Bill Text: IA HF190 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act providing an exemption from state individual income tax of certain tuition and related expenses of postsecondary education and including retroactive applicability provisions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2015-02-09 - Introduced, referred to Ways & Means. H.J. 282. [HF190 Detail]
Download: Iowa-2015-HF190-Introduced.html
House File 190 - Introduced HOUSE FILE BY WESSEL=KROESCHELL A BILL FOR 1 An Act providing an exemption from state individual income tax 2 of certain tuition and related expenses of postsecondary 3 education and including retroactive applicability 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 1579YH (1) 86 mm/sc PAG LIN 1 1 Section 1. Section 422.7, Code 2015, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 57. a. Subtract, to the extent not 1 4 otherwise deducted in computing adjusted gross income, the 1 5 amounts paid by the taxpayer for qualified tuition and related 1 6 expenses of the taxpayer or taxpayer's spouse or dependent. 1 7 b. A deduction shall not be allowed under this subsection 1 8 to a taxpayer with respect to whom a deduction under section 1 9 151 of the Internal Revenue Code is allowable to another 1 10 taxpayer for a tax year beginning in the calendar year in which 1 11 qualified tuition and related expenses are paid. Any qualified 1 12 tuition and related expenses paid by such dependent during said 1 13 tax year shall be treated as paid by such other taxpayer to 1 14 whom the deduction under section 151 of the Internal Revenue 1 15 Code is allowable. 1 16 c. A deduction shall not be allowed under this subsection 1 17 with respect to the qualified tuition and related expenses of a 1 18 taxpayer if the taxpayer or any other person claims an Iowa tax 1 19 credit calculated on the basis of the same qualified tuition 1 20 and related expenses. 1 21 d. For purposes of this subsection: 1 22 (1) "Dependent" has the same meaning as provided by the 1 23 Internal Revenue Code. 1 24 (2) "Qualified tuition and related expenses" means the same 1 25 as defined in section 25A(f) of the Internal Revenue Code, with 1 26 the following adjustments: 1 27 (a) The amount of such expenses shall be reduced in the same 1 28 manner as provided in section 25A(g)(2) of the Internal Revenue 1 29 Code. 1 30 (b) The amount of such expenses shall be reduced to the 1 31 extent excluded under subsection 32 or 33. 1 32 (c) To the extent not already reduced under subparagraph 1 33 division (b), the amount of such expenses shall be reduced to 1 34 the extent excluded from gross income under section 529(c)(1) 1 35 of the Internal Revenue Code, except that the amount of the 2 1 reduction shall not include that portion of the distribution 2 2 which represents a return of any contributions to a qualified 2 3 tuition program qualifying under section 529 of the Internal 2 4 Revenue Code. 2 5 (d) The remaining amount of such expenses shall be reduced 2 6 to the extent excluded from gross income under section 2 7 530(d)(2) of the Internal Revenue Code. 2 8 Sec. 2. Section 422.9, subsection 2, Code 2015, is amended 2 9 by adding the following new paragraph: 2 10 NEW PARAGRAPH. j. If the taxpayer has a deduction for 2 11 educational expenses under section 162 of the Internal Revenue 2 12 Code, the taxpayer shall recompute for purposes of this 2 13 subsection the amount of the deduction under section 162 by 2 14 excluding the amount subtracted under section 422.7, subsection 2 15 57. 2 16 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 2 17 retroactively to January 1, 2015, for tax years beginning on 2 18 or after that date. 2 19 EXPLANATION 2 20 The inclusion of this explanation does not constitute agreement with 2 21 the explanation's substance by the members of the general assembly. 2 22 This bill allows taxpayers to deduct from the computation 2 23 of net income for purposes of the individual income tax 2 24 the qualified tuition and related expenses of postsecondary 2 25 education to the extent not otherwise deductible under federal 2 26 or state law, and without amount or income limitations. 2 27 Federal law currently provides a deduction for qualified 2 28 tuition and related expenses in computing adjusted gross 2 29 income, but the deduction is subject to amount and income 2 30 limitations. For tax year 2014, the federal deduction is 2 31 limited to $4,000 of expenses if income does not exceed $65,000 2 32 for a single taxpayer or $130,000 for married taxpayers, and 2 33 $2,000 of expenses if income exceeds $65,000 but does not 2 34 exceed $80,000 for a single taxpayer, or if income exceeds 2 35 $130,000 but does not exceed $160,000 for married taxpayers. 3 1 The federal deduction is set to expire after the 2014 tax year. 3 2 The bill defines "qualified tuition and related expenses" 3 3 to mean the same as defined in Internal Revenue Code section 3 4 25A(f), which includes tuition and fees required for enrollment 3 5 or attendance at an eligible educational institution for 3 6 courses of instruction at such institution. An eligible 3 7 educational institution generally includes all accredited 3 8 public, nonprofit, and for=profit postsecondary institutions 3 9 that are eligible to participate in a federal financial aid 3 10 program under title IV of the federal Higher Education Act 3 11 of 1965. Expenses related to any course or other education 3 12 involving sports, games, or hobbies are excluded unless 3 13 it is part of the degree program, as are student activity 3 14 fees, athletic fees, insurance expenses, or other expenses 3 15 unrelated to the academic course of instruction. "Qualified 3 16 tuition and related expenses" does not include amounts 3 17 enumerated in Internal Revenue Code section 25A(g)(2), which 3 18 includes expenses paid from tax=exempt scholarships or other 3 19 payments, excluding gifts or inheritance, or from certain 3 20 veterans' and armed forces educational assistance allowances. 3 21 "Qualified tuition and related expenses" also does not include 3 22 amounts excluded from the computation of Iowa net income as 3 23 contributions to or earnings from an Iowa educational savings 3 24 plan trust under Iowa Code chapter 12D, or from the computation 3 25 of federal gross income as distributions of certain earnings 3 26 from any qualified tuition program qualifying under Internal 3 27 Revenue Code section 529, or as distributions from a Coverdell 3 28 education savings account qualifying under Internal Revenue 3 29 Code section 530. 3 30 Taxpayers may deduct qualified tuition and related expenses 3 31 of the taxpayer or the taxpayer's spouse or dependent. A 3 32 taxpayer who is eligible to be claimed as a dependent by 3 33 another is ineligible for the deduction, but any expenses paid 3 34 by the dependent may be claimed as a deduction by a taxpayer 3 35 who is eligible to claim the dependent for federal income tax 4 1 purposes. 4 2 An Iowa tax credit currently does not exist for the qualified 4 3 tuition and related expenses that are the subject of the bill, 4 4 but should one be enacted the bill provides that the deduction 4 5 provided in the bill will be unavailable to those taxpayers who 4 6 claim a state tax credit for the same qualified tuition and 4 7 related expenses. 4 8 Taxpayers who claim a deduction of educational expenses as 4 9 an itemized deduction under Code section 422.9, subsection 2, 4 10 are required to reduce that deduction by the amount deducted 4 11 under the bill. 4 12 The bill applies retroactively to tax years beginning on or 4 13 after January 1, 2015. LSB 1579YH (1) 86 mm/sc
