year is void and taxes payable on this valuation are not to be levied for taxes payable in the 2003-2004 fiscal year.

Section 427B.19B requiring the revaluation of industrial machinery, equipment, and computers for any year there is insufficient funding to cover tax replacement is repealed.

Sections Amended:

Section 2 of Senate File 453 (Division I) amends § 331.403, subsection 3; section 4 amends § 384.22; section 5 amends § 427B.19, subsection 3, unnumbered paragraph 1; section 6 amends § 427B.19, subsection 3, paragraph c; section 7 amends § 427B.19A, subsection 1; section 9 amends § 441.73, subsection 4; section 10 does not amend any Code section but makes the revaluation of industrial machinery, equipment, and computers for the 2001 assessment year void; and section 11 repeals chapter 405A (personal property tax replacement) and § 427B.19B (industrial machinery, equipment, and computers tax replacement). All amendments are to the 2003 Code.

Effective Date: The section that voids the revaluation of industrial machinery, equipment, and computers is effective May 30, 2003. All other sections are effective July 1, 2003.

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FRANCHISE TAX ALLOCATION - 03 SF 453-B

Prior Law:

In accordance with Iowa Code Section 422.65, all monies received from the franchise tax are deposited in the general fund. In addition, monies appropriated in section 405A.10 are allocated 60% to the general fund of the city from which the franchise tax is collected, and 40% is allocated to the county from which the franchise tax is collected. During the fiscal year ending June 30, 2003, $7,989,235 was appropriated in section 405A.10 to cities and counties.

New Provisions:

Code Sections 422.65 and 405A.10 are repealed. However, for the fiscal year ending June 30, 2004 only, $8,800,000 of franchise tax revenues will be allocated to cities and counties, with 60% going to the cities and 40% going to the counties from which the tax is collected.

Section Amended:

Section 11 of Senate File 453 repeals Iowa Code Sections 405A.10 and 422.65. Section 41 of Senate File 458 which provides for the $8.8 million allocation to cities and counties for the fiscal year ending June 30, 2004 is uncodified.

Effective Date: July 1, 2003, for fiscal years beginning on or after that date.

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LOTTERY AS A CHARTER AGENCY - 03 SF 453-C

Prior Law:

Under prior law, the lottery was a division of the Iowa Department of Revenue and Finance and received appropriations accordingly as a division of a state agency.

New Provisions:

Under this new law, the lottery division becomes an independent instrumentality of the state, but is not a state agency. The Lottery will be known as the Iowa Lottery Authority. The Iowa Lottery also becomes a charter agency. As a charter agency, it is self-funded and is to operate the lottery in a business-like manner. However, the Lottery is still accountable to the governor and general assembly. Funds from sales of lottery tickets will be used to fund the operations of the agency. The agency will be under the control of a chief executive officer and a board.

Section Amended:

Senate File SF 453, section 63-120 amends Iowa Code chapter 99G and various other Iowa Code sections that reference 99G or the previous name of the Lottery.

Effective Date: September 1, 2003.

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PROPERTY TAX APPROPRIATIONS - 03 SF 458-A

Prior Law:

Sections 425.1, 426A.1A, and 425.39 provide standing unlimited appropriations for the homestead tax credit, military service tax credit, and elderly and disabled tax credit, respectively. Section 426.1 provides for a standing appropriation of $39,100,000 for the agricultural land and family farm tax credits of which the first $10,000,000 applies to the family farm tax credit.

Section 25B.7 requires the counties to extend to the taxpayer only that portion of the credits funded by the state.

New Provisions:

The following amounts were appropriated for the 2003-2004 fiscal year:

Homestead tax credit (425.1) $105,585,004

Agricultural land and family farm tax credits (426.1) $35,497,624

Military service tax credit (426A.1A) $2,569,712

Elderly and disabled tax credit (425.39) $16,651,800

Section 25B.7 was made inapplicable by Senate File 458 meaning the counties would have to grant the full amount of credits to the taxpayer. The governor vetoed this provision. The county will be required to grant to the taxpayer only that portion of the credit estimated by the department of revenue and finance to be funded by the appropriation.

$11,281,685 was appropriated to the industrial machinery, equipment, and computers tax replacement fund for the 2003-2004 fiscal year (an amendment to Senate File 453).

Sections Amended:

The appropriations were limited by Senate File 458, Division III, section 11, subsections, 6, 7, 8, and 12, respectively. Section 13 made section 25B.7 inapplicable but was vetoed by the governor. Section 37, division IV, amended section 427B.19A(1) as amended by Senate File 453.

Effective Date: July 1, 2003.

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TAX CREDITS FOR INVESTMENTS IN QUALIFYING BUSINESSES AND COMMUNITY-BASED SEED CAPITAL FUNDS - 03 SF 458-B

Prior Law:

Only individual income taxpayers qualify for an investment tax credit for an equity investment in a qualifying business approved by the Iowa Capital Investment Board, and the credit was not available to any estate or trust. The investment tax credit could not be claimed prior to the third tax year following the tax year in which the investment was made in a qualifying business.

For an investment in a community-based seed capital fund approved by the Iowa Capital Investment Board, the fund must have no fewer than ten individual investors. These investors can be partnerships, limited liability companies, S corporations, estates or trusts, corporations, financial institutions, credit unions or insurance companies, as well as individuals.

New Provisions:

A revocable trust’s investment in a qualifying business approved by the Iowa Capital Investment Board is now eligible for the investment tax credit for individual income tax. Also, in the case of an investment tax credit for an investment in a qualifying business where the individual taxpayer died before the entire tax credit was used, the remaining credit can be claimed on the decedent’s final income tax return, even if it is prior to the third tax year following the date of investment.

For the investment in a community-based seed capital fund, the reference to individual investors was eliminated. Since investors in a community-based seed capital fund are not restricted to individual taxpayers, this further clarifies that other entities are eligible to claim this credit.

Section Amended:

Section 95 of Senate File 458 amends section 15E.42, subsection 3. Section 96 of Senate File 458 amends section 15E.43, subsection 1. Section 97 of Senate File 458 amends section 15E.43, subsection 1 by adding new paragraph d. Section 98 of Senate File 458 amends section 15E.45, subsection 2, paragraph c. All changes are to the 2003 Code.

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

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TAX CREDITS FOR INVESTMENTS IN VENTURE CAPITAL FUNDS - 03 SF 458-C

Prior Law:

A tax credit is allowed equal to 6% of a taxpayer’s equity investment in a venture capital fund approved by the Iowa Capital Investment Board.

A taxpayer who receives a 20% investment tax credit for an equity investment in a community-based seed capital fund approved by the Iowa Capital Investment Board would not qualify for a 6% tax credit for an investment made in a venture capital fund, even if separate investments were made.

New Provisions:

The same taxpayer can now be eligible for both the 20% tax credit for an investment in a community-based seed capital fund and a 6% tax credit for an investment in a venture capital fund, as long as separate investments are made by the investor.

Section Amended: Section 99 of Senate File 458 amends section 15E.51, subsection 3, Code 2003.

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

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ELIGIBLE ENTERPRISE ZONE HOUSING PROJECTS - 03 SF 458-D

Prior Law:

Eligible housing businesses in enterprise zones approved by the Department of Economic Development who are eligible for the investment tax credit shall complete the building or rehabilitation within two years from the time the business begins construction on homes or dwelling units. If construction is not completed in two years, the housing business would not be eligible for investment tax credits and would be subject to repayment of tax incentives.

New Provisions:

The Department of Economic Development may extend the two-year completion period for a housing project if completion was impossible or impractical due to a substantial loss caused by flood, fire earthquake, storm, or other catastrophe. Substantial loss is defined as damage or destruction in excess of 30% of the project’s expected eligible basis.

Section Amended: Section 100 of Senate File 458 amends section 15E.193B, subsection 4, Code 2003.

Effective Date: Effective upon enactment, which occurred May 30, 2003

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ATM FEES - 03 SF 458-E

Prior Law: ATM fees are subject to tax if they are connected with a customer’s checking account.

New Provisions:

Exempts from Iowa sales tax, service fees imposed by a financial institution if the charge is to a non-customer of the financial institution imposed for point of sale, service charge, or access to an automated teller machine. Financial institution means the same as defined in section 527.2.

Section Amended: Senate File 458, section 126 amends section 422.45 by adding new subsection 64, Code 2003.

Effective Date: May 30, 2003.

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CORPORATE TO CORPORATE TRANSFER - 03 SF 458-F

Prior Law: Prior law did not provide an exemption from use tax for the transfer of vehicles from one corporation to another.

New Provisions

Under this new law, the gross receipts from transferring vehicles subject to registration from one corporation to another corporation are exempt as long as two criteria are met: 1. Both corporations involved in the transfers must have been primarily engaged in the business of leasing vehicles subject to registration; and 2. Both corporations are part of the same controlled group for federal income tax purposes.

Section Amended: Senate File 458, section 127 amends section 423.4 by adding new subsection 9A, Code 2003.

Effective Date: May 30, 2003

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NONTERMINAL STORAGE FACILITY DEFINED - 03 SF 458-G

Prior Law: None.

New Provisions

"Nonterminal storage facility" is defined as a facility where motor fuel or special fuel is stored that is not supplied by a pipeline or marine vessel. It includes a facility that manufactures products which may be used as motor fuel or special fuel. "Nonterminal storage facility" does not include liquefied petroleum gas.

Sections Amended: Section 129, division VII, of Senate File 458 adds new section 20A to § 452A.2, Code 2003.

Effective Date: July 1, 2003.

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TOBACCO COMPLIANCE EMPLOYEE TRAINING FUND - 03 SF 458-H

Prior Law: None.

New Provisions

A tobacco compliance employee training fund is established in the office of the treasurer of state. Civil penalties assessed by the department of public health for violations under § 453A.22 shall be deposited in the fund. Moneys in the fund are appropriated to the alcoholic beverages division of the department of commerce to be used in the administration of the tobacco compliance employee training program under § 453A.2A.

Sections Amended: Section 130, division VII, of Senate File 458, amends § 453A.2, Code, 2003, by adding new subsection 5B.

Effective Date: May 30, 2003.

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THE PHASE IN OF THE REDUCTION IN THE STATE’S
GROSS PREMIUM TAX RATE FOR COUNTY MUTUAL INSURANCE ASSOCIATIONS
AND STATE MUTUAL INSURANCE ASSOCIATIONS -
03 SF 458-I

Prior Law

Under the previous law, the state’s gross premium tax rate on sales of insurance by county mutual insurance associations and state mutual insurance associations was two percent. The premium tax was imposed on the gross receipts from premium and fees for business done within the state by an association in a calendar year. The premium tax was due on or before March 1 of the year following the year for which the tax was due.

New Provisions:

For county mutual insurance associations and state mutual insurance associations, the gross premium tax rate is reduced from two percent to one percent over a three-year period. Thus, the tax 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 premium tax rate is 1% for the 2007 year and for subsequent calendar years. Each county mutual insurance association and each state mutual insurance association transacting business in the state whose Iowa premium tax liability for the preceding calendar year was one thousand dollars or more is to remit on or before June 1 of the year on a prepayment basis, an amount equal to one-half of the premium tax liability for the preceding calendar year. In addition, the association is to remit on or before June 30th on a prepayment basis, for prepayment in the 2003 and 2004 calendar years, eleven percent of the premium tax liability for the preceding calendar year; for prepayment in the 2005 calendar year, twenty-six percent of the premium tax liability for the preceding calendar year; for prepayment in the 2006 and subsequent calendar years, fifty percent of the premium tax liability for the preceding calendar year. Any premium tax that is not prepaid is to be paid on or before March 1 of the year following the year for which the tax was due.

The sums prepaid by a county mutual insurance association or a state mutual insurance association shall be allowed as credits against the association’s premium tax liability for the calendar year during which the premium prepayments are made. If a prepayment exceeds the annual premium tax liability of an association, the excess shall be allowed as a credit against subsequent prepayment of tax liabilities by that association. The commissioner of insurance may suspend the certificate of authority of an association that fails to make a prepayment before the due date.

Section Amended: Section 136 of Senate File 458 amends section 518.18, unnumbered paragraph 2, Code 2003, by adding numbered paragraphs 1, 2 and 3. Section 137 amends section 518A.35, Code 2003.

Effective Date: Section159 of S. F. 458 provides that the provisions take effect upon enactment which was on May 1, 2003.

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