2007 Iowa Legislative Summaries

CORPORATE & INDIVIDUAL INCOME & FRANCHISE TAXES

HF 319

Update of References To The Internal Revenue Code

HF 892-A

Film Qualified Expenditure Tax Credit

HF 892-B

Film Investment Tax Credit

HF 892-C

Income Tax Exclusion Relating To Qualified Film Expenditures

HF 904-B

Withholding Allowances

HF 923-E

Iowa Educational Savings Plan Trust

HF 923-F

School Tuition Organization Tax Credit

HF 923-G

Income Tax Checkoffs

HF 923-H

Composite Returns

HF 923-I

Withholding Tax For Nonresident Partners

HF 923-J

Employer Social Security Credit

HF 923-K

Statute of Limitations For Claiming Refund Relating To Capital or Ordinary Gain Relating To Involuntary Conversion Due To Eminent Domain

SF 70

Income Tax Exclusion For Certain Victim Compensation Payments

SF 431

Income Tax Exclusion For Hiring Certain Individuals

SF 566

Historic Preservation And Cultural And Entertainment District Tax Credit

SF 578

Income Tax Exclusion For Vietnam Conflict Veterans Bonus

SF 590

Earned Income Tax Credit

SF 601-B

Wage-Benefits Tax Credit

 

PROPERTY TAXES

HF 912-C

Web Search Portal Exemption From Property Tax

HF 923-R

Property Tax Abatement

SF 200

Property Tax Assessment For Trespassing

SF 278

Utility Replacement Tax

SF 450

Delinquent Property Taxes

SF 601-A

Property Tax Credit Funding

SF 601-E

Property Tax Study Committee

 

SALES & USE TAX

HF 912-A

Web Search Portal Exemption From Sales Tax

HF 912-B

Sales Tax Refund For Information Technology Facilities

HF 923-M

Out-of-State Chartered Financial Institutions Doing Business In Iowa

HF 923-N

Information Provided on The Internet Through Devices Other Than Computer Modems

HF 923-O

Items “Completely Consumed” By A Building Contractor

HF 923-P

Taxpayer Records Maintained In An Electronic Format

SF 414

Card Game Tournaments-Qualified Veterans' Organizations-Taxable Proceeds

SF 592-A

Definition of A State In Reference To The Streamlined Sales and Use Tax Agreement

SF 592-B

Remove Reference To Multiple Points of Use Exemption From The General Sourcing Rules

SF 592-C

Exclusion of Liability For Purchasers

SF 601-C

Collaborative Educational Center Additional Exemption Provisions

 

INHERITANCE—FIDUCIARY & ESTATE TAXES

 

None

 

CIGARETTE & TOBACCO

HF 923-S

Cigarette And Tobacco Tax

SF 128

Cigarette Tax Increase

 

MOTOR FUEL

SF 601-D

Variable Motor Fuel Tax Rate Extension

 

LOCAL OPTION AND SILO

HF 923-Q

Waiver of Notice Requirements Hotel/Motel, Lost And Silo Tax

 

MISCELLANEOUS

HF 904-A

Loan Agency Tax Repeal

HF 923-A

Venture Capital Credits-Qualifying Business, Community-Based Seed Capital Fund and Venture Capital Fund

HF 923-B

County And City Urban Renewal Tax Increment Financing

HF 923-C

Personal Liability Silo And Cigarette Taxes

HF 923-D

Penalty Waiver For Disclaimer Inheritance Tax

HF 923-L

Annual Reporting

SF 580

Tax Amnesty Program

 

 

HF 319 - UPDATE OF REFERENCES TO THE INTERNAL REVENUE CODE

Prior Law

The primary references to the Internal Revenue Code in the various statutes for the determination of income were amended through January 1, 2006.

New Provisions

The primary references to the Internal Revenue Code were amended to January 1, 2007 to include the federal income tax changes in the following federal legislation:

Some of the major provisions of this federal legislation are set forth below:

The references to the Internal Revenue Code in the various statutes for the Iowa research activities credit are updated to January 1, 2007 , so the federal changes in the research activities credit are adopted for Iowa tax purposes.

Section Amended

Section 1 of House File 319 amends section 15.335, subsection 4, Code 2007. Section 2 amends section 15A.9, subsection 8, paragraph e, Code 2007. Section 3 amends section 422.3, subsection 5, Code 2007. Section 4 amends section 422.10, subsection 3, Code 2007. Section 5 amends section 422.32, subsection 7, Code 2007. Section 6 amends section 422.33, subsection 5, paragraph d, Code 2007.

Effective Date

Sections 1 through 6 are retroactive to January 1, 2006, for tax years beginning on or after that date.

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HF 892-A - FILM QUALIFIED EXPENDITURE TAX CREDIT

Prior Law

None

New Provisions

A film qualified expenditure tax credit is available for individual income, corporation income, franchise, insurance premiums and moneys and credits tax.

The tax credit is equal to 25% of a taxpayer's qualified expenditures in a film, television or video project registered with the film office of the Department of Economic Development. The film, television or video project must have expenditures of at least $100,000 in Iowa to be registered with the film office.

A qualified expenditure is a payment to an Iowa resident or an Iowa-based business for the sale, rental, or furnishing of tangible personal property or for services directly related to the registered project. This includes, but is not limited to: aircraft, vehicles, equipment, material, supplies, accounting, animals and animal care, artistic and design services, delivery and pickup services, graphics, labor and personnel, lighting, makeup and hairdressing, film, music, photography, sound, video and related services, printing, research, site fees and rental, travel related to Iowa distant locations, trash removal and cleanup, and wardrobe. Labor and personnel does not include the director, producers, or cast members other than extras and stand-ins. A list of eligible expenditures shall be established by rule of the Department of Revenue in consultation with the Department of Economic Development.

Any credit in excess of the tax liability is not refundable but may be credited to the tax liability for the following five years or until depleted, whichever is earlier. If the taxpayer earning the credit is a partnership, limited liability company, S corporation or estate or trust electing to have the income taxed to an individual, the individual may claim the tax credit based on the pro rata share of the individual's earnings from the partnership, limited liability company, S corporation, or estate or trust.

After the project has been registered and the expenditures have been incurred, the Department of Economic Development will issue a tax credit certificate to the taxpayer containing the name, address, tax identification number, date of project completion and the amount of the tax credit.

The tax credit certificate may be transferred to any person or entity. Within 90 days of transfer, the transferee shall submit the transferred tax credit certificate to the Department of Revenue along with a statement containing the amount of credit to be transferred. Within 30 days of receiving the transferred tax credit certificate, the Department of Revenue shall issue a replacement tax credit certificate to the transferee.

Any consideration received for the transfer of the tax credit is not included in income for individual income, corporation income or franchise tax purposes. Any consideration paid for the transfer of the tax credit shall not be deducted from income for individual, corporation income or franchise tax purposes.

Section Amended

Section 3 of House File 892 creates new section 15.393. Section 5 creates new section 422.11T. Section 7 amends section 422.33 by adding new subsection 24. Section 9 amends section 422.60 by adding new subsection 13. Section 10 creates new section 432.12J. Section 12 amends section 533.24 by adding new subsection 11. All amendments are to the 2007 Code.

Effective Date

Retroactive to January 1, 2007, for tax years beginning on or after that date.

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HF 892-B - FILM INVESTMENT TAX CREDIT

Prior Law

None

New Provisions

A film investment tax credit is available for individual income, corporation income, franchise, insurance premiums and moneys and credits tax.

The tax credit is equal to 25% of a taxpayer's investment in a film, television or video project registered with the film office of the Department of Economic Development. The film, television or video project must have expenditures of at least $100,000 in Iowa to be registered with the film office.

A taxpayer cannot claim the film investment tax credit for qualified expenditures for which the film expenditure tax credit was claimed.

Any credit in excess of the tax liability is not refundable but may be credited to the tax liability for the following five years or until depleted, whichever is earlier. If the taxpayer earning the credit is a partnership, limited liability company, S corporation or estate or trust electing to have the income taxed to an individual, the individual may claim the tax credit based on the pro rata share of the individual's earnings from the partnership, limited liability company, S corporation, or estate or trust.

After verifying the eligibility for the tax credit, the Department of Economic Development will issue a tax credit certificate to the taxpayer containing the name, address, tax identification number, date of project completion and the amount of the tax credit.

The tax credit certificate may be transferred to any person or entity. Within 90 days of transfer, the transferee shall submit the transferred tax credit certificate to the Department of Revenue along with a statement containing the amount of credit to be transferred. Within 30 days of receiving the transferred tax credit certificate, the Department of Revenue shall issue a replacement tax credit certificate to the transferee. Any consideration received for the transfer of the tax credit is not included in income for individual income, corporation income or franchise tax purposes. Any consideration paid for the transfer of the tax credit shall not be deducted from income for individual, corporation income or franchise tax purposes.

Section Amended

Section 3 of House File 892 creates new section 15.393. Section 6 creates new section 422.11U. Section 7 amends section 422.33 by adding new subsection 25. Section 9 amends section 422.60 by adding new subsection 14. Section 11 creates new section 432.12K. Section 12 amends section 533.24 by adding new subsection 12. All amendments are to the 2007 Code.

Effective Date

Retroactive to January 1, 2007, for tax years beginning on or after that date.

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HF 892-C - INCOME TAX EXCLUSION RELATING TO QUALIFIED FILM EXPENDITURES

Prior Law

None

New Provisions

An income tax exclusion is available for income received by Iowa residents or Iowa-based businesses for individual income and corporation income tax relating to certain qualified film expenditures relating to certain film, television or video projects. The film, television or video project must be registered with the film office of the Department of Economic Development, and must have expenditures of at least $100,000 in Iowa.

A qualified expenditure eligible for the income exclusion is a payment to an Iowa resident or an Iowa-based business for the sale, rental or furnishing of tangible personal property or for services directly related to the registered project. The same expenditures that qualify for the film expenditure tax credit provided in Iowa Code section 15.393 also qualify for the income tax exclusion, as long as the payments are made to an Iowa resident or an Iowa-based business. The exclusion is allowed only to the extent that income is included in federal adjusted gross income for individuals and federal taxable income for corporations.

A taxpayer who claims the film qualified expenditure tax credit, a business in which such taxpayer has an equity interest, and a business in which such taxpayer participates in its management is not eligible for the income tax exclusion.

Section Amended

Section 3 of House File 892 creates new section 15.393. Section 4 amends section 422.7, by adding new subsection 50. Section 8 amends section 422.35, by adding new subsection 23. All amendments are to the 2007 Code.

Effective Date

Retroactive to January 1, 2007, for tax years beginning on or after that date.

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HF 904-A - LOAN AGENCY TAX REPEAL

Prior Law

A loan agency tax was imposed under chapter 430A of the Iowa Code. The tax was imposed on corporations not incorporated in Iowa which were engaged in the business of making loans or investments in Iowa on loans other that real estate loans. The tax was levied at the rate of 5 mills on each dollar of money loaned or invested in Iowa . The tax was paid to the county treasurer in the county where the corporation had offices. The tax was apportioned 20% to the county, 30% to the city where the corporation had offices, and 50% to the state of Iowa.

In a ruling dated March 28, 2006 , the Polk County District Court in General Motors Acceptance Corporation v. Polk County, Iowa, et. al. ruled that this tax facially discriminated against interstate commerce and violated the United States Constitution commerce clause because this tax was only imposed on out-of-state corporations, and was not imposed on Iowa-based corporations. Based on this ruling, the loan agency tax was no longer being enforced by the Department of Revenue and the county treasurers who administered and collected this tax.

New Provisions

The loan agency tax chapter (430A) of the Iowa Code was repealed.

Section Amended

Section 6 of House File 904 repeals chapter 430A, Code 2007.

Effective Date

July 1, 2007

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HF 904-B - WITHHOLDING ALLOWANCES

Prior Law

  When computing the number of withholding allowances on the Iowa W-4 (Employee Withholding Allowance Certificate), the following allowances are allowed:

While these allowances are also allowed for federal tax purposes, there is an additional allowance also allowed for federal purposes. A federal allowance is allowed for certain adjustments such as IRA contributions, alimony, student loan interest and moving expenses, which are allowed as a reduction in computing federal adjusted gross income. This federal allowance is provided in section 3402(m) (3) of the Internal Revenue Code.

New Provisions

The allowance for adjustments set forth in section 3402(m) (3) of the Internal Revenue Code will now be allowed as a withholding allowance for Iowa income tax purposes when completing the Iowa W-4 form.

Section Amended

Section 3 of House File 904 amends section 422.16, subsection 1, unnumbered paragraph 1, Code 2007.

Effective Date

July 1, 2007

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HF 912-A - WEB SEARCH PORTAL EXEMPTION FROM SALES TAX

Prior Law

No previous exemption for this specific industry. However, purchases of computers and items attached by signal cable to the computer were exempt from Iowa sales and use tax if purchased by a commercial enterprise pursuant to Iowa Code section 423.3(47) (2007).

New Provisions

A new exemption from Iowa sales and use tax is created for certain purchases or rentals by a “web search portal” business. A “web search portal” is defined as a business that is primarily engaged in providing a search portal to organize information; to access, search, and navigate the internet, including research and development to support capabilities to organize information; and to provide internet access, navigation, and search functionalities.  

This new exemption allows this type of business to purchase or rent all computers and related equipment that are necessary for the maintenance and operation of a web search portal whether directly or indirectly connected to the computers. The items exempt from sales tax include: cooling systems, cooling towers, and other temperature control infrastructure. In addition, the exemption from sales tax includes: the purchases or rental of all power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of the web search portal, including but not limited to exterior dedicated business owned substations, back-up power generation systems, battery systems, and related infrastructure; and racking systems, cabling, and trays, which are necessary for the maintenance and operation of the web search portal. Also exempt from Iowa sales tax is the purchase of back-up power generation fuel that is purchased by a web search portal business for use in the items listed above and the purchase of electricity purchased for use in providing a web search portal.

Qualifications: For a web search portal business to claim this exemption, all of the following requirements must be met: (1) The business of the purchaser or renter shall be as a provider of a web search portal; (2) The web search portal business shall have a physical location in the state that is used for the operations and maintenance of the web search portal site on the internet including but not limited to research and development to support capabilities to organize information and to provide internet access, navigation, and search; 07 HF 912-A (3) The web search portal business shall make a minimum investment in an Iowa physical location of two hundred million dollars within the first six years of operation in Iowa beginning with the date the web search portal business initiates site preparation activities. The minimum investment includes the initial investment, including land and subsequent acquisition of additional adjacent land and subsequent investment at the Iowa location; and (4) The web search portal business shall purchase, option, or lease Iowa land not later than December 31, 2008 , for any initial investment. However, the December 31, 2008, date shall not affect the future purchases of adjacent land and additional investment in the initial or adjacent land to qualify as part of the minimum investment for purposes of this exemption.  

This exemption applies from the date of the initial investment in or the initiation of site preparation activities for the web search portal facility. For purposes of claiming this exemption, the requirements may be met by aggregating the various Iowa investments and other requirements of the web search portal business's affiliates. This exemption also applies to affiliates of the web search portal business. Failure to meet eighty percent of the minimum investment amount requirement specified within the first six years of operation from the date the web search portal business initiates site preparation activities will result in the web search portal business losing the right to claim this exemption and the web search portal business shall pay all sales or use tax that would have been due on the purchase or rental or use of the items listed in this exemption, plus any applicable penalty and interest imposed by statute.

Section Amended

Section 1 of House File 912 amends Iowa Code section 423.3 by adding a new subsection 92, Code 2007.

Effective Date

July 1, 2007

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HF 912-B - SALES TAX REFUND FOR INFORMATION TECHNOLOGY FACILITIES

Prior Law

None

New Provisions

This new provision provides for a refund of Iowa sales tax paid by an information technology facility on the purchase of fuel or electricity used in the operation of the information technology facility.

To qualify for a refund of sales tax paid, all of the following criteria must be met: (1) The information technology facility must be located in Iowa on July 1, 2007; (2) The information technology facility seeking the refund must be classified, as verified by the Iowa Department of Economic Development, under the six digit North American industry Classification System number 518210 or 541519, which indicates that the facility is primarily engaged in providing computer related services; (3) The capital expenditures for computers, machinery, and other equipment used in the operation of the facility equals at least one million dollars; and (4) The facility is certified as meeting the Leadership in Energy and Environmental Design (LEED) standards.  

To obtain a refund, the information technology facility must do all of the following: (1) The applicant shall use forms furnished by the department; (2) The applicant shall separately list the amounts of sales and use tax paid during the reporting period; and (3) The applicant may request when the refund begins, but it must start on the first day of a month and proceed for a continuous twelve-month period.  

In determining the amount to be refunded, if the dates of the utility billing or meter reading cycle for the sale or furnishing of metered gas and electricity is on or after the first day of the first month through the last day of the last month of the refund year, the full amount of tax charged in the billings shall be refunded. In determining the amount to be refunded, if the dates of the sale or furnishing of fuel for purposes of commercial energy and the delivery of the fuel is on or after the first day of the first month through the last day of the last month of the refund year, the full amount of tax charged in the billings shall be refunded. An information technology facility may apply to the department for a refund on an annual basis for up to five years. To receive refunds during the five-year period, the 07 HF 912-B technology facility must file a refund claim within three months after the end of each refund year. The refund in this subsection applies only to state sales and use tax paid and does not apply to local option sales and services taxes imposed pursuant to chapters 423B and 423E.  

Section Amended

Section 2 of House File 912 amends Iowa Code section 423.4, by adding a new subsection (8) (a), Code 2007.

Effective Date

July 1, 2007

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HF 912-C - WEB SEARCH PORTAL EXEMPTION FROM PROPERTY TAX

Prior Law

None

New Provisions

This new provision sets forth an exemption from Iowa property tax for certain property that is purchased by a web search portal business. A “web search portal” is defined as a business that is primarily engaged in providing a search portal to organize information; to access, search, and navigate the internet, including research and development to support capabilities to organize information; and to provide internet access, navigation and search functionalities.

The exemption allows this type of business to purchase or rent all computers and related equipment that are necessary for the maintenance and operation of a web search portal and property whether directly or indirectly connected to the computers. This exempt list also includes cooling systems, cooling towers, and other temperature control infrastructure. In addition, also exempt from property tax are all power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of the web search portal, including but not limited to exterior dedicated business owned substations, back-up power generation systems, battery systems, and related infrastructure; and racking systems, cabling, and trays, which are necessary for the maintenance and operation of the web search portal. The exemption does not apply to power distribution systems subject to assessment under Iowa Code chapter 437A.  

Qualifications: For a web search portal to claim this exemption, all of the following requirements must be met: (1) The business of the purchaser or renter shall be as a provider of a web search portal; (2) The web search portal business shall have a physical location in the state that is used for the operations and maintenance of the web search portal site on the internet, including but not limited to, research and development to support capabilities to organize information and to provide internet access, navigation, and search; (3) The web search portal business shall make a minimum investment in an Iowa physical location of two hundred million dollars within the first six years of operation in Iowa beginning with the date the web search portal business initiates site preparation activities. The minimum investment includes the initial investment, including land and subsequent acquisition of additional adjacent land and subsequent investment at the Iowa location; and 07 HF 912-C (4) The web search portal business shall purchase, option, or lease Iowa land not later than December 31, 2008, for any initial investment. However, the December 31, 2008, date shall not affect the future purchases of adjacent land and additional investment in the initial or adjacent land to qualify as part of the minimum investment for purposes of this exemption.  

This exemption applies from the date of the initial investment in or the initiation of site preparation activities for the web search portal facility. For purposes of claiming this exemption, the requirements may be met by aggregating the various Iowa investments and other requirements of the web search portal business's affiliates. This exemption also applies to affiliates of the web search portal business. The exemption does not apply to land, buildings, and improvements.  

Section Amended

Section 3 of House File 912 amends Iowa Code section 427.1, by adding a new subsection 35, Code 2007.

Effective Date

July 1, 2007

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HF 923-A - VENTURE CAPITAL CREDITS – QUALIFYING BUSINESS, COMMUNITY-BASED SEED CAPITAL FUND AND VENTURE CAPITAL FUND

Prior Law

Qualifying businesses, community-based seed capital funds and venture capital funds apply to the Iowa Capital Investment Board for certification which allows investors into these businesses and funds to be eligible for tax credits. When submitting applications to the Iowa Capital Investment Board, the business or fund must provide a list of all investors who have already made investments into the fund or business. This includes the names, addresses, taxpayer identification numbers, equity interest or shares issued, consideration paid for the interest or shares, and the amount of potential tax credit for each investor.

New Provisions

The requirement that taxpayer identification numbers for each investor be provided with the application for certification has been eliminated. The taxpayer identification number will be provided for each investor at the time they apply for the tax credit, which is done after the certification process is completed.

Section Amended

Section 1 of House File 923 amends section 15E.44, subsection 1, Code 2007. Section 2 amends section 15E.45, subsection 3, paragraph a, subparagraph 1, Code 2007.

Effective Date

July 1, 2007

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HF 923-B - COUNTY AND CITY URBAN RENEWAL TAX INCREMENT FINANCING

Prior Law

Biennial reporting requirements for urban renewal were listed in Iowa Code section 403.23. This section of the Code will be repealed effective July 1, 2007.

New Provisions

This new language in the county and city budget statutes provides that a county or city that has a designated urban renewal area must list as part of the city or county budget all of the following: 1. All estimated and actual increment financing revenues; 2. All estimated and actual expenditures by the county or city of revenues, proceeds from debt and expenditures of debt proceeds; 3. Identification of all entities receiving a direct payment of taxes funded by the tax increment financing revenues; and 4. The total of all loans, advances, indebtedness and outstanding bonds, including interest on these items, at the close of the most recently ended fiscal year that qualify for payment under the fund created under Iowa Code section 403.19 (creating tax increment financing). For purposes of this provision, “indebtedness” means written agreements where the county or city agrees to suspend, abate, exempt, rebate, refund, or reimburse property taxes, provide a grant for property taxes paid, or makes a direct payment of taxes with money in a special fund. The department of management and the legislative service agency are to govern the criteria and format in which counties are to report this information.  

Section Amended

Sections 3 (county budget), and 4 (city budget) of House File 923 amends Iowa Code section 331.434, subsection 1 and 384.1 subsection 1, respectively, Code 2007. Section 28 of House File 923 repeals Iowa Code section 403.23 (biennial reporting requirements for urban renewal), Code 2007.

Effective Date

July 1, 2007

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HF 923-C - PERSONAL LIABILITY SILO AND CIGARETTE TAXES

Prior Law

Personal liability was imposed on retailers and permit holders for other taxes, but not local option taxes and cigarette and tobacco.

New Provisions This bill provided that a retailer or purchaser can be held personally liable for school infrastructure local option taxes and a person who is a permit holder for the sale of cigarettes and tobacco can also be held personally liable for those taxes.

Section Amended

Section 5 of House File 912 amends Iowa Code section 421.26, Code 2007.

Effective Date

July 1, 2007

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HF 923-D - PENALTY WAIVER FOR DISCLAIMER INHERITANCE TAX

Prior Law

Iowa law required that an Iowa inheritance tax return must be filed within nine months from the date of death of the decedent to avoid penalty for tax due in the estate.

New Provisions

This new provision allows for penalty to not be imposed on an inheritance tax return that is filed more than nine months from the date of the decedent's death as long as the inheritance tax return is filed within 60 days from the date that a valid disclaimer of property is filed in the estate by the beneficiary that is refusing to take the property.

Section Amended

Sections 6 and 7 of House File 923 amend Iowa Code sections 421.27, subsection 1 and subsection 2, Code 2007.

Effective Date

July 1, 2007

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HF 923-E - IOWA EDUCATIONAL SAVINGS PLAN TRUST

Prior Law

A deduction is allowed for Iowa individual income tax for contributions made to the Iowa educational savings plan trust, also known as College Savings Iowa, on behalf of a beneficiary. The Iowa educational savings plan trust was created to assist in covering future higher education costs of the beneficiaries. The maximum amount of contribution allowed as a deduction for a participant in the plan is adjusted annually for inflation, and the maximum deduction per beneficiary is currently $2,595 for the 2007 year.

If a participant cancels the beneficiary's account in the Iowa educational savings plan trust and receives a refund of the funds, the amount of contributions previously deducted must be included in net income on the Iowa individual income tax return.

New Provisions

In addition to including any refunds due to cancellation of the plan in Iowa net income, any withdrawals made by a participant that are used for purposes other than the payment of qualified education expenses also have to be included in Iowa net income to the extent that contributions were previously deducted.

Section Amended

Section 8 of House File 923 amends section 422.7, subsection 32, Code 2007, by adding new paragraph c.

Effective Date

July 1, 2007

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HF 923-F - SCHOOL TUITION ORGANIZATION TAX CREDIT

Prior Law

A school tuition organization tax credit is available for individual income tax equal to 65% of the amount of a voluntary cash contribution made by a taxpayer to a school tuition organization. The school tuition organization must represent more than one school, and 90% of the revenues received by the organization must be used to provide tuition grants to allow children to attend a qualified school of their parent's choice.

Each school served by a school tuition organization must submit a participation form to the department annually by October 15 which provides the certified enrollment as of the third Friday of September. By November 15 of each year, the department will authorize school tuition organizations to issue tax credit certificates for the following tax year.

The total of tax credit certificates to be authorized was $5.0 million for 2007 and subsequent years.

New Provisions

The tax credit is now available for noncash contributions made to a school tuition organization starting with the 2007 year. The value of a noncash contribution shall be appraised pursuant to rules prescribed by the director of revenue.

Starting in 2007, each school served by a school tuition organization must submit a participation form to the department annually by November 1 which provides the certified enrollment as October 1, or the first Monday in October if October 1 falls on a Saturday or Sunday.

The total of tax credit certificates to be authorized is now $7.5 million for 2008 and subsequent tax years. The total remains at $5.0 million for 2007.

Section Amended

Section 9 of House File 923 amends section 422.11S, subsection 1, Code 2007. Section 10 amends section 422.11S, subsection 2, Code 2007, by adding new paragraph c. Section 11 amends section 422.11S, subsection 6, paragraph d, Code 2007. Section 12 amends section 422.11S, subsection 7, paragraph b, unnumbered paragraph 1, Code 2007. Section 13 amends section 422.11S, subsection 8, unnumbered paragraph 1, Code 2007. Section 111 of Senate File 601 amends section 422.11S, subsection 7, paragraph a, subparagraph (2), Code 2007.

Effective Date

The changes relating to noncash contributions apply retroactively to January 1, 2007, for tax years beginning on or after that date. The changes relating to dates of reporting and additional credits available apply to tax years beginning on or after January 1, 2008.

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HF 923-G - INCOME TAX CHECKOFFS

Prior Law

There is a limitation of four income tax checkoffs available on an Iowa individual income tax return. Every two years, the two checkoffs with the lowest amount of contributions are repealed, and the Iowa general assembly can enact two additional checkoffs. If more than four checkoffs are enacted in the same session of the Iowa general assembly, the earliest enacted checkoffs will be included on the individual income tax return form. All other checkoffs enacted during that session of the general assembly will be repealed.

There was no provision in Iowa law dealing with a situation where additional checkoffs beyond the limit of four were enacted on the same day by the general assembly.

New Provisions

In situations where more checkoffs are enacted on the same day by the general assembly than the allowable limitation of four, the director of revenue shall determine which checkoffs will be included in the Iowa individual income tax form.

Section Amended

Section 14 of House File 923 amends section 422.12E, unnumbered paragraph 2, Code 2007.

Effective Date

July 1, 2007

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HF 923-H - COMPOSITE RETURNS

Prior Law 

A composite return may be filed for Iowa individual income tax for nonresident partners, members, shareholders or beneficiaries of partnerships, limited liability companies, S corporations or estates or trusts doing business in Iowa. These nonresident partners, members, shareholders or beneficiaries were required to be individuals in order to be included in the composite return.

New Provisions

Nonresident trusts or estates which are partners, members, shareholders or beneficiaries in partnerships, limited liability companies, S corporations or estates or trusts may also be included in an Iowa composite return.

Section Amended

Section 15 of House File 923 amends section 422.13, subsection 5, Code 2007.

Effective Date

July 1, 2007

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HF 923-I - WITHHOLDING TAX FOR NONRESIDENT PARTNERS

Prior Law  

Income received by a nonresident partner of a partnership doing business in Iowa is subject to Iowa withholding tax.

New Provisions

Iowa withholding tax is not required from a partner's pro rata share of income from a publicly traded partnership, as defined in section 7704(b) of the Internal Revenue Code, provided that the publicly traded partnership files with the department an information return. This information return must report the name, address, taxpayer identification number for each unit holder with an income in Iowa from the publicly traded partnership in excess of $500.

Publicly traded partnerships are limited partnerships, the interests (or units) in which are traded on public exchanges such as the New York, American and NASDAQ exchanges.

Section Amended

Section 16 of House File 923 amends section 422.16, subsection 12, Code 2007.

Effective Date

July 1, 2007

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HF 923-J - EMPLOYER SOCIAL SECURITY CREDIT

Prior Law

The amount of employer social security credit allowed under section 45B of the Internal Revenue Code is allowed as a deduction for Iowa corporation income tax purposes to the extent that the credit increased federal adjusted gross income.

New Provisions

The amount of employer social security credit allowed under section 45B of the Internal Revenue code is allowed as a deduction for Iowa corporation income tax to the extent the credit increased federal taxable income. Corporations have federal taxable income, not federal adjusted gross income.

Section Amended

Section 17 of House File 923 amends section 422.35, subsection 17, Code 2007.

Effective Date

July 1, 2007

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HF 923-K - STATUTE OF LIMITATIONS FOR CLAIMING REFUND RELATING TO CAPITAL OR ORDINARY GAIN
RELATING TO INVOLUNTARY CONVERSION DUE TO EMINENT DOMAIN

Prior Law

If any Iowa individual or corporation income tax was paid on capital or ordinary gain from the sale of property due to involuntary conversation due to eminent domain and the taxpayer subsequent repurchased the property, the statute of limitations to claim a refund was extended until six months after the property was repurchased.

However, the capital or ordinary gain from the sale of property due to involuntary conversion due to eminent domain is excluded from individual and corporation income tax in the initial instance.

New Provisions

The provision regarding the extension of the statute of limitations to claim a refund if property was subsequently repurchased was repealed. Since the capital or ordinary gain was not subject to tax initially, there is no need to have an extended statute of limitations for refund when no tax was ever paid.

Section Amended

Section 18 of House File 923 amends section 422.73, subsection 3, Code 2007, by repealing the subsection.

Effective Date

July 1, 2007

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HF 923-L - ANNUAL REPORTING

Prior Law

The department was required to prepare and publish an annual report that would include the following:

1. Statistics regarding collections, classification of taxpayers and other valuable facts;
2. Information regarding tax reforms based on studies, research and recommendations;
3. The progress of the centralized debt collection program;
4. Information regarding assessment, taxation and recommendations to improve the tax system;
5. Information regarding abatement of any unpaid portion of assessed tax, interest, or penalties which the director determines is erroneous, illegal, or excessive and a summary of each case in which abatement of tax, interest, or penalties was made;
6. Information about recurrent taxpayer noncompliance and recommendations regarding how to improve compliance; and
7. Information about the integrated revenue information system and any progress regarding the system, including real and estimated expenditures.  

New Provisions

This new amendment has changed the content of the annual report by excluding information from items 2, 3, and 7, above.  

Section Amended

Section 19 of House File 923 amends 422.75, Code 2007.

Effective Date

July 1, 2007

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HF 923-M - OUT-OF-STATE CHARTERED FINANCIAL INSTITUTIONS DOING BUSINESS IN IOWA

Prior Law

Iowa tax was imposed on the sales price of the service charges of any financial institution. The statute's definition of “financial institution” included institutions chartered by the State of Iowa and the Federal Government but did not include institutions chartered by other states because those financial institutions could not do business in Iowa. Due to recent changes in the law, financial institutions chartered in other states can now do business here.

New Provisions

The definition of “financial institution” is amended to include “all banks, savings banks, credit unions, and savings and loan associations chartered or otherwise created under the laws of any state and doing business in Iowa.”

Section Amended

Section 20 of House File 923 amends section 423.2, subsection 6, unnumbered paragraph 2, Code 2007.

Effective Date

July 1, 2007

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HF 923 -N - INFORMATION PROVIDED ON THE INTERNET THROUGH DEVICES OTHER THAN COMPUTER MODEMS

Prior Law

The sales price of charges paid to a provider of access to on-line computer service is exempt from Iowa tax. “On-line computer service” was defined as “a service that provides or enables computer access by multiple users to the internet or to other information made available through a computer server.” This definition was adequate when all information provided on the internet was provided through computer servers, but the definition has become inadequate as more information is provided on the internet through devices other than computer servers.

New Provisions

The appropriate subsection of the Code is amended to make the exemption in favor of on-line computer service applicable to information made available through a computer server “or other device.”

Section Amended

Section 21 of House File 923 amends section 423.3, subsection 65 of the Code 2007.

Effective Date

July 1, 2007

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HF 923-O - ITEMS “COMPLETELY CONSUMED” BY A BUILDING CONTRACTOR

Prior Law

A building contractor whose sponsor was a “designated exempt entity” could buy building materials, supplies, and equipment exempt from tax if the materials, supplies or equipment were to be used in the performance of the construction contract with the designated exempt entity. However, the law did not specify the type of use necessary for the exemption to apply. Conceivably, if materials, supplies, or equipment were to be used “predominately” or “mainly” in performing a contract with an exempt entity, the exemption would apply.

New Provisions

A contractor can buy building materials, supplies, or equipment exempt from Iowa tax for use in the performance of a contract with a designated exempt entity “only to the extent the building materials, supplies, or equipment are completely consumed in the performance of the construction contract with the designated exempt entity.”

Section Amended

Section 22 of House File 923 amends section 423.3, subsection 80, paragraph b, Code 2007.

Effective Date

July 1, 2007

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HF 923-P - TAXPAYER RECORDS MAINTAINED IN AN ELECTRONIC FORMAT

Prior Law

The applicable statute stated that any retailer obligated to collect Iowa sales or use tax or any consumer obligated to pay use tax shall keep such “records, receipts, invoices, or other papers as the director shall require.” The statute made no specific reference to retailer's or purchaser's records maintained in an electronic format.

New Provisions

The statute is amended to state that if a retailer or taxpayer maintains records “in an electronic format” the retailer or taxpayer shall comply with reasonable requests from the director to provide the retailer's or taxpayer's electronic records in a standard record format.

Section Amended

Section 23 of House File 923 amends section 423.41, Code 2007.

Effective Date

July 1, 2007

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HF 923-Q - WAIVER OF NOTICE REQUIREMENTS; HOTEL/MOTEL, LOST AND SILO TAX

Prior Law

Hotel/motel: Forty-five days prior to hotel/motel tax being effective or prior to a revision or the tax rate, or repeal of the tax, a city or county must provide notice of such action to the Director of Revenue.

LOST: Within 10 days of an election regarding the imposition, repeal or change in rate of LOST, the county auditor must give written notice of the election results to the Director of Revenue by sending a copy of the abstract of the votes to the Director.

SILO: Within 10 days of an election regarding the imposition, repeal or change in rate of SILO, the county auditor must give written notice of the election results to the Director of Revenue by sending a copy of the abstract of the votes to the Director.

New Provisions

This provision added that the Director of Revenue has the authority to waive the notice requirement.

Section Amended

Sections 24, 25 and 26, of House File 923 amend Iowa Code sections 423A.4; subsection 2, 423B.1 subsection 6, paragraph b and 423E.2 subsection 5, paragraph b, Code 2007.

Effective Date

July 1, 2007

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HF 923-R - PROPERTY TAX ABATEMENT

Prior Law

The board of supervisors had the option of abating the taxes levied against property acquired by gift after the deadline for filing a claim for tax exemption if the property would have been exempt under section 427.1, subsections 7, 8, or 9 had a timely claim for exemption been filed.

New Provisions

The board of supervisors now has the option of abating the taxes levied against property acquired by purchase after the deadline for filing a claim for tax exemption if the property would have been exempt under section 427.1, subsections 7, 8, or 9 had a timely claim for exemption been filed.

The board of supervisors is required to refund the property taxes paid by an institution described in section 427.1, subsections 8 or 9, that purchased property after the deadline for filing a claiming for tax exemption. The county must have a population of more than 88,000 but not more than 95,000. The refund provision applies only to taxes payable in the fiscal years beginning July 1, 2002 and July 1, 2005.  

Sections Amended

Section 27 of House File 923 amends Iowa Code section 427.3, Code 2007, and section 29 adds a refund provision that will not be codified.

Effective Date

May 29, 2007. The amendment to section 427.3 applies retroactively to property taxes payable in the fiscal year beginning July 1, 2002 and the fiscal year beginning July 1, 2005.

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HF 923-S - CIGARETTE AND TOBACCO TAX

Prior Law

Wholesalers and retailers selling cigarettes at less than cost were guilty of a simple misdemeanor.

$115,000.00 was appropriated annually to the department for the purchase of tax stamps to be placed on cigarette packs as evidence of payment of the tax.

The names and addresses of no more than 3 of the principal officers or members of a business applying for a bond to obtain a cigarette permit were required to be included on the application form for a bond.

Retail permits were required to be on forms furnished by the department.

Permits were not required to be publicly displayed at the place of business where cigarettes were sold.

A state permit holder that sold cigarettes at retail was required to issue an invoice to the holder's retail department.

Cigarette reports were not required to be filed with the department by electronic transmission.

The department furnished permit holders with paper forms for use by the permit holder in filing reports with the department.

Common carriers were not required to file monthly reports by electronic transmission nor provide monthly reports detailing all shipments of cigarettes and tobacco products into and out of the state.

The director was authorized to appoint an assistant whose sole duty was to administer and enforce the tax on cigarettes and tobacco products.

No additional penalty could be assessed against a cigarette permit holder for the cost of an audit that revealed that the permit holder had not filed all required reports with the department.

There was no requirement that cigarette distributors file all required reports and returns and pay the tax prior to receiving tax stamps.

There were no provisions covering the seizure of tobacco products.

Cigarettes and tobacco products could be sold through vending machines with other non-tobacco products. In addition, the statute used incorrect terminology in referring to permit “cancellations” and “license” fees.

The statue did not prohibit the sale of cigarettes or tobacco products not contained within a sealed carton or pack.

The director did not have the authority to require by rule that tobacco transportation reports be filed electronically and the failure or refusal to file or allow the examination of the required reports was a simple misdemeanor.

Tobacco distributors were required to file monthly reports on forms furnished and prescribed by the director.

Tobacco distributors were not required to file reports by electronic transmission.

All violations of Division II of chapter 453A were simple misdemeanors.

No civil penalties were imposed for violations of tobacco tax laws.

No authority was granted to the department to assess a penalty against tobacco products permit holders for the cost of an audit if the audit revealed that the appropriate amount of taxes had not been paid.

New Provisions

In addition to being guilty of a simple misdemeanor, wholesalers and retailers selling cigarettes at less than cost are subject to civil penalties ranging from $200 to $1,000. An unlimited appropriation is made for the purchase of cigarette tax stamps. The names and addresses of all of the officers or members of a business applying for a bond to obtain a cigarette permit are required to be included on the application form for a bond. Retail permits may be on forms furnished or approved by the department.  

Permits are required to be publicly displayed at the place of business where cigarettes are sold.

Permit holders who sell cigarettes at wholesale and retail from the same location are required to maintain separate records of such sales.      

The director may require by rule that cigarette reports be filed by electronic transmission.

The department shall furnish permit holders with either electronic or paper forms for use by the permit holder in filing reports with the department.

The director may require by rule that common carriers file monthly reports by electronic transmission and provide monthly reports detailing all shipments of cigarettes and tobacco products into and out of the state.

The requirement that the director appoint an assistant whose sole duty was to administer and enforce the tax on cigarette and tobacco products was repealed.

An additional penalty shall be assessed against a cigarette permit holder for the cost of an audit that reveals that the permit holder did not file all required reports with the department.

A cigarette distributor is required to file all reports and returns and pay the tax prior to receiving tax stamps.

The cigarette provisions on seizures are made applicable to tobacco products.  

Cigarettes and tobacco products can not be sold through vending machines with other non-tobacco products, other than matches. In addition, the statute is clarified to state that permits can be “revoked” rather than “canceled” and retailers receive a “permit” rather than a “license.

Cigarettes and tobacco products are required to be sold within a sealed carton or pack.

House File 923 amended Senate File 128 which increased the tax on cigarettes and tobacco products but limited the increase on cigars to no more than 50¢ per cigar.

The director is given the authority to require by rule that tobacco transportation reports be filed electronically and the failure or refusal to file or allow the examination of the required reports is changed from a simple misdemeanor to a serious misdemeanor.

Tobacco distributors are required to file monthly reports on forms furnished or made available in electronic form and prescribed by the director. Distributors are also made subject to civil penalties for violations of section 453A.46.

The director may require by rule that tobacco reports be filed by electronic transmission.

Some violations of Division II of chapter 453A are now considered serious rather than simple misdemeanors.

Civil penalties are imposed for violations of tobacco tax laws consistent with those applicable to cigarettes.

The department is granted the authority to assess a penalty against tobacco products permit holders similar to cigarette tax enforcement provisions for the cost of an audit if the audit revealed that the appropriate amount of taxes were not paid.

Sections Amended

Section 32 of House File 923 amends section 421B.3 by adding new subsection 3. Section 33 amends section 453A.7. Section 34 amends section 453A.13, subsections 5 and 9. Section 35 amends section 453A.13 by adding new subsection 10. Section 36 amends section 453A.15, subsection 2. Section 37 amends section 453A.15 by adding new subsection 7. Section 38 amends section 453A.18. Section 39 amends section 453A.24. Section 40 amends section 453A.25, subsection 3. Section 41 amends section 453A.30. Section 42 amends section 453A.31. Section 43 amends section 453A.32 by adding new subsection 6. Section 44 amends section 453A.36, subsection 6. Section 45 amends section 453A.36. Section 46 amends section 453A.43, subsections 1 and 2, as amended by 2007 Iowa Acts, Senate File 128. Section 47 amends section 453A.45, subsection 5. Section 48 amends section 453A.46, subsections 1 and 3. Section 49 amends section 453A.46 by adding new subsection 7. Section 50 amends section 453A.50, subsection 2. Section 51 amends section 453A.50 by adding new subsection 3. Section 52 adds new section 453A.51. Section 53 amends section 453C.1, subsection 10. Section 54 provides that refunds of taxes that result from the limitation on the taxes imposed on cigars between March 15, 2007 and the effective date of the amendment to section 453A.43 shall not be allowed unless a refund claim is filed prior to October 1, 2007 . This section will not be codified. All amendments are to the Code 2007.

Effective Date

Section 55 relating to the refunds contained in section 54 is retroactive to March 15. All other sections of House File 923 are applicable to the 2007 Code and are effective July 1, 2007.

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SF 70 - INCOME TAX EXCLUSION FOR CERTAIN VICTIM COMPENSATION PAYMENTS

Prior Law

Any victim compensation payments received by a taxpayer were included in Iowa adjusted gross income to the same extend these payments were included in federal adjusted gross income.

New Provisions

To the extent included in federal adjusted gross income, the following items can now be excluded from Iowa adjusted gross income for individual income tax:

Section Amended

Section 2 of Senate File 70 amends section 422.7, Code 2007, by adding new subsection 50.

Effective Date

Retroactive to January 1, 2007, for tax years beginning on or after that date.

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SF 128 - CIGARETTE TAX INCREASE

Prior Law

The tax was 1.8 cents per cigarette (36 cents per pack of 20) and the tax on tobacco products was 22% of the wholesale sales price of the tobacco products.

There was no inventory tax on tobacco products.

The basic cost of cigarettes for a retailer was 6% and for a wholesaler 3%.

New Provisions

The tax is increased to 6.8 cents per cigarette ($1.36 per pack of 20) and the tax on tobacco products is increased to 50% of the wholesale sales price of the tobacco products.

An inventory tax is imposed on tobacco products.

The basic cost of cigarettes is increased to 8% for a retailer and 4% for a wholesaler.

Cigarettes are required to be sold only in packages of 20 or more cigarettes.

A health care trust fund is created in the office of the treasurer of state. The first $127,600,000 of the tax on cigarettes and tobacco products is appropriated annually to this fund.

Sections Amended

Section 1 of Senate File 128 amends section 421B.2, subsection 3, paragraph b.

Section 2 amends section 421B.2, subsection 4, paragraph b. Section 3 amends section 453A.6, subsection 1. Section 4 amends section 453A.6 by adding a new subsection 7. Section 5 amends section 453A.35. Section 6 adds new section 453A.35A. Section 7 amends section 453A.40, subsection 1. Section 8 amends section 453A.42 by adding new subsection 11A. Section 9 amends section 453A.42, subsection 14. Section 10 amends section 453A.43. Section 11 provides for no inventory tax as a result of the tax increase. All amendments are to the 2007 Code.

Effective Date

March 16, 2007

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SF 200 - PROPERTY TAX ASSESSMENT FOR TRESPASSING

Prior Law

If the landowner did not erect a fence to prevent the trespassing of livestock on neighboring land or public roads, the board of township trustees could cause a fence to be erected and certify the costs of erecting the fence to the county auditor for collection as other taxes.

New Provisions

The board of township trustees may request the county board of supervisors to assume the board's duties and the board of supervisors shall certify the costs to the county auditor for collection as property taxes.

Sections Amended

Section 2 of Senate File 200 adds new section 169C.6.

Effective Date

July 1, 2007

 

SF 278 - UTILITY REPLACEMENT TAX

Prior Law

For replacement tax definitions, “New electric power generating plant” was defined as a plant owned by or leased to an electric company, electric cooperative, or municipal utility initially generating electricity on or after January 1, 2003 .

The utility replacement task force was set to expire January 1, 2007.

A taxpayer whose property was subject to the statewide property tax was not required to notify the department of transfers of property by local taxing district unless the transfer was the local amount of any major addition.

For purposes of the allocation of the replacement tax, only the first $44,444,445 of assessed value for an electric power generating plant was to remain in the taxing district where the plant was located. In the transfer of an electric power generating plant, if the transferee owns no other operating property in the state the statewide amount was allocated among the local taxing districts of the transferor's assessed value as of the end of the preceding calendar year.

The director was required to decrease the assessed value of the taxpayer's property in each taxing district by the taxable value within each taxing district if there was a transfer or disposal of property in the previous calendar year.

New Provisions

The definition of “new electric power generating plant” is expanded to include a plant that is sold or transferred in whole or in part on or after January 1, 2003.

The utility replacement task force is extended for an additional 3 years through January 1, 2010.

A taxpayer whose property is subject to the statewide property tax is required to notify the department of all transfers or disposals of property by local taxing district.

For purposes of the allocation of the replacement tax, the first $44,444,445 of taxable value of a new electric power generating plant shall remain in the taxing district where the plant is located and shall not be allocated to any other taxing districts if the taxpayer owns no other operating property in the state. The taxes on the value in excess of $44,444,445 are to be deposited in the property tax relief fund created in Code chapter 426B.

The director is required to decrease the assessed value of the taxpayer's property in each taxing district by the assessed value within each taxing district if there was a transfer or disposal of property in the previous calendar year.

Sections Amended

Section 1 of Senate File 278 amends Iowa Code section 437A.3, subsection 11. Section 2 amends section 437A.15, subsection 7. Section 3 amends section 437A.19, subsection 1, paragraph a, and section 4 amends section 437A.19, subsection 2, paragraphs b and c. All amendments are to the 2007 Code.

Effective Date

July 1, 2007

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SF 414 - CARD GAME TOURNAMENTS-QUALIFIED VETERANS' ORGANIZATIONS-TAXABLE PROCEEDS

Prior Law

Sales tax was imposed on the sales price derived from the operation of various games of skill and chance the playing of which is legal under chapter 99B of the Code. Those games included bingo, raffles, other games of chance, and card games such as poker, pinochle, pitch, gin rummy, bridge, euchre, hearts, and cribbage, but tournaments involving those card games were not lawful activities under chapter 99B. Only certain qualified organizations could operate or conduct these games.

New Provisions

Conducting tournaments involving card games is an activity authorized by chapter 99B. “Card games” means only poker, pinochle, pitch, gin rummy, bridge, euchre, hearts, and cribbage. To be lawful, a tournament must be conducted by a new type of qualified organization, a “qualified organization representing veterans.” There are a number of rules, restrictions, and requirements which a qualified organization representing veterans must abide by when conducting a card game tournament. The sales price derived from the operation of any card game tournament is subject to Iowa tax.

Section Amended

Section 6 of Senate File 414 amends section 423.2, subsection 4, Code 2007.

Effective Date

July 1, 2007

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SF 431 - INCOME TAX EXCLUSION FOR HIRING CERTAIN INDIVIDUALS

Prior Law

Taxpayers who are considered small business corporations, as defined in Iowa Code section 16.1, subsection 36, are allowed an additional deduction for Iowa individual income and corporation income tax equal to 65% not to exceed $20,000 of the first twelve months of wages paid to the following individuals:

New Provisions

Section 16.1, subsection 36, Code 2007 was repealed, and the same provisions of this subsection regarding the definition of a small business were added to the portions of the Iowa Code which provide for the income tax deductions for individual and corporation income tax. Therefore, there was no change to the definition of a small business for purposes of this income tax deduction.

Section Amended

Section 35 of Senate File 431 amends section 422.7, subsection 12, paragraph c, unnumbered paragraph 6, Code 2007. Section 36 amends section 422.35, subsection 6, paragraph c, unnumbered paragraph 4, Code 2007.

Effective Date

July 1, 2007

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SF 450 - DELINQUENT PROPERTY TAXES

Prior Law

There were no specific provisions in the Iowa Code.

New Provisions

Senate File 450 provides that no time limitation shall apply to an action brought by a county to collect delinquent property taxes levied on or after April 1, 1992. This codifies the Iowa Supreme Court's ruling in Fennelly v. A-1 Machine & Tool Co., No. 73/04-1232 (October 6, 2006). The court held that the county is immune from the statute of limitations when collecting delinquent property taxes.

Sections Amended

Section 1 of Senate File 450 amends Iowa Code section 614.1, Code 2007, by adding new subsection 14.

Effective Date

July 1, 2007

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SF 566 - HISTORIC PRESERVATION AND CULTURAL AND ENTERTAINMENT DISTRICT TAX CREDIT

Prior Law

An historic preservation and cultural and entertainment district tax credit has been available for individual income, corporation income, franchise and insurance premiums tax. The credit is equal to 25% of the qualified costs of rehabilitation of eligible property, and the credit is administered by the state historic preservation office of the Iowa Department of Cultural Affairs.

The credit was limited in the aggregate to $6.4 million per fiscal year starting with the fiscal year ending June 30, 2006 , and $4.0 million was reserved for projects in cultural and entertainment districts. Any credit in excess of the tax liability was subject to refund based on the discounted value of the tax credit five years after the year of project completion at an interest rate equivalent to the prime rate plus two percent. The refunded tax credit could not exceed 75% of the allowable tax credit.

New Provisions

The amount of aggregate tax credit issued in a fiscal year is now capped at $10 million for the fiscal year ending June 30, 2008, $15 million for the fiscal year ending June 30, 2009 and $20 million for the fiscal year ending June 30, 2010 and subsequent fiscal years. Of the tax credits approved for a fiscal year, ten percent are allocated for projects with costs of $500,000 or less, and forty percent are allocated for projects in cultural and entertainment districts or areas identified in Iowa great places agreements.

Any credit in excess of the tax liability is now fully refundable, and is no longer subject to a discounted percentage. In lieu of requesting a refund, the overpayment can be credited to the tax liability for the following tax year.

Section Amended

Section 2 of Senate File 566 amends section 404A.4, subsection 3, Code 2007. Section 3 amends section 404A.4, subsection 4, Code 2007. Section 4 amends section 422.11D, subsection 1, Code 2007. Section 5 amends section 422.33, subsection 10, paragraph a, Code 2007. Section 6 amends section 422.60, subsection 4, paragraph a, Code 2007. Section 7 amends section 432.12A, subsection 1, Code 2007.

Effective Date

Applies to credits applied for or reserved prior to July 1, 2007. The full refundability of the credit will apply to any tax credit available for use for the fiscal year ending June 30, 2008 and subsequent fiscal years.

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SF 578 - INCOME TAX EXCLUSION FOR VIETNAM CONFLICT VETERANS BONUS

Prior Law

None

New Provisions

A Vietnam Conflict Veterans Bonus fund is established under the Department of Veterans Affairs.This bonus is available for persons who served on active duty in the United States armed forces from July 1, 1973, through May 31, 1975. Eligible persons may receive $17.50 for each month that the person was on active duty in the Vietnam service area during the specified period, not to exceed $500. Persons who served on active duty during the specified period but not in the Vietnam service area may receive $12.50 per month, not to exceed $300. The bill provides that the maximum compensation a person can receive under this bill shall be reduced by the amount of any Vietnam veterans bonus received by that person for service prior to July 1, 1973. The amount of bonus received by a Vietnam veteran that is included in the veteran's federal adjusted gross income is not included in the veteran's Iowa net income.

Section Amended

Section 2 of Senate File 578 amends section 422.7, Code 2007, by adding new subsection 50.

Effective Date

Retroactive to January 1, 2007, for tax years beginning on or after that date.

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SF 580 - TAX AMNESTY PROGRAM

Prior Law

It has been over twenty years since the State of Iowa offered a tax amnesty program.

New Provisions

For a period beginning on September 4, 2007 and ending on October 31, 2007, taxpayers who have tax liabilities delinquent, tax liabilities owed, or tax liabilities not reported nor established as of December 31, 2006 can apply in writing to the Department for amnesty. To receive amnesty, a taxpayer must file an application and pay all tax that is due and covered by the amnesty program plus fifty percent of any interest due on such taxes. In return, the Department will waive all penalties and one-half of the interest, the department will not criminally prosecute the taxpayer or seek further payment of taxes covered by the amnesty. Failure to pay all taxes delinquent as of December 31, 2006 invalidates the amnesty. In addition to the more commonly known taxes such as income tax and sales and use tax, the amnesty covers hotel and motel taxes, both local option taxes, the automobile rental excise tax, the construction equipment tax, the environmental protection charge on petroleum diminution, the qualified use inheritance tax, and the excise tax on unlawful dealing in certain substances.

Section Amended

All the provisions of the amnesty program are established by Senate File 580. It is not expected that the Senate File will be codified.

Effective Date

Upon enactment (May 24, 2007).

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SF 590 - EARNED INCOME TAX CREDIT

Prior Law

The Iowa earned income tax credit was equal to 6.5% of the federal earned income tax credit, and any credit in excess of the tax liability was nonrefundable.

New Provisions

The Iowa earned income tax credit is now equal to 7.0% of the federal earned income tax credit, and any credit in excess of the tax liability is now refundable like the federal earned income tax credit.

Section Amended

Section 1 of Senate File 590 amends section 422.12B, subsection 1, Code 2007. Sections 2 through 21 make coordinating amendments to other tax credits since the earned income tax credit is now refundable.

Effective Date

Retroactive to January 1, 2007, for tax years beginning on or after that date.

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SF 592-A - DEFINITION OF A STATE IN REFERENCE TO THE STREAMLINED SALES AND USE TAX AGREEMENT

Prior Law

The agreement included any state of the United States and the District of Columbia .

New Provisions

Recognize the addition of Puerto Rico as a “state” for the purpose of the Streamlined agreement.

Sections Amended

Section 1 of Senate File 592 amends section 423.1 subsection 52, Code 2007.

Effective Date

July 1, 2007

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SF 592-B - REMOVE REFERENCE TO MULTIPLE POINTS OF USE

EXEMPTION FROM THE GENERAL SOURCING RULES

Prior Law

There was a basic position under the Streamlined Sales and Use Tax Agreement as to how sales of digital goods, computer software, and services concurrently available for use in more that one jurisdiction and sold to a business purchaser were to be treated under the laws of all states which were parties to the Agreement. Additional material was added to the statute which expanded upon the existing basics of taxation of products with multiple points of use. The statute stated explicitly that a purchaser providing an exemption certificate claiming multiple points of use shall report and pay the tax to every jurisdiction where use had occurred. It also stated that a purchaser and seller may work together to find an appropriate method of apportionment for multiple points of use products when the purchaser does not present the seller with an exemption certificate. If the appropriate method was used, the seller could collect and remit the tax to the various jurisdictions without any obligation to collect more tax unless the seller had exercised “bad faith.” The section stated explicitly that if its provisions were not applicable to sales of products with multiple points of use that the general sourcing provisions of the Code would apply. Finally, an updated provision stated that the section was not intended to limit any person's constitutional or statutory right to a tax credit.

New Provisions

Multiple points of use exemption forms have been deleted from the streamlined sales and use tax agreement. The amendment to this Code section in 2006 Iowa Acts, chapter 1158, section 71, is also repealed. References to Code section 423.18 in Code sections 423.16(3), 423.57, and 423.51, subsection 2, paragraph "d", as enacted by 2006 Iowa Acts, chapter 1158, section 77, are stricken. There were two versions of the multiple points of use forms in the Iowa law. One was currently effective and one was set to become effective on January 1, 2008 . Thus, all these sections needed to be amended to strike or repeal the provisions.

Sections Amended

Sections 2, 5, 7, 8 and 9 of Senate file 592 amend sections 423.16 subsection 3, 423.57, 423.51 subsection 2, paragraph d, 2006 Iowa Acts, chapter 1158, section 71, and 423.18. Code section 423.18 is repealed. All amendments are to the 2007 Code, unless noted in the section.

Effective Date

July 1, 2007

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SF 592-C - EXCLUSION OF LIABILITY FOR PURCHASERS

Prior Law

There were no special provisions for any tax relief for a purchaser.

New Provisions

A new provision was added to specify under what circumstances a purchaser is relieved of liability for tax, penalty, and interest. The purchaser is relieved of liability if the state provides erroneous data in the state's taxability matrix or in the tax rate, boundary, or taxing jurisdiction databases. This relief is the same relief provided to sellers or certified service providers.

Section Amended

Section 4 of Senate File 592 is amended to add new section 423.34A . Sections 3 and 6 amend sections 423.33 subsection 1 and 423.57 to include a reference to this new Code section . All amendments are to the 2007 Code.

Effective Date

July 1, 2007

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SF 601-A - PROPERTY TAX CREDIT FUNDING

Prior Law

Section 425.1(1) provides an annual appropriation for reimbursements to counties for homestead tax credits allowed to qualified homeowners.

Section 426.1 provides a limited annual appropriation of $39,100,000 for reimbursements to counties for agricultural land tax credits allowed for eligible land. The first $10,000,000 is to be transferred to the family farm tax credit fund for reimbursements to counties for credits allowed to eligible persons. (Section 425A.1).

Section 426A.1A provides an annual appropriation for reimbursements to counties for military service tax credits allowed to qualified military veterans.

Section 425.39 provides an annual appropriation for reimbursements to counties for tax credits allowed to elderly and disabled homeowners and for reimbursements to elderly and disabled renters.

New Provisions

The appropriations made to these funds for the 2007-2008 fiscal year are:

If the appropriation for the homestead credit, military exemption, or elderly/disabled credit is insufficient to fully fund the program, the political subdivision is required to extend to the taxpayer only that portion of the credit or exemption estimated by the department to be funded by the appropriation. The department has estimated that the homestead credit will be funded to the extent of 73%, the military exemption 100%, and the elderly/disabled tax credit/rent reimbursement 100%.

Sections Amended

Section 5 of Senate File 601 lists the amount appropriated for each program.

Effective Date

May 29, 2007

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SF 601-B - WAGE-BENEFITS TAX CREDIT

Prior Law

A wage-benefits tax credit is available for businesses which create new jobs for which the wages and benefits paid equals at least 130% of the average county wage. The amount of the wage-benefits tax credit issued in a fiscal year cannot exceed $10 million.

New Provisions

For fiscal years beginning on or after July 1, 2007, the amount of wage-benefits tax credit issued in a fiscal year cannot exceed $4 million .

Section Amended

Section 82 of Senate File 601 amends section 15I.3, subsection 4, Code 2007.

Effective Date

July 1, 2007, for fiscal years beginning on or after that date.

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SF 601-C - COLLABORATIVE EDUCATIONAL CENTER

ADDITIONAL EXEMPTION PROVISIONS

Prior Law

A couple of years ago, an exemption from Iowa sales and use tax was created that allowed for the purchase of all goods, wares, or merchandise sold, or of services furnished, which are used in the fulfillment of a written construction contract for the construction of additions or modifications to a building or structure used as part of a collaborative educational facility. To receive the exemption all of the following requirements must be met:

1) The contract for construction of the building or structure is entered into on or after April 1, 2003.

(2) The building or structure is located within the corporate limits of a city in the state with a population in excess of one hundred ninety=five thousand residents.

(3) The sole purpose of the building or structure is to provide facilities for a collaborative of public and private educational institutions that provide education to students.

(4) The owner of the building or structure is a nonprofit corporation governed by chapter 504 or former chapter 504A which is exempt from federal income tax pursuant to section 501(a) of the Internal Revenue Code.

New Provisions

The new amendment creates a new provision in addition to the one above where all of the following requirements must be met to claim this new exemption:

(1) The contract for construction of the building or structure is entered into on or after May 15, 2007.

(2) The sole purpose of the building or structure is to provide facilities for a regional academy under a collaborative of public and private educational institutions that includes a community college established under chapter 260C that provide education to students.

(3) The owner of the building or structure is a qualified charitable nonprofit corporation governed by chapter 504 or former chapter 504A which is exempt from federal income tax pursuant to section 501(c)(3) of the Internal Revenue Code.

Refunds of tax, penalty and interest for this exemption for amounts paid on or after May 15, 2007, and ending on or before June 30, 2007, will not be allowed unless refund claims are filed by October 1, 2007.

Section Amended

Sections 112 of Senate File 601 amends Iowa Code section 423.3, subsection 89, Code 2007. Section 125 provides for a refund of the tax paid between May 15, 2007 and June 30, 2007 provided that a refund claim is filed by October 1, 2007. This section will not be codified.

Effective Date

July 1, 2007

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SF 601-D - VARIABLE MOTOR FUEL TAX RATE EXTENSION

Prior Law

Legislation was enacted in 2001 providing for a variable tax based on a comparison of the number of gallons of ethanol blended gasoline and non ethanol blended gasoline distributed in the state in each calendar year. The department determines the distribution percentages each calendar year and the tax rates corresponding with those percentages are applied to the period beginning the following July 1 and ending June 30 of the next calendar year. The existing formula was scheduled to expire June 30, 2007.

New Provisions

The legislation extends the existing formula for an additional 5 years through June 30, 2012.

Sections Amended

Section 113 of Senate File 601 amends section 452A.3, subsection 1, and section 114 amends section 452A.3, subsection 1A. Both amendments are to the 2007 Code.

Effective Date

July 1, 2007

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SF 601-E - PROPERTY TAX STUDY COMMITTEE

Prior Law

None.

New Provisions

Senate File 601 establishes a legislative property tax study committee to conduct a comprehensive review of property taxation in Iowa . The committee shall be comprised of legislative members who are voting members and nonvoting members representing certain interest groups and state departments. The study committee is authorized to contract with one or more tax consultants or experts familiar with the Iowa property tax system. The study committee is to meet during the 2007 and 2008 legislative interims and is to submit a final report to the general assembly on or before January 5, 2009.

Sections Amended

Section 127 of Senate File 601 establishes the property tax study committee. This provision will not be codified.

Effective Date

July 1, 2007

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