Bill Text: IA HF2026 | 2021-2022 | 89th General Assembly | Introduced

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Bill Title: A bill for an act exempting all retirement income from the individual income tax including retroactive applicability provisions.

Spectrum: Partisan Bill (Republican 54-0)

Status: (Introduced - Dead) 2022-01-31 - Fiscal note. [HF2026 Detail]

Download: Iowa-2021-HF2026-Introduced.html

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House File 2026 - Introduced
HOUSE FILE 2026
BY MOHR , A. MEYER , SORENSEN ,
FRY , BACON , MAXWELL ,
GUSTAFSON , MOMMSEN ,
WORTHAN , KERR , MITCHELL ,
THORUP , LUNDGREN ,
SIEGRIST , SEXTON , WILLS ,
BLOOMINGDALE , PAUSTIAN ,
McCLINTOCK , JACOBSEN ,
STONE , BAXTER , DOLECHECK ,
KAUFMANN , WHEELER , BUSH ,
GRABER , HOLT , GOBBLE ,
THOMPSON , BOSSMAN , DUNWELL ,
LATHAM , INGELS , LOHSE ,
BODEN , GERHOLD , JONES ,
WESTRICH , CISNEROS , BEST ,
JENEARY , FISHER , MOORE ,
ANDREWS , DEYOE , BRINK ,
OSMUNDSON , NORDMAN ,
SHIPLEY , BOUSSELOT ,
BRADLEY , HEIN , HITE , and
SIECK
A BILL FOR
An Act exempting all retirement income from the individual
income tax including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. Section 422.5, subsection 3, paragraph a, Code
2022, is amended to read as follows:
a. The tax shall not be imposed on a resident or nonresident
whose net income, as defined in section 422.7 , is thirteen
thousand five hundred dollars or less in the case of married
persons filing jointly or filing separately on a combined
return, heads of household, and surviving spouses or nine
thousand dollars or less in the case of all other persons; but
in the event that the payment of tax under this subchapter
would reduce the net income to less than thirteen thousand five
hundred dollars or nine thousand dollars as applicable, then
the tax shall be reduced to that amount which would result
in allowing the taxpayer to retain a net income of thirteen
thousand five hundred dollars or nine thousand dollars as
applicable. The preceding sentence does not apply to estates
or trusts. For the purpose of this subsection , the entire net
income, including any part of the net income not allocated
to Iowa, shall be taken into account . For purposes of this
subsection , net income includes , except all amounts of pensions
or other retirement income , except for military retirement pay
excluded under section 422.7, subsection 31A, paragraph “a” ,
or section 422.7, subsection 31B , paragraph “a” subsection
31 , received from any source which is not taxable under this
subchapter as a result of the government pension exclusions in
section 422.7 , or any other state law. If the combined net
income of a husband and wife exceeds thirteen thousand five
hundred dollars, neither of them shall receive the benefit
of this subsection , and it is immaterial whether they file a
joint return or separate returns. However, if a husband and
wife file separate returns and have a combined net income of
thirteen thousand five hundred dollars or less, neither spouse
shall receive the benefit of this paragraph, if one spouse has
a net operating loss and elects to carry back or carry forward
the loss as provided in section 422.9, subsection 3 . A person
who is claimed as a dependent by another person as defined in
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H.F. 2026
section 422.12 shall not receive the benefit of this subsection
if the person claiming the dependent has net income exceeding
thirteen thousand five hundred dollars or nine thousand dollars
as applicable or the person claiming the dependent and the
person’s spouse have combined net income exceeding thirteen
thousand five hundred dollars or nine thousand dollars as
applicable.
Sec. 2. Section 422.5, subsection 3B, paragraph a, Code
2022, is amended to read as follows:
a. The tax shall not be imposed on a resident or nonresident
who is at least sixty-five years old on December 31 of
the tax year and whose net income, as defined in section
422.7 , is thirty-two thousand dollars or less in the case
of married persons filing jointly or filing separately on a
combined return, heads of household, and surviving spouses or
twenty-four thousand dollars or less in the case of all other
persons; but in the event that the payment of tax under this
subchapter would reduce the net income to less than thirty-two
thousand dollars or twenty-four thousand dollars as applicable,
then the tax shall be reduced to that amount which would result
in allowing the taxpayer to retain a net income of thirty-two
thousand dollars or twenty-four thousand dollars as applicable.
The preceding sentence does not apply to estates or trusts.
For the purpose of this subsection , the entire net income,
including any part of the net income not allocated to Iowa,
shall be taken into account . For purposes of this subsection ,
net income includes , except all amounts of pensions or other
retirement income , except for military retirement pay excluded
under section 422.7, subsection 31A, paragraph “a” , or section
422.7, subsection 31B , paragraph “a” subsection 31 , received
from any source which is not taxable under this subchapter
as a result of the government pension exclusions in section
422.7 , or any other state law. If the combined net income of a
husband and wife exceeds thirty-two thousand dollars, neither
of them shall receive the benefit of this subsection , and it
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H.F. 2026
is immaterial whether they file a joint return or separate
returns. However, if a husband and wife file separate returns
and have a combined net income of thirty-two thousand dollars
or less, neither spouse shall receive the benefit of this
paragraph, if one spouse has a net operating loss and elects
to carry back or carry forward the loss as provided in section
422.9, subsection 3 . A person who is claimed as a dependent by
another person as defined in section 422.12 shall not receive
the benefit of this subsection if the person claiming the
dependent has net income exceeding thirty-two thousand dollars
or twenty-four thousand dollars as applicable or the person
claiming the dependent and the person’s spouse have combined
net income exceeding thirty-two thousand dollars or twenty-four
thousand dollars as applicable.
Sec. 3. Section 422.7, subsection 31, Code 2022, is amended
by striking the subsection and inserting in lieu thereof the
following:
31. a. Subtract, to the extent included, retirement income
received by the taxpayer.
b. For purposes of this subsection, “retirement income”
means a governmental or other pension or retirement pay,
including but not limited to defined benefit or defined
contribution plans, annuities, individual retirement accounts,
plans maintained or contributed to by an employer, or
maintained or contributed to by a self-employed person as an
employer, and deferred compensation plans or any earnings
attributable to the deferred compensation plans.
Sec. 4. Section 422.7, subsections 31A and 31B, Code 2022,
are amended by striking the subsections.
Sec. 5. RETROACTIVE APPLICABILITY. This Act applies
retroactively to January 1, 2022, for tax years beginning on
or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
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H.F. 2026
This bill relates to the exclusion of retirement income from
the computation of net income for purposes of the individual
income tax.
Under current law, a taxpayer may exclude all retirement
pay, including certain survivor benefits, received from the
federal government for military service performed in the armed
forces, the armed forces military reserve, or national guard.
In addition, a taxpayer who is disabled, who is at least 55
years of age, or who is the surviving spouse or other specified
survivor of that qualifying taxpayer, may exclude a maximum
of $6,000 of other retirement income ($12,000 for married
couples).
The bill exempts all retirement income from individual
income tax.
The bill also excludes retirement income from the
calculation of net income for purposes of determining whether
or not a taxpayer’s net income exceeds the amount at which the
individual income tax will not be imposed pursuant to Code
section 422.5(3) or Code section 422.5(3B), and for which an
individual income tax return is not required to be filed, and
for purposes of calculating the alternate tax in Code section
422.5, and further provides that any retirement income excluded
from the individual income tax will not be added back to these
calculations for tax years beginning in 2022 or later.
The bill defines “retirement income” for purposes of the
exclusion.
The bill applies retroactively to January 1, 2022, for tax
years beginning on or after that date.
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