SF 366 – Department of Revenue policy bill

SF 366 makes a number of changes to existing tax policy, mostly clarifying current practices or making technical corrections to the administration and collection of taxes.

Division I – A third-party developer tax credit is available under the High-Quality Jobs program through the Iowa Economic Development Authority for use against corporate income taxes. This bill expands the tax credit to other business entities, such as LLCs, S-corporations and partnerships.

Division II – Makes technical corrections to the deadline and process for claiming the Geothermal Heat Pump Tax Credit to reflect current policy. The process is similar to that used by taxpayers claiming the solar energy system tax credit.

Division III – Solar energy facilities – Utility replacement tax: Lowers the value of utility improvements that would constitute a “major addition” for solar energy facilities to $1 million (down from $10 million). This impacts local government because they can capture a portion of the property tax generated by major improvements, whereas other improvements by utilities only impact the property taxes over the entirety of the utility’s service area.

Division IV – Makes technical corrections to the administration process for the fee for new vehicle registrations, and creates new penalties for failure to file and underpayment of the fee for new registration (10% and 5% of the fee for new registration, respectively).

Division V – Makes changes to a provision of the 2020 omnibus tax bill that extended the imputed tax liability for taxpayers as part of a pass-through entity. The change allows taxpayers to claim the portion of tax credits available to the pass-through entity when calculating their imputed tax liability.

Division VI – Contains clean-up language that was included in the 2020 omnibus tax bill last session. These changes are technical and provide the department with additional rulemaking authority.

Division VII – Allows county treasurers to place a hold on car registration renewals for unpaid court debt. This is a follow-up issue from 2020 when court debt collection was transferred back to the Department of Revenue’s central collections unit. Counties can place holds on car registration renewals for unpaid taxes. Some counties have used that authority to also place holds on car registrations for unpaid court debt, though it was disputed if that was actually allowed.

Division VIII – Garnishment: Clarifies that a distress warrant issued by the Department of Revenue or the director of the Department of Inspections and Appeals is a final warrant and not subject to change or appeal.

Division IX – Allows for the electronic transfer of information collected by county treasurers while registering snowmobiles, ATVs and boats to the Department of Revenue.

Division X – Makes corrections and clarifications to the administration and collection of sales and use taxes:

• Updates outdated language and conforms to current use of “tangible personal property”
• Updates language regarding rentals and when sales are exempt under current law to reflect current practices

Division XI – Extends from October to November the date DOR will set and publish the interest rate it will use.

Division XII – Clarifies language from the 2020 tax policy omnibus bill regarding when a local assessor could not personally assess a property. This language restricts that requirement to property owned by the assessor or their family member. The bill also establishes reporting requirements for using special counsel to handle property tax assessment litigation once special counsel is employed. Assessors may employ special counsel to handle litigation issues, but 2020 legislation required them to get approval of the city legal department or the county attorney.

Division XIII – Includes tax returns in the types of information that must be redacted by the department in an appeal or a contested case. This also applies to the director’s authority to disclose confidential information when necessary under current law. The division is needed because of recent changes to the definition of “tax return” in Iowa Code.

Division XIV – Provides technical corrections for situations when a taxpayer may designate someone to have power of attorney when corresponding with DOR on their behalf. This includes language requested by the Attorney General to clear up an issue of standing, as well as scenarios and administrative issues that came to light during rulemaking.

Division XV – Extends from two-week to one year the deadline for notification of sales and use tax refunds under the High-Quality Jobs Program. This is in line with other notification requirements under the program.
[2/17: 48-0 (Absent: Hogg, Nunn)]

SF 367 – Fixes for Court Debt Bill

SF 367 corrects errors and unintended language in SF 457, a criminal surcharge and court debt bill enacted in 2020.

SF 367 does the following:

SF 574 – Confidential information, veteran property tax credits and exemptions

SF 574 fixes an issue in 2020 legislation that was meant to prevent the collection of names of veterans using property tax information. This bill clarifies that the disabled veteran/POW and military serviceproperty tax credits and exemptions can be made public on property tax reports for individualparcels, but cannot be aggregated under public records.
[4/13: 45-0 (Absent: Hogg, Lofgren, Nunn, Petersen, Rozenboom]

SF 578– IDALS department bill

SF 578 makes various changes to the operations of the Iowa Department of Agriculture and Land Stewardship (IDALS).

Many of these issues were introduced and debated in 2020:

• Department organization: Updates the Code to reflect the elimination of the Marketing News Services bureau. The department will still collect and disseminate the information as it is provided by USDA.
• Identity theft:As IDALS moves to an electronic licensing system, the department does not want social security numbers online or on licenses for safety.

• Local Farm and Produce Program and Fund: IDALS will reimburse schools for purchase of fresh farm produce if the school registers. The food source must be located in within 30 miles of the school district. This bill contains no funding. For every $3 spent by schools, the fund reimburses $1. This will be a part of the existing Farm to School program. The program can be used to provide food commodities along with fresh produce. Food commodities would include eggs, dairy, processed nuts, honey and syrup, as well as meat and fish.
• Code clean up relating to: 

• Fertilizers and soil conditioners
• Weights and measures
• Fee reduction from $9 to $4.50
• Deleting oath of weighmaster
• Eliminating mandatory servicers licenses (test is not administered anymore)

The bill also makes confidential any information IDALS collects from animal facilities that register under the voluntary premise ID program, which tracks livestock to help identify the path or threats of spread of animal diseases.
[4/28: 48-0 (Absent: Schultz, Nunn)]

SF 608 – Department of Revenue “modernization” proposal

SF 608 streamlines and improves the administration of taxes as DOR transitions to a more modern and integrated computer system.

Division I makes changes to practices for calculating penalties, the amounts those penalties are applied to and how DOR would apply waivers to those penalties under the new system; updates terminology (e.g., changing “tax due or shown to be due” to more simple “unpaid tax”) to eliminate inconsistencies; and updates language to conform to current practice for applying payments that are due across multiple payment periods.

Division II establishes a more streamlined process for filing returns by pass-through entities (including LLCs, S-corps, etc.). These changes will be incorporated into the design phase of the new tax administration system. The new system will require a pass-through entity to file a composite return for all nonresident owners of the entity. Currently, the pass-through entity must withhold the nonresident owners estimated Iowa tax liability as they would withholding taxes. The nonresident owner then can file a tax return to either claim a refund for overpayment of their portion of the withholding or for any taxes due. Requiring the filing of a composite return for all nonresident owners relieves the pass-through entity of the need to withhold estimated taxes monthly, as well as maintaining the return and withholding preferences of individual owners. The pass-through entity will instead pay estimated Iowa taxes owed by the nonresident owner based on the nonresident owner’s Iowa-sourced income at the applicable Iowa tax rate. This will also eliminate the need for a nonresident owner to file their own Iowa income tax return, except to claim a credit for any out-of-state taxes paid on the Iowa-sourced income. The current system doesn’t provide a clear picture of whether the full Iowa tax liability is being paid by nonresident owners, and creates confusion among those taxpayers about the current system of withholding, estimated payments and optional composite filing.

Division III amends portions of HF 309 regarding public agency disclosures of personal information of donors to nonprofits. DOR is concerned that it would require the department to subpoena records for audits or other activities. This bill clarifies the applicability of HF 309 so that DOR will not be in violation of the bill under these actions:

• Identifying a person as a representative, responsible party, employee, withholding agent, or other signatory or contact of a tax-exempt entity on any return, form, application or other document required by the department;
• Exercising powers under Code section 422.70 (general powers —— hearings);
• Disclosing information sought pursuant to a contested case;
• Disclosing information expressly required by law, including disclosures pursuant to Code section 411.11S (student tuition organization tax credit).

The restrictions in HF 309 do not entitle any taxpayer or tax-exempt entity to any deduction, exemption, credit or other tax position that the taxpayer or exempt entity is unable to substantiate with sufficient evidence.
[4/28: 48-0 (Absent: Schultz, Nunn)]

SF 619 – Omnibus tax legislation compromise

SF 619 is the compromise tax policy bill between House and Senate Republicans. It contains a wide range of topics, including many that were voted on by the full Senate or were passed out of the Senate Ways and Means or Appropriations committees. Some of the topics included in the bill are:

• Removal of triggers for the contingent income tax system, which will go into effect in Tax Year 2023
• Phase-out and repeal of the inheritance tax
• Moving mental health and disability services funding from property taxes to state funding
• Phase-out and repeal of the “backfill” to local governments to make up for cuts to commercial property taxes
• A number of housing initiatives proposed by the Governor
• Updates and extensions to various incentive programs administered by Economic Development Authority

Topics that are in both versions and remain in the compromise (SF 619/HF 839)

These portions are identical in both bills:                                  

• Removal of triggers on contingent tax system: This will make the contingent tax system created in SF 2417 in 2018 for TY 2023, which is one year earlier than is currently projected with the triggers in place.
• Child Dependent and Development Care tax credit expansion: This will increase the income threshold for taxpayers who qualify for the state tax credit from $45,000 to $90,000. This does not make any changes to those who are already eligible to claim the credit.
• COVID grants tax exemption: This expands the tax exemption for COVID relief grants to other programs administered by state agencies beyond the PPP program that was included in 2020 legislation.
• PPP fix for fiscal filers: This is fix so that businesses who operate on a fiscal year tax filing basis are eligible for the PPP exemption for funds they received during the 2019 fiscal year.
• Housing trust fund – This will raise the cap on transfers of real estate taxes to the state housing trust fund to $7 million (up from $3 million).
• High Quality Jobs (HQJ)/child care facilities – This allows for additional scoring for businesses applying for HQJ tax credits if the facility will offer child care services for employees
• HQJ COVID waiver: This allows the Iowa Economic Development Authority to account for reductions in workforce due to COVID when determining an applicant’s eligibility for HQJ tax credits.
• Parity for telehealth mental health services: This will require an insurer to reimburse providers at the same rate for telehealth mental health services as they would for in-person services.
• Disaster Recovery/Eviction prevention program: This provides for an established disaster recovery trust fund and an eviction prevention program, which were original parts of the Governor’s housing initiative.
• Energy Revolving loan program: This would transition the existing alternate energy revolving loan program in to an energy infrastructure revolving loan program.
• Brownfields/grayfields redevelopment tax credit: This will extend the program for 10 years through June 30, 2031, and raise the program cap by $5 million (to $15 million).
• Bonus Depreciation: This will allow Iowa taxpayers to use the federal accelerated depreciation for equipment purchases, which allows a business to expense up to 50% of the cost in the first year instead of depreciating over time. The bill will allow businesses to continue to receive the uncapped interest expense deduction in the 2020 omnibus tax policy bill, along with bonus depreciation. Iowa law would have required a business claiming bonus depreciation to limit their interest expense deduction to what is allowed under federal law.

Compromises between the House and Senate on common topics

• Inheritance tax phase-out and repeal in four years. The phase-out works by increasing the exemption amount and increasing the percent of the estate that is exempt from the tax:
  • 2021: 20% rate reduction
  • 2022: 40% rate reduction
  • 2023: 60% rate reduction
  • 2024: 80% rate reduction
  • 2025, inheritance tax is repealed.
• Workforce housing tax credits:
  • Provides $15 million for FY 22 to address the backlog for tax credits in the large cities portion of the program over two years. $2 million of that increase is for small cities.
  • Increases the program overall by $10 million (to $35 million) beginning in FY 23. The program will be evenly divided between small cities and large cities.
• High quality jobs/renewable chemical tax credits: Reduce the HQJ program cap by $35 million (to $70 million per year). Reduces the Renewable Chemical Production tax credit program cap by $5 million (to $5 million). That program has only issued about $1.8 million in credits over three years.

Topics from the Senate version (SF 619)

• Creates a Downtown Loan Guarantee Program to be administered by the Iowa Economic Development Authority (IEDA) and Iowa Finance Authority (IFA) to encourage downtown businesses and banks to reinvest and reopen following the COVID-19 pandemic.
• Beginning farmer tax credit changes: Allows leases of agricultural buildings and modifies qualifications for lease agreements.
• Manufacturing 4.0: Creates a fund at IEDA to assist manufacturers with qualified investments in modernizing their manufacturing processes.
• Mental health funding/eliminate county levies: This is the Senate GOP proposal for the state to take over funding responsibilities for mental health services across the state. It provides $53 million in state funds to replace local property taxes in the first year and provides $3 million to the incentive fund. The bill also provides more guardrails for the Iowa Department of Human Services (DHS) to use contracts with regions to provide oversight of services.
• Eliminate commercial and industrial backfill for local governments: Phases out the backfill payments to local governments. The backfill was created to prevent a tax shift to homeowners and farmers with the rollback in business property taxes in 2013. The five- or eight-year phase out of payments to local governments will be based on the growth of commercial property valuations in the local jurisdiction.
• School foundation aid changes: Replaces money local school districts would lose by eliminating the backfill.
• Elderly property tax credit: Creates a secondary elderly property tax credit for homeowners 70 and older. It essentially freezes their property taxes at a base year amount. The credit is not fully funded by the state, so local governments must pay for the credit by cutting services or passing the costs on to other property owners.

New topic that was NOT in either proposal

Five-year phase out of promotional play receipts from the wagering receipts tax: Exempts promotional play gaming receipts from the calculation of adjusted gross receipts (AGR) beginning July 1, 2026. This will make promotional play receipts free from gaming taxes. For the next three years, promotional play is part of AGR but is taxed separately from AGR and phased out under the reduced rates. Currently, there is a cap on promotional play tax receipts of $25.82 million per year. This cap works by excluding promotional play from the calculation of AGR after the date the Iowa Racing and Gaming Commission determines the cap has been met.

Promotional play is a form of marketing that gaming operators use to increase gambling at their facilities. Promotional play involves the exchange of tokens, chips, credits and other cashless wagering methods provided by a licensed gaming operator to an individual without an exchange of money.

Topics that are from the House version (HF 839)

• Extends the targeted jobs withholding tax credit program by three years to 2024. This program is available to employers in four areas (Sioux City, Council Bluffs, Burlington and Fort Madison/Keokuk). The program was set to end after June 30, 2021.
• Increase the Volunteer firefighter/EMS/Reserve officer tax credit from $100 to $250.
• Exempt non-profit organizations operating food banks from paying sales and use tax on purchases.
• Extends the current four income tax checkoffs through 2024. Under current law, the lowest two performing tax credits would be removed for 2021.
  [5/17: 29-15 (Yes: Republicans, Bisignano, Kinney; Absent: Celsi, Goodwin, Johnson, Nunn, Schultz, Williams)]

HF 367 – Income tax exemption for proceeds from a burial trust

HF 367 would exempt the proceeds from a burial trust account from being subject to state income tax. A burial trust is for pre-payment of burial expenses. In some cases, the amount in the trust exceeds the costs of the burial. Excess funds from the trust have been treated as income for the beneficiary.
[5/19: 48-0 (Absent: Nunn, Williams)]

HF 368 – Administration of rent reimbursement program

HF 368 would transfer the administration of the rent reimbursement program from DOR to DHS. The program helps elderly and low-income taxpayers with rent costs associated with property taxes. This mirrors the elderly and disabled property tax credit program for individuals who own their homes. Moving the program to DHS allows the program to be administered out of their local offices throughout the state, increasing accessibility for eligible taxpayers.
[3/22: 48-0 (Absent: Kinney, Nunn]

HF 418 – Department of Revenue property tax proposal

HF 418 eliminates the multiresidential classification for property assessment purposes and places those properties under the residential property tax classification. This reduces the need for special assessments and equalization orders for that class of property. Multiresidential property represents a very small portion of the assessed value statewide. This makes sales comparisons difficult because there are very few similar sales within a time period. Many counties also have very few properties in that class, which also causes issues under the equalization process. Moving these properties under the residential classification will simplify the process for local assessors and also even out property values for these properties under the equalization process. The small number of multiresidential properties sold caused some initial equalization orders to be sent to counties with 50% to 100% increases in assessed value based on market value analyses.

The multiresidential classification was created as part of the property tax reform bill in 2013 to phase out the tax differential on apartments and other residential properties that had been classified as commercial property. The 2013 legislation phased down the taxable value of multiresidential property until it would match the residential rollback rate. 

Removal of the multiresidential property classification will not negatively impact the operation or financing of self-supporting municipal districts (SSMIDs).  
[2/23: 48-0 (Absent: Nunn, Shipley)] 

HF 523 – Flood mitigation as essential county purpose

HF 523 would add flood-mitigation practices, strategies and structures to the list of essential county purposes established in Code. Counties are generally allowed to incur debt and issue general obligation bonds for performing essential purposes. This will allow a county to perform flood-mitigation projects in unincorporated areas of the county. Cities currently have this authority, but are limited in where they can perform flood mitigation work. The bill was promoted by Muscatine County as a way for them to create flood protection for areas increasingly under the threat of flood damage but outside where a city can perform the work.
[4/28: 48-0 (Absent: Schultz, Nunn)]

HF 588– Herbert Hoover Presidential Library tax credit

HF 588 would establish an income tax credit for Iowa taxpayers who make donations to the Hoover Presidential Library and Museum Renovation Project Fund. The credit is 25% of the donated amount with a maximum credit of $250,000 per taxpayer. The total amount of credits that can be issued under the program is $5 million. The credit program is modeled after the Endow Iowa Tax Credit Program and is designed to help generate $20 million in donations for a major renovation of the Hoover Presidential Library in West Branch.

Tax credits issued under the program are not transferrable or refundable. They can be applied to individual, corporate, franchise, insurance premium, and moneys and credits taxes. Unused credits can be carried forward for five years.
[4/21: 46-0 (Absent: Mathis, Nunn, Schultz, Whiting)]

HF 693 – Iowa Utilities Board Omnibus

HF 693, a recommendation by the Iowa Utilities Board (IUB), makes technical changes to Iowa Code; authorizes the IUB to again have an administrative law judge on staff to assist with ensuring compliance with legal requirements; codifies practices on advanced estimated assessments; allows the IUB to assess and bill interstate pipeline companies in the same manner as intrastate pipeline companies; aligns civil penalties with federal levels regarding pipeline and hazardous waste safety to eliminate the need for IUB to continually file legislation to match the U.S. Department of Transportation Pipeline and Hazard Materials Safety Administration dollar amounts for fines; and allows the Board to identify when payments will be remitted to the Dual Party Relay Fund. SF 347 modifies the method of computing year-end assessments for telecommunication providers that are registered with the IUB.
[4/13: 45-0 (Absent: Hogg, Lofgren, Nunn, Petersen, Rozenboom)]

HF 711 – Probate fees

HF 711 addresses court costs (fees) charged a decedent’s estate when it is probated (settled through the court). The Bar Association claims that counties are assessing court costs differently, resulting in inconsistencies across Iowa. This bill excludes certain types of property when calculating court costs when an estate is probated, including joint tenancy property, transfers during a decedent’s lifetime and assets payable directly to beneficiaries.
[5/17: 45-0 (Absent: Goodwin, Johnson, Nunn, Schultz, Williams)]

HF 828 – Commercial Driver’s License testing fees

HF 828 establishes fees for scheduling a commercial driver’s license (CDL) driving skills test and administering each of the three required tests. The scheduling fee will be $25. The fee for conducting the three required tests will be $25 for each test. These fees do not apply to private third-party vendors who administer these tests. There are also certain exemptions for people who are employed and volunteer for a government entity. The bill encourages the Iowa Department of Transportation to establish a scheduling process for applicants, other than at the same site as the required knowledge test.
[4/28: 48-0 (Absent: Schultz, Nunn)]

HF 837 – Iowa Land Records System Use of Electronic Submission Fees

HF 837 establishes a maximum electronic filing fee of $3 for the Iowa Land Records System. Currently, all electronic filing fees are established by contract and vary by county. The bill also provides more flexibility for Iowa Land Records in its use of fees for the electronic system, including upgrading the search function, and mobile device viewing and use. The maximum fee does not apply to “convenience charges” for debit or credit card transactions.

The County Land Records System governing board must report on its budget and program plans to the Legislature’s Local Government committees, legislative leaders and the Legislative Services Agency.
[5/19: 48-0 (Absent: Nunn, Williams)]

HF 844 – Model Business Corporations Act

HF 844 updates Iowa’s business corporations law based on the Model Business Corporation Act. The bill updates Iowa’s business law chapters to provide more clarity and includes sections that reflect the potential need for remote meetings.
[5/5: 48-0 (Absent: Hogg, Nunn)]

HF 846 – Surviving spouse transfer fees

HF 846 waives fees for transferring the title for snowmobiles, ATVs and boats when the transfer is to the surviving spouse of the owner. This process already exists for other vehicles.
[4/28: 48-0 (Absent: Schultz, Nunn)]

HF 855– Adult adoptees obtaining copies of original birth certificates

HF 855 provides a process for adoptees to obtain a non-certified copy of their original birth certificate after they turn 18. If the adoptee is deceased, their spouse or any relative within the second degree of consanguinity may request a non-certified copy of their birth certificate. Previously, Iowa law prohibited adoptees from obtaining a copy of their original birth certificate.

The State Registrar of Vital Statistics at the Department of Public Health will develop a contact preference form on which a birth parent may state a preference regarding contact by the adoptee or their relative. In addition, the Registrar will develop a medical history form for a birth parent to provide family medical history. If a birth parent fills out these forms, the Registrar will attach them to the original birth certificate and the adoption decree, and the forms will be provided to the adult adoptee or relative who applies for and receives a copy of the original birth certificate and adoption decree. A birth parent may fill out a contact form and a medical form indicating that they do not wish to be contacted and require that personally identifiable information be redacted. The cost of the new certificate is the same as an original certified copy of a birth certificate. The fee is $15.
[4/21: 46-0 (Absent: Mathis, Nunn, Schultz, Whiting)]

HF 865 – Filing requirements for business property tax credit

HF 865 removes a requirement that a property owner re-file for the business property tax credit on the remaining portion of a property when they transfer, sell or otherwise change ownership for a portion of the property.
[5/19: 48-0 (Absent: Nunn, Williams)]

HF 869 – Excessive weights for hauling milk products

HF 869 allows the Iowa Department of Transportation to issue annual permits to vehicles transporting fluid milk products in excess of current weight limits, but not to exceed 20,000 pounds per axle and not to exceed a gross weight of 90,000 pounds. The bill creates an annual fee of $400 for fluid milk haulers and creates penalties from $12 to $2,200, plus 10-cents per pound in excess of the 20,000-pound weight limit. The new excessive weight permits are for use on primary roads and primary road extensions in cities only. The effective date of the legislation is January 1, 2022.
[4/28: 47-1 (No: Dickey; Absent: Schultz, Nunn)]

SF 620 – Disposal of city utilities by sale

SF 620 would remove the appraisal requirement prior to the sale of a public utility in limited situations. Previous law required the appraisal of a public utility before it was disposed of through a sale to make sure the public receives fair market value for the utility when it is sold to a private entity. This bill facilitates the sale of a telecommunications utility in Hawarden. The city has had difficulty finding a qualified appraiser for their type of utility, and the cost of performing the appraisal would be have been prohibitive.
[4/23/19: 50-0]

SF 2403 – Fuel excise tax for ethanol- and biodiesel-blended motor fuels

SF 2403 would extend the current preferential excise tax rates for ethanol- or biodiesel-blended motor fuels. Currently:

The bill changes the structure of the preferential excise tax rates for higher blends of ethanol-blended fuel by focusing on E-15. The bill:

The ethanol and biodiesel excise tax rates are projected to divert fewer dollars from the Road Use Tax Fund and are meant to promote higher blends of renewable fuels.

The new rates will end after June 30, 2026. The report that is used to determine the distribution percentage will instead determine the discounted fuel excise tax rate. The rates are determined based on the distribution of blended fuels delivered from a motor fuel terminal. That report shows much lower distribution rates than what is declared by retailers on the reports they submit to the Department of Revenue. The retailer reports include blending that is done after the fuel leaves the motor fuel terminal.
[6/3: 49-0 (Absent: Hogg)]

SF 2413 – Agriculture departmental bill 

SF 2413 makes various changes to the operations of the Iowa Department of Agriculture and Land Stewardship (IDALS):

• Animal Health: Details the seizure and disposition of diseased animals. If animal owners do not follow the steps to help contain a disease, civil penalties will be incurred. These new steps are supported by all the animal commodity groups.
• Feral Swine:
  • Defines feral swine as any swine that is running at large.
  • Gives IDALS the authority to destroy feral swine if the owner can’t be determined.
  • Allows IDALS to conduct disease testing on feral swine. This will help protect against foreign animal diseases.
• Food Operation Trespass:
  • Enhances the trespass charge to an aggravated misdemeanor for first offense and Class “D” felony for subsequent offenses. 
  • Food operations are defined as a location where an animal is kept, including but not limited to a fair, exhibition, farmer’s market, dairy processing and egg processing facilities, and aquaculture.
    [Floor 6/5: 34-11 (No: Bolkcom, Celsi, Giddens, Hogg, Jochum, Mathis, Petersen, Quirmbach, Ragan, T. Taylor, Wahls; Absent: Lykam, Segebart, J. Smith, Sweeney, Zumbach]

HF 760 – Exemption from hotel/motel taxes for rental of lodging

HF 760 establishes a new threshold for determining the length of stays that qualify for an exemption from state and local hotel/motel taxes. Currently, the costs for stays at rented lodging that exceed 30 days are exempt from paying the state and local hotel/motel tax. The bill would extend the minimum length of a stay at a hotel/motel to qualify for the exemption only on the portion of the stay exceeding 90 days. For rentals where there is a tenant relationship (apartments/manufactured housing), the minimum length of stay to qualify for the exemption would remain at 31 days.

The bill also creates an exemption from the state and local hotel/motel tax for the sales price of lodging furnished by a nonprofit lodging provider renting to the friends and family of a hospital patient. This applies to stays at the Ronald McDonald House and similar facilities. Previously, hotel/motel tax is owed on the payment/donation given to the nonprofit by the family/friends who stay at the facility. There isn’t a fixed charge, but families can donate to the organization to cover their costs of stay. Because this is considered a payment for lodging (and thus a sale) under a Department of Revenue declaratory order, the hotel/motel tax is owed.
[6/13: 47-2 (No: Chapman, R. Taylor; Absent: Hogg)]

HF 2627—Professional Licensing

HF 2627 narrows the ability of licensing and professional boards to disqualify individuals holding certain licenses because of a criminal conviction. In addition, the bill addresses the issuing of licenses, certifications or registrations without exams to those who have licenses in other states when they establish residency in Iowa.

The bill allows (with certain exceptions) out-of-state individuals without licenses who relocate to Iowa to be issued a license without the required Iowa education and training requirements as long as they have three years of relevant work experience.

Division II of the bill includes many provisions that are not relevant to licensing. Some items in Division II are from bills the Senate passed and the House did not take up. Some items are related to COVID-19 and the Governor’s Proclamations.

Details of the bill:

DIVISION I

Disqualification provisions for criminal convictions

• The bill eliminates certain subsections in Code chapters for electricians and plumbers regarding denying, revoking or suspending licenses based on certain crime convictions.
• The bill narrows the ability of licensing and professional boards to disqualify individuals holding certain licenses because of a criminal conviction. For a conviction of a crime to serve as disqualification for a professional license, the offense must directly relate to the duties and responsibilities of the profession. “Offense directly relates to” means actions customarily performed within the scope of practice of a licensed profession or the circumstances under which an offense was committed are circumstances customary to a licensed profession. The Education Examiners can still deny a license due to a founded report of child abuse against the person.
• A licensing board may grant an exception to disqualification for a license if the board determines by clear and convincing evidence that the applicant is rehabilitated and an appropriate candidate for licensure.
• A person’s conviction of a crime maybe be grounds for a denial, revocation or suspension of a license only if unreasonable risk to public safety exists because the offense directly relates to the duties and responsibility of the profession and the appropriate license board or agency does not grant an exception. This applies to everyone under 272C (professional licensing—many different professional licenses fall under this chapter), but not to chapter 272 (educational examiners).
• Petitions and new fee: Allows an applicant to petition the professional licensing board for a determination of whether the applicant’s criminal history results in the denial of a license before applying and allows the professional licensing board to charge a fee to the applicant for administrative work involving the petition. The fee cannot exceed $25.

Reciprocity of licenses and recognition of work experience

• (Section 26) Licensure of persons licensed in other jurisdictions: Requires that a professional or occupational license, certificate or registration be issued to a person without an examination if:
  • That person establishes residency in Iowa, or is married to an active-duty military member and is accompanying them on an official permanent change of station to a military installation in Iowa.
  • Certain conditions must be met to allow for licensing, certification or registration without examination in Iowa. Those conditions include similar scope of practice in the other jurisdiction, having been licensed or registered in the other jurisdiction for least a year, the other jurisdiction imposed minimum education requirements (not substantially equivalent to Iowa), the person does not have discipline imposed on them from a regulating entity, etc. This applies to individuals who come from states that require a license, a certification or registration for their profession; and applies to a license, certification, or registration issued by the professional boards covered by Chapter 272C, as well as to the Board of Educational Examiners.
• (Section 27) A person applying for a professional license, certificate or registration in Iowa who relocates from another state that did not require a professional occupational license, certificate or registration to practice their profession/occupation may be considered to have met education, training or work-experience requirements in Iowa if they have three or more years of related work experience with a substantially similar scope of practice within the four preceding years as determined by the professional licensing board. If Code or administrative rules require a person applying for a professional occupational license, certificate or registration in this state to pass an exam, the applicant must do so. This does not apply to a license, certificate or registration issued by the boards of medicine, nursing, dental, pharmacy or education examiners.

Fee Waiver

• A licensing board must waive any fee for a license if the applicant’s household income does not exceed 200% of federal poverty guidelines, and it is the applicant’s first time applying in Iowa. 

DIVISION II

• Public records – allows for electronic examination in lieu of in-person.
• Allows record request in writing, by telephone or electronic means – and cost accordingly.
• Private security business does not include bails bond businesses.  This was a non-con part of SF 2372, a bill that was passed out of State Government but not taken up on floor.
• Allows the Elevator Safety Board to reduce elevator fees for nonprofit associations. This was a non-con part of SF 2372, a bill that was passed out of State Government but not taken up on floor.
• Eliminates the Hospital Licensing Board. This is SF 2327, which passed the Senate 49-0, but was not taken up in the House.
• Amends the substance abuse treatment Code Chapter by allowing meetings with counsel or family and friends to be telephonically or electronically.
• Allows personnel certified by BOEE to provide continuing education requirements online, if available.
• Deer hunting licensing for out-of-state hunters – SF 2201, which passed the Senate 48-2 but wasn’t taken up in the House.
• Allows real estate appraisers to complete contact hours under supervision in a bordering state, not to exceed 50% of the state requirement.
• Architect exam flexibility – don’t have to retake modals they’ve already passed.
• (Section 44) Repeals Travel Agent registration with Secretary of State requirement. This was SF 2133, which passed the Senate 32-17, but was not taken up by the House.
• Covid Impact: Pushed back repeal of old immunization law. In 2018, a bill was passed that added Iowa Code 155A.46, allowing pharmacists to independently order and administer immunizations. Rules were needed from Medicaid to ensure pharmacists could bill for the immunizations. Rules were noticed this spring, but were delayed because of COVID-19. Pushing back the repeal of the old immunization law for one more year will provide time for education and to enroll with Medicaid, as well as to ensure there is no gap in coverage for Medicaid members who get immunizations at a pharmacy.
• Covid Impact: School Physicals – extension on requirement for athletics until Dec. 31, 2020.
• Covid Impact: Shareholder Meeting – allows tele meetings through Dec. 31, 2020.
  [6/13: 32-17, party-line (No: Democrats; Excused: Hogg)]

HF 2623 – Establishes set off procedures for gambling winnings

HF 2623 makes everyone subject to the setoff if winnings must be reported on Internal Revenue Service form W-2G for gambling winnings. The requirements to file the form depend on the amount of winnings and the type of wager: $1,200 on bingo or slots; $1,500 on keno (reduced by wager); $5,000 on poker tournament (reduced by wager); and $600 on other gambling winnings when the payout is at least 300 times the amount of the wager.

The bill also amends provisions relating to qualified sponsoring organizations (QSO) licensed to operate gambling games. Members of the board of directors of a QSO must be residents of the state and the board must include a member of the county board of supervisors and city council of each county and city that has a licensed facility as ex officio nonvoting members. Selection of nonvoting members is at the option of the county or city, and the ex officio members are not be required to enter into a nondisclosure agreement. The QSO and an organization that receives contributions from the QSO to distribute grants must conduct and submit to the Iowa Racing and Gaming Commission an audit on the organization’s activities.

The bill clarifies that credit cards cannot be used for gambling in the fantasy sports and sports betting games that the Legislature established in 2019. Credit cards are not allowed for any other gambling opportunity in Iowa.
[6/5: 48-0 (Absent: Zaun, Zumbach)]

HF 2641 – Omnibus Tax Policy bill and DOR updates

HF 2641 is a large tax policy bill that was built on a Department of Revenue proposal. As signed into law, provisions include:

• Department of Revenue policy updates, largely non-controversial.
• Setoff procedures: This corrects an issue with updates to setoff procedures under SF 2328 and HF 2565. It ensures the existing rules for the setoff programs remain in effect until the Department of Revenue files adopted rules to enact the new legislation.
• Pro Rata Share of Entity-Level Income Tax Paid by Shareholders or Beneficiaries: Ensures that resident shareholders and beneficiaries can claim the out-of-state tax credit paid in another state for their share of the state taxes paid by that entity by establishing a new process for the resident shareholder/beneficiary to prove taxes paid by the pass-through entity in another state and their share of the entity (as well as taxes paid).
• Business Interest Expense Deduction and Global Intangible Low Tax Income: Changes the treatment on Global Intangible Low Tax Income (GILTI) for Iowa corporate income tax purposes. This had been treated as income and was apportioned as such. Federal tax changes in the 2018 TCJA adopted a “territorial” tax system to discourage companies from using intellectual property to shift profits out of the United States by treating it as income. The bill allows companies to deduct GILTI from their Iowa taxable income. This will reduce taxes on companies that might otherwise shift profits out of the U.S. to lower tax jurisdictions.
• Lifts the cap on the business interest expense deduction under 163(j) of the federal tax code to further lower corporate tax liability.
• Iowa Reinvestment Act: Reauthorizes a time frame for applications from July 1, 2020, to July 1, 2025, to approve additional districts, and revises the size and makeup parameters of eligible districts to allow for projects that include area in more than one city.
• Local Assessors: Adds accountability for assessors by addressing concerns over conflicts of interest regarding the assessment of property owned by assessor or family members of the assessor.
• School Tuition Organization Tax Credit: Allows the total amount of tax credits eligible to be issued for contributions to an STO to increase to $25 million from the current $15 million cap.
• Paycheck Protection Program: Creates an income tax exemption for forgiven loans issued under the Paycheck Protection Program of the federal CARES Act. Generally, loan forgiveness is treated as income and is taxable.
• Bonus Depreciation/Section 179 Expensing: Allows the amount expended under Section 179 to match what is allowed by any updated federal tax changes.
• Innocent Spouse provisions: Reflects current interpretation that Iowa relief from joint and several liability is available under all circumstances when such relief would be granted under IRC section 6015 for federal purposes.
• Iowa Educational Savings Plan (529 Plans): Couples Iowa’s eligible educational expenses to match federal changes that allow certain apprenticeship program-related expenses or qualified education loan repayments.
• Iowa Educational Savings Account and First-Time Homebuyer Account Extensions: Extends to July 31, 2020, the deadline for contributions to be designated as having been made in 2019.
• Qualifying Personal Protective Equipment (PPE) – Donation: Adds a new use tax exemption for production of personal protective equipment (PPE) assembled and donated in connection with a governor’s disaster proclamation. Effective January 1, 2020. The exemption covers both PPE and materials used to make PPE if it’s donated during the six months after the Governor declares a disaster emergency.
• Short-term Rental Properties: Prohibits counties and cities from enacting ordinances that prohibit short-term rental properties. These properties will be classified as residential property. Cities and counties can enact ordinances relating to short-term rental properties for protection of public health, residential use and zoning purposes, limitation or prohibition of use of property to house sex offenders, to manufacture, exhibit, distribute, or sell illegal drugs, liquor, pornography, or obscenity, or to operate an adult-oriented entertainment establishment as described in section 239B.5, or to provide the county with an emergency contact for a short-term rental property.
• Rural Improvement Zones: Ensures that the Lake Panorama Rural Improvement Zone continues to meet the standards to qualify as a RIZ. This change, based on discussions with bond attorneys, was promoted by RIZs in response to a Supreme Court decision involving a drunk driving arrest by a DNR officer at Lake Panorama.
• Sales tax exemption/rules rescission – Computer peripherals used in business operations: Changes the definitions used by DOR and aligns to the Streamlined Sales and Use Tax Agreement. It is projected to have minimal if any fiscal impact.
• Changes to food operations trespass: Removes food establishments and famers markets from food operations trespass locations.
• Iowa Small Business Relief Grant Program: Ensures grants received by businesses from the Economic Development Authority are exempt from income tax.
• Broadband infrastructure grant income tax exemption: $300K FY 20/$1.5M future years
• 529 Plan Recontribution: Codifies DOR position that it will allow participants to redeposit returned college funds for room and board to their 529 plans under set conditions. This issue arose when some students received refunds from colleges and universities under the CARES Act.
• Housing enterprise zone tax credits and transferability (SF 606): Makes changes to filing dates for requesting transferability for tax credits issued under the former Housing Enterprise Zone (HEZ) incentive program. The HEZ program was replaced by the Workforce Housing tax credit program in 2014. HEZ projects were required to request transferability of credits by July 1, 2014. Generally, a project under the HEZ program would request transferability for their credits upon completion of the project. Some developers were not made aware of the new deadline. When they made the request after the July 1, 2014, it was denied. This provides an exception from the deadline to request transferability for a project located in Des Moines County or in Woodbury County.
• Fly Our Colors Special Registration Plate (HF 2620): Allows the Department of Transportation to issue flying our colors special registration plates with navy along the top, red along the bottom, and an image of a bald eagle behind the plate’s letters and numbers. The fee for the plate is $35. An additional $25 fee is charged for personalized plates. Until July 1, 2023, the state treasurer must credit monthly from the statutory allocations fund to the flood mitigation fund the amount of the special fees for flying our colors plates.
  [6/13: 45-2 (No: Bolkcom, Quirmbach; Absent: Greene, Hogg, Lykam)]

SF 220 – Increased expensing for corporations for tax year 2018

SF 306 – Pilot project for park user fees at Lake Manawa and Waubonsie

SF 597 – Sales tax exemption for nonprofit blood centers

SF 605 – Child Support Recovery fees

SF 629 – Excessive weights for raw forest products

SF 634 – Limits on property tax revenues; city/county budget growth cap

HF 389 – Boat, ATV and snowmobile registration process improvements

HF 741- Extends bond from 20 to 30 years for flood purposes

HF 767 – Electric vehicles

HF 768 – Beginning farmer tax credit program

HF 769 – Gross weight of special trucks

HF 772 – Empower Rural Iowa

HF 778 – Capital gains deduction for sale of real estate involved in farming

HF 779 – Omnibus tax administration bill

 

SF 220 – Increased expensing for corporations for tax year 2018

SF 220 relates to Section 179 expensing for S-corporations, C-corporations and other entities taxed as corporations. The bill also impacts individuals filing K-1 returns (members of LLCs, S-Corp and partnerships) for income earned through those entities. In 2018, SF 2417 (GOP tax bill) raised the Section 179 expensing limit to $70,000/$280,000 annually for individual income taxes only, not for corporate taxpayers. The bill also instituted a K-1 tax form “fix” so that the limit on expensing is extended to every member of the business rather than having all partners cumulatively limited to the expensing threshold.

During rulemaking to implement SF 2417, the Iowa Department of Revenue determined that, because Section 179 expensing was not raised for corporate taxpayers, the individual taxpayers filing K-1s as a part of an S-corporation (and other corporate taxes entities) were not eligible for the expanded Section 179 limit that individual income taxpayers were given in SF 2417. Those individuals could only claim up to the previous $25,000/$200,000.

The bill resolves this issue by changing the corporate expensing levels for tax year 2018. Changes for other years are fully addressed in SF 2417. Section 179 expensing levels are increased to $100,000/$250,000 for individual and corporate returns for tax year 2019. Section 179 and other coupling issues are resolved in tax year 2020 because we established “rolling conformity” from then on; applicable federal tax changes on expenses, credits and deductions allowed under Iowa law will automatically be incorporated into Iowa tax code, without further legislative action.
[2/18: 48-0 (Absent: Miller-Meeks; Vacant: Danielson)]

 

SF 306 – Pilot project for park user fees at Lake Manawa and Waubonsie

SF 306 establishes a pilot program for park user fees at Lake Manawa State Park in Council Bluffs. The Department of Natural Resources (DNR) will collect fees from nonresidents who access the state park, and DNR can charge different rates for facility rentals to residents and nonresidents. This system mirrors how Nebraska charges for nonresidents to use their state parks. Lake Manawa is a busy state park that attracts many nonresident visitors because the park does not charge fees for access, unlike similar parks in the area. This has led to high use, a need for infrastructure repairs and demands on local law enforcement responding to illegal activity. The fees are designed to cover park needs and discourage illegal activities. The pilot program will be repealed on July 1, 2022. The bill was amended to create a similar program for Waubonsie State Park in Fremont County.
[4/25: 49-0 (Absent: Chapman)]

 

SF 597 – Sales tax exemption for nonprofit blood centers

SF 597 provides a sales tax exemption for tangible property sold or laboratory test services furnished to a nonprofit blood center, as long as the property or testing are directly and primarily used in the processing of human blood. The nonprofit blood centers must be registered with the federal Food and Drug Administration (FDA).

This exemption is needed because tax legislation passed in 2018 (SF 2417) redefined the term “manufacturing” to apply to a narrower scope of activity. This change subjected tangible property and laboratory testing services used by nonprofit blood centers to the sales tax. SF 597 replaces the sales tax exemption the nonprofit blood centers had operated under.
[4/26: 48-0 (Absent: Lykam, T. Taylor)]

 

SF 605 – Child Support Recovery fees

SF 605 is a Department of Human Services bill regarding Child Support Recovery fees. The bill eliminates the application fee of $25. It changes the annual fee to what is required by federal law. The fee will be collected from the obligee after $550 in support has been distributed to the family. The fee is only charged if the obligee has never received cash assistance. The bill amends Iowa Code Chapter 252B to remove the specific amount of the fee and cites directly to federal law. This means that the state will not have to pass legislation each time the federal government makes changes.
[4/22: 49-0 (Absent: Segebart)]

 

SF 629 – Excessive weights for raw forest products

SF 629 requires the Department of Transportation (DOT) to develop and implement a single statewide system to receive applications for and issue permits to allow vehicles of excessive size or weight to operate on roads under state or local jurisdiction. DOT will determine, in consultation with local authorities, the network of highways and streets under local jurisdiction, including the appropriate routes, on which the vehicles may operate. DOT will issue permits for a fee set by DOT rule and proportionate to the fees in Code section 321E.14. DOT will allocate a portion of the fees to local authorities. DOT must submit a report to the Legislature by December 31, 2021, regarding the development and implementation of the system.

The bill allows DOT to issue annual permits for $175, authorizing a vehicle or combination of vehicles to transport divisible loads of raw forest products from fields to storage, processing or other commercial facilities. A vehicle or combination of vehicles for which a permit is issued may exceed the maximum weights in Code section 321.463 if the gross weight does not exceed the limits in Code section 321E.7 (20,000 pounds on any one axle and 46,000 pounds on any one tandem axle having at least four tires). The bill prohibits a vehicle or combination of vehicles issued such a permit from traveling on the interstate or exceeding the size limits set in Code sections 321.454 through 321.457. The permit is valid for operation on non-primary highways if local authorities approved the route within their jurisdictions.
[4/23: 37-12 (No: Celsi, Greene, Hogg, Miller-Meeks, Nunn, Quirmbach, Schultz, Segebart, Sinclair, J. Smith, R. Taylor, Zaun)]

 

SF 634 – Limits on property tax revenues; city/county budget growth cap

SF 634 establishes a new public hearing process before local governments assembles their budgets. As part of this process, the local board will establish a total maximum property tax revenue limit for the city or county budget process. This includes taxes available through existing levies for general services, rural services, trust and agency, and supplemental levies.

The proposal does not eliminate any levy authority or any specific levies. The local board must publish the maximum property tax revenues within that group for the current budget year, and calculate an effective levy rate that shows what the effective rate would have been if total maximum property tax revenues were not increased. This would provide the public with information on how much property tax revenues are generated by new valuations and revaluations of existing property.

The proposal establishes a “soft cap” of 2% growth in total maximum property tax revenues over the previous year. If a local board proposes to increase the total maximum property tax revenue by more than 2%, the resolution must be approved by a two-thirds majority vote.

For counties, the levies included under the total maximum property tax calculation include:

• The sum of property tax dollars certified for general county services: ($3.50) basic levy, general county services supplemental levies and additions to basic levies (unusual circumstances), but excluding additions approved at election under current Code (special levy elections).
• The sum of property tax dollars certified for levy for rural county services: ($3.95) basic levy, rural county services supplemental levies and additions to basic levies (unusual circumstances), but excluding additions approved at election under current Code.

For cities, the levies included under the total maximum property tax revenue calculation include:

• The sum of property tax dollars certified for city government purposes under the following levies: the city basic levy ($8.10), city trust and agency fund, emergency fund and various additional taxes, under additional taxes, including emergency management commission and insurance.

The bill establishes new requirements for publication of information prior to the budget process. The bill allows an additional two weeks to complete local budgets that must be submitted to the state. The bill requires that local governments include information on the current budget protest process as part of their budget approval.

The bill does not include a reverse referendum process or “hard caps” on local budget growth. The bill maintains existing levies. The changes are effective for local budgets after July 1, 2020.
[4/23: 33-17 (Yes: Republicans, Bisignano)]

 

HF 389 – Boat, ATV and snowmobile registration process improvements

HF 389 updates the Iowa Code regarding the process for registering and titling boats and other vessels. Boat and vessel registration is now done using an electronic licensing system. These changes will improve the process:

• Allowing an owner to register their vessel with any county recorder rather than the county where the vessel was initially registered.
• Allowing a 60-day grace period for renewal of a boat registration. Boat registrations expire on April 30, prior to the time most owners take their vessel onto the water. Owners could renew prior to June 1 without a $5 late fee.
• Allowing an owner to initially register their vessel for shorter than the three-year registration period so as to prorate the fee and align the registration with the timeline for renewal.
• Allowing a title to be used to sell or transfer a vessel. Currently, the transfer or sale requires completing a form on the original registration certificate.
• Removing the requirement for a notarial to witness the application for a title after acquiring a vessel.

The bill also increases from 15 to 30 the number of days a snowmobile, all-terrain vehicle or vessel dealer has to send fees and applications to transfer a vehicle requiring a title.
[4/18: 48-1 (No: Celsi; Absent: Mathis)]

 

HF 741– Extends bond from 20 to 30 years for flood purposes

HF 741 would allow general obligation bonds issued to finance a flood-control project that was approved by the state flood mitigation board to be financed over a 30-year period instead of 20 years under current law. This is the same time frame that currently exists for cities and counties to issue bonds for essential purposes. At time of passage, one flood-control project in Cedar Rapids met the terms outlined in the bill.
[4/26: 49-0 (Absent: Feenstra)]

 

HF 767 – Electric vehicles

HF 767 creates new registration fees for Electric and Hybrid Vehicles and a new excise tax on hydrogen and electric fuel. In light of the increasing use of these vehicles, the Legislature directed the Iowa Department of Transportation (DOT) to estimate the impact of increased usage of electric, hybrid and other high-efficiency motor vehicles on future revenues to the Road Use Tax Fund. It also required DOT to evaluate and recommend alternative funding mechanisms or the alteration of existing funding mechanisms to offset decreases in future revenues due to the increased use of electric, hybrid and other high-efficiency motor vehicles. DOT produced recommendations with the goal of no net change in revenue, equity and low administrative costs. HF 767 is based on the recommendations from the DOT report.

Registration Fees – Battery electric vehicles are vehicles that have no internal combustion engine and are propelled exclusively by electricity. Under the bill, battery electric motors will pay an additional registration fee of $65 in 2020, increasing to $130 after January 1, 2022. Plug-in hybrid vehicles will pay a $32 fee beginning in 2020, increasing to a fee of $65 after January 1, 2022. Motorcycles that have a battery electric or hybrid motor will pay an additional $4.50 fee beginning in 2020, with the fee increasing to $9 by January 1, 2022.

Excise Tax – A gallon of hydrogen is 249 pounds and will pay an excise tax of 65 cents per gallon. Vehicles using hydrogen fuel will have a special fuel sticker from the County Treasurer designating that the vehicle takes special fuel. Electric fuel means electrical energy delivered or placed into a battery or other energy source outside the motor vehicle to propel it. An excise tax of two and six-tenths cents per kilowatt hour of electric fuel delivered into the battery will attach at the time of delivery. A person cannot sell or dispense electric fuel unless they hold an electric fuel license.
[4/27: 34-14 (Yes: Republicans, Kinney, Quirmbach; Absent: Lykam, T. Taylor)]

 

HF 768 – Beginning farmer tax credit program

HF 768 amends the Beginning Farmer Tax Credit Program, which had allowed up to $12 million in tax credits for the last five years. The legislation that increased the maximum tax credits allowed per year included a sunset of that increase after a five-year period to review the program to ensure the increase remained necessary and that the credit was targeted to the right type of situation. After the sunset, that income tax credit was reduced to a maximum of $6 million for tax years 2019 and after.

Under this legislation, the tax credit limit for the beginning farmer program is again raised to $12 million for tax years 2019 and beyond. The tax credit is reorganized as a single program rather than reverting to the Agricultural Asset Transfer Tax Credit and Custom Contract Farming Tax Credit. The bill maintains existing income and asset limitations for qualifying farmers and restricts the cost of the lease a beginning farmer can be charged by someone who claims the tax credit. The tax credit no longer covers custom contract farming operations.
[4/25: 49-0 (Absent: Chapman)]

HF 769 – Gross weight of special trucks

HF 769 allows a special truck used for certain farming purposes to increase to a gross maximum weight of 39 tons. The registration fee is an additional $25 per ton between 32 and 38 tons, and an additional $10 between 38 and 39 tons.
[4/26: 49-0 (Absent: Feenstra)]

 

HF 772 – Empower Rural Iowa

HF 772 changes the Broadband Infrastructure Grant Program and the Workforce Housing Tax Credit Program. Under the bill, qualifying broadband projects eligible for grant assistance must meet upload/download speeds established by the Office of the Chief Information Officer. Currently, the speeds are outlined in Code at 25mbps/3mbps. The bill also extends the grant program by five years, and proposes a $5 million increase in tax credits available through the Workforce Housing Tax Credit Program. This $5 million is set aside for projects located within the 88 lowest population counties in the 2010 census. The Workforce Housing Tax Credit Program has a tax credit cap of $20 million, with $5 million reserved for projects in smaller communities.

The bill changes the application process from first-come, first-served to a competitive process that scored by IEDA. Additionally, the bill allocates the entire cap for the program for FY20 to small city projects that were registered priority to July 1, 2019.

HF 772 also provides $10 million in Workforce Housing tax credits for projects in counties designated disaster areas because of flooding along the Missouri River. Housing projects in disaster areas can receive a tax credit of up to 20% of new investment in the project, in addition to sales tax refunds. This is in addition to the credits available under the Workforce Housing Program.
[4/24: 50-0]

 

HF 778 – Capital gains deduction for sale of real estate involved in farming

HF 778 amends the contingent capital gains for farm property that will happen for tax year 2023 if the revenue triggers in 2018’s SF 2417 are met. SF 2417 changed the capital gains exemption for farm real estate to a new standard under the contingent tax system in that bill. The capital gains deduction under the contingent tax system was narrower, reducing the value of the capital gains deduction.

The capital gains deduction is allowed for sales of six types of qualifying assets:

• Cattle, horses or breeding livestock
• Real property used in a farm business
• Real property used in a non-farm business
• Timber
• A business
• Employer securities to a qualified Iowa employee stock ownership plan.

The future (contingent) capital gain deduction is limited to:

• The taxpayer “materially participated” in the farming business for at least 10 years and held the real property for at least 10 years; and sold the real property to a relative.

• The deduction would be revoked if the relative sells or transfers the real property used in a farming business to a non-relative on the taxpayer within five years of the original sale.

The bill would amend the future (contingent) capital gains deduction so that it would apply in the following cases:

• The taxpayer “materially participated” in the farming business for at least 10 years and held the real property for at least 10 years; or the taxpayer sold the real property to a relative.
• This bill expands the definition of relative to include an entity in which a relative of the taxpayer has a legal or equitable interest in the entity as an owner, member, partner or beneficiary.
• This bill strikes provisions related to restricting the capital gain deduction for the sale of real property used in a farming business if the relative sells or transfers the real property used in a farming business within five years of the original sale.
  [4/25: 49-0 (Absent: Chapman)]

 

HF 779 – Omnibus tax administration bill

Division I – Income and franchise tax changes:

• Technical changes to the new qualified business income deduction to incorporate the “cooperative” fix. This addresses the federal Tax Cut and Jobs Act (TCJA) that had inadvertently created a tax equity issue for people who sold their grain or other agricultural products through a cooperative.
• Changes the administration of the school tuition organization (STO) so that the amounts are calculated on a calendar year basis rather than tax year. This is how the program is currently administered, but the change is necessary because corporate tax years vary.
• Clarifies the allocation of the early childhood development tax credit among married taxpayers who filed joint federal tax returns.
• Provides for the coupling of the state franchise tax to the federal tax code.
• Technical changes to the treatment of like/kind exchanges to couple with federal changes made after the TCJA.

Division II – Administrative changes: The Department of Revenue may adopt rules allowing taxpayers to designate another person to receive tax information.

Division III – Sales and Use tax changes:

• Clarifies the existing definition of “affiliate” to aid in collecting sales and use taxes from affiliated businesses.
• Changes the amount of service or warranty contract subject to sales or use tax to the full price of the service contract.
• Clarifies that carpentry repair and installation services are taxable. This relates to an Iowa Supreme Court case that involved construction services provided by Lowe’s. This mirrors administrative rules for electric or plumbing services. The administrative rules for carpentry did not include the two terms, creating uncertainty that the court ultimately decided.
• Creates a new sales and use tax exemption for grain bins, including construction materials and replacement parts.
• Clarifies the type of equipment not exempt from sales and use tax on sales or rentals of industrial machinery, equipment and computers. This change relates to telecommunications companies and prevents refund claims that could arise from other legislative changes that were not meant to create a new exemption for machinery and equipment used for manufacturing purposes.
• Extends the sales tax exemption on digital products sold for commercial purposes to include digital service contracts.
• Eliminates language creating a 200-transaction threshold for determining if a retailer is subject to the requirements for remote sellers to collect and remit sales tax. This leaves one test ($100,000 or more in sales) for determining whether or not a remote seller must comply with Iowa’s sales tax requirements. The transaction threshold is being eliminated in other states as well.
• Reduces the frequency of required reports that must be filed by a “referrer” of online sales. A “referrer” is distinct from a marketplace facilitator. Under the bill, DOR cannot collect tax or require filings for referrers until administrative rules are in place to establish the responsibilities of a referrer.
• Directs the Department of Revenue to establish a task force to review and provide clarity regarding the definition of “computer” as used throughout the Code and administrative rules.

Division IV – Automobile Rental Excise Tax: Streamlines the process for collecting and administering the automobile rental excise tax to eliminate issues where online platforms don’t collect the full rental sales price at time of transaction.

Division V – Telephone company property: Addresses conflicting legislative language in bills enacted following the 2018 session. SF 2388 and another bill both amended the same Code section. The changes included in those bills created uncertainty in how to implement them.

Division VI – Targeted Jobs Withholding Tax Credit: Extends the targeted jobs withholding tax credit program by two years so that it ends after June 30, 2021, and restricts it to jobs created (not retained). The program is available for specified jobs located in a pilot project city. Pilot project cities include Sioux City, Council Bluffs, Burlington and Keokuk/Fort Madison. Sioux City is the most active participant in this program.

Division VII – School Tuition Organization tax credits – Increases the amount of tax credits that can be issued under the School Tuition Organization (STO) tax credit program by $2 million to $15 million annually for tax year 2020. STOs provide scholarship assistance to students from families with incomes up to 400 percent of the federal poverty level.

Division VIII–Income tax checkoffs: Re-authorizes the state fair and combined volunteer firefighter/veterans income tax checkoffs, and establishes a process to notify the Legislature of which checkoffs are scheduled to be eliminated from the state income tax form.

There is a two-year cycle for established income tax checkoffs. After those two years, the two checkoffs that received the lowest amounts are eliminated from the state income tax return. For this cycle, the two lowest returns were the state fair and the combined volunteer firefighter/veterans checkoffs. The highest two checkoffs support wildlife habitat and child abuse prevention.

The state income tax return has a maximum of four slots available for income tax checkoffs. The current system allows an opportunity to consider which checkoffs are included on the state income tax return and provides an opportunity to add new checkoffs to the form.

Division IX– Powers and duties of director of Revenue: Adds a new item to the Code section outlining the powers and duties of the director of the Department of Revenue. This change clarifies that the director can audit or examine all taxes collected or administered by the department. This will extend audit and examination authority to the moneys and credits tax for credit unions. Because of a law change in 2018, the department now administers this tax. It previously had been administered through counties.

Division X – Sales and Use Tax Exemption for Manufacturers: Clarifies changes from SF 2417 that had restricted who qualified for the sales and use tax exemption for manufacturing processes. Under that bill, anyone engaged in a designated business was unable to qualify for the manufacturing exemption. The bill allows the exemption for a company that is primarily engaged in manufacturing but also engaged in the listed activities. This is a minor adjustment to the change in definition of manufacturer in SF 2417, not a full-scale reversal.

Division XI – State Research Activities Tax Credit (RAC): Amends the industries eligible to claim the state RAC to include agriscience. In 2018, SF 2417 reigned in the types of companies claiming the credit, and restored the credit to the activities intended under the legislation as passed in 2010. SF 2417 also prohibited those engaged in agricultural production, commercial and residential repair and installation, including HVAC, plumbing, security and electrical systems, from claiming the credit.

Recent rulemaking by the Department of Revenue to enact SF 2417 has already included agrisciences as an eligible industry because it is difficult to separate it from “life sciences” that are allowed under the legislation. The bill does not extend the RAC to agricultural animal production.

Division XII – Adoption tax credit; timing of eligible expenses: Allows adoption expenses to be included when claiming the adoption tax credit. Previously, expenses only could be claimed during the year the adoption is completed. That meant eligible expenses claimed in years before the adoption is completed can’t be included and requires the taxpayer to file amended returns for previous years to claim the credit for eligible expenses incurred during those years.

Division XIII – Utility Replacement Tax Task Force: Extends the utility replacement task force by five years to January 1, 2024. This task force reviews the implementation and operation of the utility replacement tax created to replace the previous property tax on utilities.

Division XIV – Repealing the alternative minimum tax for franchise taxes: Repeals the alternative minimum tax (AMT) for franchise taxes beginning in tax year 2021. A one-year transition allows the use of the AMT credit in tax year 2021 for those who have to pay the AMT in tax year 2020. This repeal mirrors the repeal of the corporate AMT in 2018’s SF 2417.

Division XV – Geothermal system tax credit: Reinstates the state geothermal system tax credit that was eliminated in 2018’s SF 2417. The state credit is based off of the federal geothermal tax credit. The state credit will be issued on a first-come, first-served basis. The amount of credits issued in any one year is limited to $1 million.

Division XVI – Moneys and Credits Taxes: Makes a technical fix to a legislative change in 2018 that put the Department of Revenue in charge of collecting and assessing the moneys and credits tax on credit unions. The bill removes the county boards of supervisors and county treasurers in the levying and collection process.
[4/27: 44-4 (No: Bolkcom, Celsi, Quirmbach, R. Taylor; Absent: Lykam, T. Taylor)]

All bills passed by the Legislature and sent to the Governor for her signature during the 2018 session. 

SF 2388 – Ending central assessment of telecommunication property; transfer to local assessment and valuation
SF 2389 – DNR authority to set pricing for camping and rental fees
SF 2390 – Food safety and hotel sanitation fees and inspections
SF 2400 – Local government risk pools
SF 2407 – Knoxville Raceway sales tax rebate update
SF 2417 – GOP tax scheme
HF 631 – Hunting and fishing fee increases
HF 2370 – Post-adoption information
HF 2446 – Utilities Board omnibus/voice over the internet protocol service regulations
HF 2478 – Exempt sales tax for construction equipment purchased for lease or rental
HF 2500 – Workforce housing deadline extension

 

SF 2388 would eliminate the current system for assessing telecommunication facilities that applies to wire-line telephone and Internet service providers and replace it with a traditional assessment process on a local basis. Wire-line service providers have been centrally assessed by the Department of Revenue on a number of factors to determine the value. The property includes wires and other transmission equipment. The property tax paid is distributed proportionally to the jurisdictions where the transmission infrastructure is located. The bill modifies cable television property assessment so that it is valued in the same manner and on comparable property as wireless and wire-line telecommunications companies under the legislation.

Telecommunications property will be locally assessed with the valuation limited to the value of real property associated with the utility. This new procedure is projected to lower the taxable valuation of telecommunications property by an estimated $885 million and reduce property taxes to local governments by nearly $30 million. The tax reduction has a three-year phase-in, which is accomplished by providing an additional exemption under the central assessment system before transitioning to the local system for assessments after January 1, 2022.

Under the bill, cell towers are not considered telecommunications property and will not be assessed under Chapter 433. Cell towers are assessed locally as real property. However, the bill does provide a phase-out of property taxes on cell towers.

 

SF 2389 would give the Department of Natural Resources (DNR) authority to adjust fees for campsites, cabins and other facilities in state parks and management areas. The department previously established fees through the administrative rulemaking process, which can take more than six months. Under SF 2389, DNR will set rates for campsites, including offering package deals and discounts, to more effectively market the sites.

 

SF 2390 changes food safety and hotel sanitation fees and inspections based on recommendations from the Department of Inspections and Appeals (DIA), Department of Public Health (DPH) and regulated establishments, including restaurants, schools, hotels and banquet facilities.

The food inspection program was designed to be self-supporting with fees covering the costs of the program. This allowed local governments to run programs and provide services at a local level. Without a fee increase, local governments haven’t been able to afford the program, so more responsibilities shifted to the state. The fee increase will allow more local governments to resume inspections. Fee increases don’t apply to schools and licensing requirements don’t apply to education events with food vendors.

 

SF 2400 allows library districts to participate in the Iowa Community Assurance Pool (ICAP), a local government risk pool. The bill also updates Iowa law for townships, 28E organizations, emergency management agencies, empowerment boards, transit authorities and county fairs to provide allow them the same coverage under the risk pool as cities and counties, including coverage against employee theft.

 

SF 2407 updates the existing sales tax rebate for improvements at Knoxville Raceway by simplifying the process for claiming the rebate and changing the maximum rebate to $1.8 million (instead of 25 percent of project costs or a maximum of $2 million).

 

SF 2417 – GOP TAX PLAN

Overall tax bill impact

The Republican tax plan is a major transformation of Iowa’s tax system that will eventually reduce revenues by more than $1 billion annually.

Lower revenues initially come from reductions in individual and corporate tax rates, along with expanded expensing deductions for farmers and small businesses and a new tax deduction for most businesses organized as LLCs and S-corporations. We’ll see even greater reductions in the future when the plan changes what income is subject to tax for individuals and major reductions in the top tax rates. The bill also expands Education Savings Accounts for private K-12 education expenses, expands Iowa’s sales tax to more online sales, and makes a number of changes to existing tax credits.

These tax cuts will cripple Iowa’s ability to train more skilled workers, to increase family incomes and to help create more opportunities for our children and grandchildren. Iowa will be in a state of constant budget crisis, with state resources decreasing over time.

This bill reduces general fund revenue by more than $100 million in FY19 and by more than $261 million in FY20. In tax year 2024, the bill is projected to reduce individual and corporate income taxes by more than $1 billion.

Reduced revenue will lead to cuts in state spending on many programs, which may in turn increase local property taxes. More school districts will be subject to the “budget guarantee” and will be forced to rely on local property tax increases to balance their budgets. Public safety and mental health service shortfalls will also fall on local governments and property taxes.

A portion of the revenue loss is made up by modernizing the state sales tax system to more effectively collect taxes for online purchases. The bill also expands the state sales tax to include digital goods and services, taxis and ride-sharing companies, and room rental services (VRBO and Travelocity). It also changes the definition of “manufacturer” to overturn an Iowa Supreme Court decision (Sherwin Williams). The net impact of sales tax changes in the bill is around $67 million in FY19 and $117 million in FY20.

Business tax credit changes are projected to have a minor impact on overall revenues in the near term. The limitations on who can claim the Research Activities Credit and “base year” calculations will reduce awards through the program, but not substantially. The bill does include a five-year extension to the deadline for certifying qualified investment funds under the Innovation Fund program and a one-year extension to the Targeted Jobs Withholding Tax Credit program in certain cities (i.e., Sioux City, Council Bluffs, Burlington and Fort Madison).

The bill also eliminates income tax credits that supported geothermal energy system installations. This program has created jobs across the state and supported renewable energy and energy efficiency improvements to homes, farms and businesses.

Individual income tax changes

Initially, the income tax changes in the bill will:

• Leave the existing income tax system and brackets in place but will reduce the rates for tax year 2019.
• Couple Iowa’s tax code with the federal changes that expand the Earned Income Tax Credit and teaching expense deductions for tax year 2018.
• Phase in increases for Section 179 expensing. For tax year 2018, the limit is raised to $70,000/$280,000 annually for individual income taxes only, not corporate. The bill also institutes a K-1 tax form “fix,” which means the limit on expensing is extended to every member of a business rather than having all partners cumulatively limited to the expensing threshold. Additionally, the legislation does not couple with federal changes that eliminated “like-kind” exchanges from qualifying under Section 179. Those exchanges and the K-1 “fix” will end in tax year 2020. A K-1 is the form that reports the amounts that are passed through to each party that has an interest in a small business entity.
• Expand qualifying education expenses for 529 savings plans to include private K-12 education beginning in tax year 2018.
• Provide for general individual and corporate tax code coupling for tax year 2019. Section 179 expensing increases to $100,000/$250,000 for individual and corporate returns.
• Include the new qualified business deduction (QBID), which provides businesses that file under the individual income tax system (LLCs, S-Corp, partnerships, etc.) a major new deduction on federal income taxes. This deduction is equal to 20 percent of the qualified income from the business. The deduction is phased in over four years beginning in tax year 2019.
  • With the QBID, individuals can deduct 20 percent of “qualified business income” from a partnership, S corporation or sole proprietorship, as well as 20 percent of qualified real estate investment trust (REIT) dividends, qualified cooperative dividends and qualified publicly traded partnership income.
• Fully couple Iowa’s tax code with federal tax changes for tax year 2020, and automatically couple Iowa’s tax code with federal changes in the future. Previously, Iowa only coupled with federal tax changes by passing legislation to implement the changes.
• Not couple Iowa’s tax code with “bonus depreciation” provisions. Iowa has routinely not coupled with this provision.

Beginning in tax year 2023, the bill could change Iowa’s individual income tax system dramatically, assuming two conditions are met: 1) General fund net receipts for FY22 (or after) exceed $8.31 billion; and 2) Net general fund receipts grow at least 4 percent above the year prior (equal to or more than 104 percent of previous year’s net receipts).

• The basis for determining Iowa taxable income will be calculated on federal taxable income. This will incorporate all federal tax deductions into the Iowa tax code.
• Many of the Iowa specific adjustments to taxable income are eliminated. A summary of those adjustments is below.
• The state standard deduction is removed. The federal standard or itemized deductions will be factored into the tax code by using federal taxable income as the base.
• A new deduction for businesses is created for payments on the principal or interest of a qualified education loan incurred by an employee.
• Federal deductibility is eliminated, brackets are reduced and rates for tax year 2023 are lowered.
• The individual alternative minimum tax and the associated credit are repealed. This tax is paid by a small number of filers who can then get a credit for the tax paid in later years if the Alternative Minimum Tax is in excess of tax liability.

Corporate income tax

Tax rates for corporations will be reduced beginning in tax year 2021:

• The 50 percent federal deductibility provision in Iowa’s tax code is eliminated.
• Iowa’s tax code will fully couple with federal tax changes for tax year 2020, and automatically couple with federal changes thereafter. Currently, Iowa only couples with federal tax changes by passing legislation to implement the changes.
• Iowa’s tax code will not couple with “bonus depreciation” provisions. Iowa has routinely not coupled with this provision.
• The corporate Alternative Minimum Tax is repealed.

Tax Credits

The bill makes many changes to tax credits and tax incentives. These include:

• Revising the Taxpayer Trust Fund and eliminating the Taxpayer Trust Fund tax credit. The fund is revised to hold money from “excess revenues” and be available to finance future tax policy changes, including, but not limited to, increasing the general retirement income exclusion or reducing tax rates. The fund has received money when general fund revenue exceeds REC estimates, up to $60 million. The bill eliminates the cap on transfers.
  • The Taxpayer Trust Fund tax credit has been issued twice since it was created in 2013. Tax credits are issued only when the fund has a balance in excess of $30 million.
• Extending the Targeted Jobs Withholding Tax Credit by one year. The program was to expire June, 30, 2018.
• Providing a five-year extension for certificating a qualified investment fund under the Innovation Tax Credit program.
• Placing a number of restrictions on the use of Research Activities Credits by:
  • Specifying industries that can claim the credit. Eligible businesses are in manufacturing, life sciences, software engineering, or aviation and aerospace.
  • Prohibiting those in agricultural production, commercial and residential repair and installation, including HVAC, plumbing, security and electrical systems, from claiming the credit.
  • Restricting the state credit to businesses that also claim and are allowed the federal RAC credit.
  • Prohibiting a business from receiving a refund or carrying forward supplemental RAC credits issued under the High Quality Jobs Program.
  • Defining “base amount” to determine expenditures a business can claim under the program. This is meant to restrict the base amount to what was intended by the original legislation.
• Repealing the alternative minimum tax credit, which is unnecessary with the repeal of the AMT, and providing for transition period.
• Expanding student eligibility for tuition grants under the Student Tuition Organization tax credit program. The threshold for eligibility is increased from 300 percent of the federal poverty level to 400 percent of the federal poverty level. The tax credit program cap is increased by $1 million to $13 million annually for tax year 2019.
• Repealing the geothermal heat pump tax credit beginning in tax year 2019.

529 plans – Education Savings Account expansion

The bill incorporates the recent federal expansion of qualified expenses under 529 college savings plans to include private K-12 education expenses. Maximum contributions for this purpose are $10,000 annually.

The 529 saving plan was established to encourage savings for higher education with contributions limited to $3,000 per year. The plans are invested in qualified securities and are designed to accumulate value while a child ages in order to pay for college. This new method will allow payment of expenses in the same year, essentially creating a tax deduction for private education expenses.

Sales/Use Taxes

The main provisions of this portion of the bill provide for collecting sales taxes on Internet purchases by  Iowans by expanding what is considered the nexus of the sale to include sales sourced to a person located in Iowa. Previously, nexus was restricted to the physical location of the seller; sellers located outside of Iowa were not obligated to collect and remit sales taxes. This issue is the subject of a case argued before the U.S. Supreme Court in April 2018.

The bill also makes digital products and information services subject to Iowa’s sales and use tax. This extends the tax to digital downloads of movies, music and books, as well as software. Information services include such streaming services  as Netflix and Hulu, such genealogical research services as Ancestry.com, and other services that involve sending digital information to an end user. The Department of Revenue has asserted that such streaming television services as Netflix and Hulu are already subject to state sales tax requirements that apply to cable video services.

The bill extends the sales tax to taxi services and ridesharing platforms, and creates exemptions for public transit, paratransit, and emergency and nonemergency medical transportation

The bill expands sales taxes to services that facilitate the rental or use of lodging and automobiles. This would require ridesharing companies like Uber/Lyft, AirBnB/VRBO and others that assist in these transactions to collect and remit sales taxes. These companies are jointly liable for taxes owed on services they assist in accommodating. This means such booking services as Travelocity are liable for taxes owed on hotel rooms reserved using their platform in the event the hotel does not remit the taxes owed to the state.

The bill restricts a “manufacturer” to standards in force prior to an Iowa Supreme Court decision in a case involving Sherwin Williams. This eliminates many businesses from claiming the manufacturer exemption from sales tax on purchases of equipment and scales back Iowa’s sales tax exemption on manufacturing equipment.

Local Option Sales Tax (LOST) Election Approval changes

The bill strikes provisions in state law for LOST elections conducted in Polk and Johnson counties after January 1, 2019. Existing law requires contiguous cities to vote to approve the implementation of a LOST. This provision makes cities such as Des Moines, West Des Moines and others in metro ineligible to implement LOST, even if the city’s voters approved the measure.

Miscellaneous Administrative changes for the Department of Revenue

The first three divisions of the bill contain a number of administrative changes proposed by the Department of Revenue. These include:

• Establishing consistent interest accrual procedures across tax types administered by the department.
• Expanding tax fraud penalties beyond credits and refund claims to include reimbursements, rebates or other payments.
• Providing the department the authority to share information with the Attorney General’s office and law enforcement in cases of suspected tax evasion.
• Codifying a recent Iowa Supreme Court (Bass v. JC Penney Inc.) ruling regarding class actions and private right of actions for overpayment of taxes collected by a private entity. LSA legal update on the case.
• Dictating that the department will be the point of contact on behalf of political subdivisions and the state to ensure accurate geographical boundary information is provided to the U.S. Census Bureau.
• Improving the procedure for collecting the prepaid wireless service excise tax and the water service excise tax.
• Providing that political checkoff funds received by Revenue will be deposited into the General Fund. The checkoffs were eliminated last year but some amended returns are being submitted with money set aside for the checkoff.

Changes to Individual Income tax adjustments

The bill changes existing deductions for calculating Iowa taxable income:

• The cost of purchasing health insurance for a spouse or dependents (only impacts Iowans taking the federal standard deduction). The adjustment will remain, but it is limited to Iowans 65 and older with incomes less than $100,000 who purchase health insurance for their spouse or qualified dependents.
• Net capital gains deduction, including the 50 percent deduction for capital gains associated with a qualified Employee Stock Ownership Program. The new capital gains deduction is limited to farm real estate transactions only. The deduction is available for transfers of real estate to lineal relatives as well as two levels of consanguinity, which includes brothers and sisters and their children. Provisions attempt to prevent using this qualified transaction as a way to avoid paying capital gains taxes by transferring the property to a qualified relative who then sells the property to a non-qualified person.

The bill eliminates or phases out these deductions for calculating Iowa taxable income:

• Employment of disabled individuals and former prisoners
• Organ donation
• Restitution/compensation for property taken through involuntary condemnation/eminent domain
• Income earned by non-residents who conduct emergency response work for utilities in the event of a disaster
• Tax expenses for a fiduciary in executing an estate
• Restitution for Agent Orange exposure, those kept in Asian-American internment camps during World War II and those victimized by Nazis
• Income earned during active duty in Desert Storm, Bosnia-Herzegovina peace keeping and the second Iraq war

The bill appears to remove income from these provisions in calculating Iowa taxable income:

• Certain intangible drilling and development costs described in IRC §57(a)(2).
• The percentage depletion amount with respect to certain oil, gas or geothermal wells described in IRC §57(a)(1).75
• The depreciation taken on a speculative shell building, defined in Iowa Code section 1(27), that is owned by a for-profit entity receiving the proper tax exemption, unless the taxpayer is not using the building as a speculative shell building. For state income tax purposes, depreciation is computed and subtracted from federal adjusted gross income as if the building was classified as 15-year property.

 

HF 631 would give the Department of Natural Resources (DNR) authority to establish fees for hunting and fishing licenses and permits. The fees had been established in Iowa Code and could only be changed through legislation. Now, the Natural Resources Commission (NRC) can set fees through administrative rulemaking.

Hunting and fishing fees are deposited into the Fish and Game Protection Fund. This fund is constitutionally protected; it can only be used to regulate or advance fishing, hunting and trapping in Iowa, and to administer programs that protect, restore and manage fish or wildlife. In the past, fees did not keep up with the department’s costs to provide services. That led to cuts to conservation law enforcement staff and projects to improve wildlife habitat and recreational opportunities.

As passed by the Legislature, a person issued a youth deer-hunting license with an unused tag can hunt in other deer-hunting seasons. A youth hunter can only use the approved “method of take” or weapon during that season.

 

HF 2370 requires the State Registrar of Vital Statistics to send a list of available post-adoption services to adoptive parents, along with the new birth certificate. The list of services is to be provided by the Department of Human Services.

 

HF 2446 clarifies and updates Iowa Code by deleting references in Utilities Board regulatory sections that are obsolete and repeals requirements for studies that have been completed and the reports properly filed with the Legislature. In addition, two Utilities Board orders that establish regulations for voice over the internet protocol (VoIP) phone service are put into Iowa Code.

 

HF 2478 clarifies that leased or rented construction equipment is not subject to sales tax when it is resold by the retailer who was renting or leasing the equipment.

 

HF 2500 allows the director of Iowa’s Economic Development Authority to grant an extension of up to one year for completing projects awarded credits under the Workforce Housing program. Projects were to have been completed within three years of registration, but some projects were in danger of missing their deadline.

The following bills were passed by the Legislature and signed into law by the Governor.

SF 488 – Workforce Housing Tax Credit program set aside for small communities
SF 489 – Legalizing consumer fireworks
SF 493 – Additional bonding options for benefited recreational lake district
SF 501 – Increasing certain fees collected by the county sheriff
SF 502 – Consumer Credit Code update
SF 503 – Deferral of unpaid installments on certain consumer credit loans
SF 504 – County mental health and developmental disability property taxes
SF 505 – First-time Homebuyer Savings Accounts
HF 242 – Repealing the individual income tax checkoff for the Iowa election campaign fund
HF 478 – Striking future repeal of the Property Assessment Appeal Board (PAAB)/assessment appeal procedures
HF 607 – Alcohol Policy Omnibus
HF 608 – DOR technical bill – IRC clarifications and flood mitigation fix
HF 609 – Allowing a land use district to impose a local hotel and motel tax
HF 617 – IDALS code clean- up
HF 625 – Eliminating requirement to indicate health coverage for children on tax return
HF 626 – IID long-term-care insurance filing fee elimination

SF 488 sets aside $5 million in tax credits under the Workforce Housing Incentive Program for projects in communities outside of Iowa’s 11 most populated counties. The 11 most populated counties include all major metropolitan areas plus their suburbs and ring cities. If that amount is not fully claimed, the remainder will be available for projects in the larger cities.
[4/18: 50-0]

 

SF 493 allows a benefited recreational district to issue the same types of bonds as cities and counties. The only district in the state, which is located around Lake Delhi in Delaware County, has been restricted to issuing only general obligation or revenue bonds. The new law gives Lake Delhi the opportunity to refinance bonds to save money over the term of the bond.

It also allows a benefited recreational district to refinance bonds without a public vote. The law would still require a public vote for the district to bond for new debt or an increase in the amount of debt.
[3/28: 49-0 (Rozenboom absent)]

 

SF 501 increases a number of fees charged by county sheriffs for services they are required to provide. Many of these services involve private parties for civil processes, including serving notices, warrants and subpoenas; and making and executing bills of sale and certificates or deeds for land sold. Fees were last increased in 2001.

Sheriffs asked the Legislature in 2015 for an increase in fees. The Legislature requested that sheriffs provide additional information on the cost of providing services and how much the counties subsidize them through property taxes. In December, the sheriffs detailed this information in a report. This law increases fees to make them more closely match the cost of services, taking the burden off the backs of county property taxpayers.
[4/12: 48-1 (Bisignano “no”; Bertrand absent)]

 

SF 502 is an agreement among the Iowa Attorney General, Iowa Bankers Association and Iowa Credit Union League to modernize the Iowa Consumer Credit Code. Many fees for creditors and remedy awards for debtors have not been adjusted since the Code was created in 1974. The legislation:

• Allows the Attorney General greater latitude to declare supervised loans void when made by parties who do not have proper authorization to make them.
• Provides for a credit reporting charge, a $30 charge for returned checks and over-limit violations on credit cards.
• Increases the allowable late-payment charge cap from $15 to $30 on all consumer credit and changes the rebate rules for deposit-taking lenders, which will make it easier to provide smaller consumer loans.
• Raises the remedy award for a consumer’s private right of action for violations of the consumer credit code along with violations of disclosure provisions from a minimum of $100 to $200 and from a maximum of $1,000 to $2,000. It also raises the civil remedy for the Attorney General to bring an action against a creditor from no more than $5,000 to no more than $10,000.
• Raises the annual notification fee for credit sellers and debt collectors from $10 to $50, and increases the allowable charge for late filing by these credit sellers and debt collectors from $20 to $75.
  [4/12: 49-0 (Bertrand excused)]

 

SF 503 clarifies the Iowa Consumer Credit Code related to deferred payment on a closed-end, simple interest loan. Currently, the parties to a pre-computed consumer credit transaction may agree in writing to a partial or full deferral of any unpaid installments and the creditor may receive a deferral charge. The bill adds deferrals with respect to interest-bearing consumer credit transactions that are not pursuant to open-end credit arrangements, and other than consumer lease or consumer rental purchase agreements. The parties may agree in writing to a partial or full deferral of any unpaid installments in addition to any interest accrued, pursuant to the terms of the transaction. The creditor may receive a deferral charge not to exceed $30 (this mirrors the fee language in SF 502).
[4/12: 49-0 (Bertrand excused]

 

SF 504 updates the system that governs how Iowa counties levy property taxes to fund regional mental health and developmental disability services. Under the system, county expenditures have been capped at a level based on their expenditures, as established in 1996. The caps are at dollar levels, not property tax rates. The spending levels are also limited by the $47.28 per-capita levy cap on county spending.

The system has meant a number of counties have much lower per capita levy rates for mental health and developmental disability funding than what is allowed under law. Counties with growing populations and increasing property tax values have seen their per-capita funding level lowered as a result of the expenditure limits established in 1996.

The mental health and developmental disability services system was redesigned in 2011, creating regions to provide services. Counties within a region can pool their resources to provide services. However, individual counties within the region are still limited by the old system when it comes to levying property taxes. Counties within a region have ended up “subsidizing” other counties that max out on the dollars they are allowed to generate for expenditures.

The two most prominent examples of this are the East Central Iowa Region and the Eastern Iowa region. In the East Central region, Johnson County is generating the lowest amount of funding per capita because it is at its county expenditure cap. Other counties in the region generate more per capita through property taxes, with nearly half of the counties levying at the $47.28 per-capita cap. In the Eastern region, three of the other four counties are levying at the per-capita cap to fund regional services, while Scott County is generating only $19.22 per capita because of the expenditure limitation. Polk County is its own region and is restricted to the county expenditure cap for spending on services even though it is well below the $47.28 per capita cap. For more on funding for the adult mental health and disability services system, go to www.legis.iowa.gov/docs/publications/IR/798981.pdf

The new law addresses inequities on property taxes within regions and allows increases in regional expenditures on mental health and developmental disability services. It also establishes a procedure for enforcing the 25-percent limit on operating reserves held by counties.

It equalizes the per-capita levy rate among all counties within a region. Counties will no longer be restricted by the base-year expenditure, so counties like Johnson and Scott can increase their contribution, and the region can reduce the contribution by other counties that are contributing at a higher level. Population numbers used for determining per-capita spending is based on the most recent federal census or population estimate. This does not allow for more spending on services in a region.

The statewide per-capita cap will remain at $47.28. The inflation factor is not allowed if it puts expenditures above the per-capita spending cap.

It allows Polk County to use funds from the county hospital levy to supplement its county services fund in an amount up to the $47.28 per capita expenditure cap. This allows Polk County to use up to $7 million from their county hospital levy to meet their service expenditures. Broadlawns must contribute $2.8 million per year for three years. Broadlawns must provide $3.5 million in covered services to residents of Polk County.

It establishes a process for amounts in the county services fund that are in excess of the 25 percent reserve allowed under law (20 percent for regions with populations above 100,000). The county would reduce its mental health levy rate to expend funds in reserve until the limit is reached. This process cannot be used to exceed regional expenditure limitations. The draw-down is based on a county’s contribution to the excess reserves and spread over three years.

The law should make the regional system stable for the near future and address the need for more flexibility for Polk County to meet its needs for funding services. It does not address the long-term viability of the funding system for mental health and disability services. The new law establishes workgroups to address existing concerns about the need for improvements in delivery and access of services. A fiscal viability review of mental health and disability services funding will take place in 2018, and will make recommendations to the Legislature.

The law allows a sheriff or sheriff’s deputy to inform a hospital where they transport an individual for involuntary hospitalization that an arrest warrant has been issued or charges are pending against the individual and request that the hospital notify the sheriff or sheriff’s deputy about the discharge of the individual prior to the discharge.
[4/18: 46-4 (Bisignano, Boulton, McCoy, Petersen “no”)]

 

SF 505 creates a new state income tax exemption for qualified deposits to a First-time Homebuyer Savings Account. Withdrawals from the account are tax-free if the money is used for a down payment and closing costs for a single-family, owner-occupied home in Iowa. To set up an account, a person must submit a form to the Department of Revenue designating the account as a First-time Homebuyer Savings Account. The beneficiary may access the fund to purchase their first home. The account holder may change the beneficiary at any time or may designate himself as the beneficiary. Contributions may be made by any person, in any amount. There is no cap on donations/contributions to the account. The account holder may withdraw funds at any time.

An account holder may deduct contributions from their income taxes. The deducted amount may not exceed $2,000 per year for an individual or $4,000 for married taxpayers. These amounts are adjusted for inflation each calendar year. The new law exempts any interest or earnings received from the holder’s accounts. The total amount that may be deducted from one’s income tax for these two tax incentives cannot exceed an aggregate lifetime limit of 10 times the maximum deduction determined above for the applicable year ($20,000 for 2016), or double that amount for married taxpayers with a joint account ($40,000 for 2016).

The account holder can claim the tax incentives for 10 tax years from opening the account, or on the date when account funds are withdrawn, whichever comes first. Any amount remaining in the account after the 10^th year must be added to net income of the account holder that tax year. Nonqualified withdrawals from the account will be added to net income and are subject to a 10-percent penalty unless the withdrawal was made because of death, disability or bankruptcy. The law prohibits money for house/closing costs from being allowed as an itemized deduction on Iowa individual income taxes. The tax provisions will begin on or after January 1, 2018.
[4/17: 49-1 (Bolkcom “no”)]

 

HF 242 removes the political checkoff from Iowa state income tax forms for taxes prior to January 1, 2017. The political checkoff is repealed and no longer available. It had generated approximately $65,000 for qualified state political parties, which include the Republican Party of Iowa and the Iowa Democratic Party.
[4/19: 37-13 (Bisignano, Bolkcom, Boulton, Dotzler, Dvorsky, Hogg, Horn, Jochum, Lykam, McCoy, Petersen, Quirmbach, Taylor “no”)]

 

HF 478 eliminates the future repeal date for the Property Assessment Appeal Board. The board was established in 2005 to hear and review appeals of property valuation assessments by property owners after the local board of review process takes place. The board was initially scheduled to cease operations after July 1, 2013, but was extended through various pieces of legislation to July 1, 2021.

Changes are also made to the process for filing an appeal with the board, notifications of appeals and decisions by the board, including aligning the district court review of board decisions with existing review procedures under Code 17A, which governs review of state agency decisions.

The new law prevents an assessor from requesting or requiring a property owner to provide information in the form of balance sheets, earnings statements, revenue reports or other information that would be used by the assessor to determine the profitability of the company occupying the building. Pro-taxpayer changes to the assessment appeal process and improvements in assessor and deputy assessor qualifications include:

• An applicant for assessor must complete preliminary education requirements to be eligible for the appointment to assessor. The Department of Revenue must prescribe the preliminary education requirements by rule.
• Changing the definition of misconduct as a reason for removal of a county assessor. Misconduct is knowingly engaging in assessment practices that contravene applicable law, rule or court order. Removal is not mandatory and would be done by a vote of the majority of the county conference board.
• Providing for preliminary education requirements for deputy assessors as established by the Department of Revenue.
• Changing the burden of proof in situations when a complainant offers competent evidence that is different than the market value established by the assessor. In that situation, the burden of proof is on the assessor or those seeking to uphold the valuation. The burden of proof is changed when the assessor seeks a change in the class of a property if the property class was adjudicated within the previous four years. The assessor must present information on changes to the property to support the change.
• The director of revenue will prescribe uniform forms for appeals of property assessments.
• Removing different grounds for appeal based on even year or odd year.
• Eliminating the requirement that the aggrieved taxpayer must present information/reasoning regarding the challenge they are filing. Instead the aggrieved taxpayer would simply check a box indicating the grounds on which they are challenging the assessment (inequitable, over-valued, exempt from assessment, error in the assessment, or in cases of fraud or misconduct by the assessor).
• Establishing misconduct is a new grounds for appeal. If an aggrieved taxpayer wins on a challenge based on fraud or misconduct, the assessor is liable for the costs incurred by the taxpayer. Costs are paid from the assessment expense fund in 441.16.
• Directing the Department of Revenue to study the current system for assessor and deputy assessor continuing education and make recommendations by December 15.
  [4/20: 50-0]

HF 607 contains a number of technical and changes to the Alcoholic Beverages Division. The technical changes include removing redundant language, clarifying current practices, and standardizing language regarding the contents of applications for liquor control licenses, wine permits and beer permits.

Policy changes include:

• Streamlining licensing for beer manufacturers and wholesalers who had been governed by separate classes of permits.
• Allowing brewpubs to sell their beer for consumption off premises in a growler without the beer passing through a wholesaler. This also places on the brewpub the responsibility for remitting the barrel tax for beer sold in a growler.
• Allowing an Iowa brewery with a taproom to sell wine by the glass for consumption on premises. Native wineries are already allowed to sell beer for consumption on premises in addition to wine.
• Changing the terminology for Iowa distilled spirits from “micro-distilleries” and “micro-distilled spirits” to “native distilleries” and “native distilled spirits.” This mirrors current terminology for Iowa-produced wines and beer.
• Allowing native distilleries with production of 100,000 gallons or fewer annually to sell up to nine liters per day. Previous law limited the sale of distilled spirits by native distilleries to 1.5 liters. A native distillery with production of more than 100,000 gallons annually is limited to 1.5 liters. Native distilleries with production of 100,000 gallons or fewer may sell their product at retail for consumption on premises.
  [4/17: 50-0]

 

HF 608 clarifies the applicability of a taxpayer to claim the Research Activities Credit. Because of the unique one-year-only IRC update/coupling legislation passed in 2016, some were concerned that the Research Activities Credit would not be available to them. It is still available. The new law also fixes a Code section reference to the flood mitigation program.
[4/18: 50-0]

 

HF 609 would allow a land use district to impose a local hotel/motel tax within its boundaries. A land use district has an elected board of trustees that will vote on an ordinance to impose a local hotel/motel tax within the district.

The Amana Colonies in Iowa County is currently the only land use district in the state and it has  a local hotel/motel tax. The proceeds are allocated by the county board of supervisors. Under this law, the land use district may impose its own local hotel/motel tax and capture all of the revenue generated by hotels within the district, rather than having to share it with the entire county.
[4/19: 47-3 (Bowman, D. Johnson, Taylor “no”)]

 

HF 617 makes a number of changes to Department of Agriculture functions, including:

• Changing the name of the state soil conservation committee to the Soil Conservation & Water Quality Committee.
• Excluding edge-of-field practices from the 50 percent limit on financial incentives under the cost-share program.
• Clarifying that cover crops are an eligible practice under the cost-share program.
• Allowing issuance of two-year licenses instead of annual licenses.
• Vaccination procedures and standards.
• Registration requirements for fertilizers and soil conditioners.
• Delivery ticket requirements for commodities sold in bulk.
• Labeling requirements for ethanol-blended gasoline.
• Use of automatic recorders on scales.
  [4/19: 50-0]

 

HF 625 eliminates the option for taxpayers to indicate on their tax returns whether their dependent children have health insurance coverage. Since 2010, this has helped identify those eligible for hawk-i or Medicaid. The Department of Revenue would compile the information, and the Department of Human Services (DHS) would identify those eligible to apply for health insurance coverage for their children. Recent information on the number of new enrollees under this program is not available because of changes in the application for hawk-i and Medicaid that removed a question on how the individual heard about the program.
[4/11: 29-19 party-line (D. Johnson “no”; Allen, McCoy absent)]

 

HF 626 eliminates a $25 filing fee for independent review of a benefit trigger determination under a long-term-care insurance policy. Previously, the Insurance Commissioner could waive this fee, which became the practice 100 percent of the time for the past five years. The IID routinely helps Iowans with insurance issues without charging a fee, and removing the provision eliminates confusion.
[4/11: 49-0 (Allen excused]