Bill Text: IA HF2062 | 2021-2022 | 89th General Assembly | Introduced

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Bill Title: A bill for an act relating to individual and corporate income taxes by providing an alternative base income tax at the election of the taxpayer, and including effective date and applicability provisions.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2022-01-20 - Introduced, referred to Ways and Means. H.J. 102. [HF2062 Detail]

Download: Iowa-2021-HF2062-Introduced.html

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House File 2062 - Introduced
HOUSE FILE 2062
BY WILLS
A BILL FOR
An Act relating to individual and corporate income taxes by
providing an alternative base income tax at the election of
the taxpayer, and including effective date and applicability
provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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H.F. 2062
DIVISION I
ALTERNATIVE INCOME TAX —— ELECTION
Section 1. NEW SECTION . 422.5B Tax imposed —— alternative
base income tax.
1. For purposes of this section, “base income” means
taxable income as properly computed for federal income tax
purposes under section 63 of the Internal Revenue Code, with
the following adjustments:
a. Subtract to the extent included net capital gains income.
b. Subtract to the extent included dividend and interest
income.
c. Subtract to the extent included the amount of social
security benefits taxable under section 86 of the Internal
Revenue Code.
d. Subtract to the extent included the total amount of
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
by a self-employed person as an employer, and deferred
compensation plans or any earning attributable to the deferred
compensation plans.
2. Notwithstanding any other provision of law, a resident or
nonresident may, in lieu of the taxes imposed and calculated
under sections 422.5 and 422.5A, elect to be subject to state
income tax imposed and calculated pursuant to subsection 3.
3. A tax is imposed upon every resident and nonresident
of the state making the election under subsection 2 which tax
shall be levied, collected, and paid annually in an amount
equal to the net income of the resident or nonresident times
four percent.
4. Notwithstanding any other provision of law to the
contrary, a resident or nonresident making the election
under subsection 2 shall not be allowed any nonrefundable or
refundable credit allowed under this subchapter for the tax
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H.F. 2062
year for which the election is made, except for withheld tax
and estimated tax paid under section 422.16.
Sec. 2. Section 422.13, Code 2022, is amended by adding the
following new subsection:
NEW SUBSECTION . 1A. a. Notwithstanding subsection 1,
a resident or nonresident of this state who is at least
sixty-five years old on December 31 of the tax year and who
elects to be subject to the alternative base income tax in
subsection 422.5B, shall not be required to make and file a
return if the taxpayer’s base income does not exceed thirty-two
thousand dollars in the case of married persons filing jointly,
heads of household, and surviving spouses or twenty-four
thousand dollars in the case for all other taxpayers. For
purposes of this subsection, “base income” means the same as
defined in section 422.5B, except that it includes all amounts
of pensions or other retirement income received from any source
which is not taxable under section 422.5B, but does not include
military retirement pay described in section 422.7, subsections
31A and 31B.
b. A taxpayer who is at least sixty-five years old on
December 31 of the tax year and whose base income does not
exceed the applicable amounts in paragraph “a” and who does not
make and file a return pursuant to this section shall be deemed
to have made the election pursuant to section 422.5B.
Sec. 3. Section 422.13, subsection 2, Code 2022, is amended
to read as follows:
2. For purposes of determining the requirement for filing
a return under subsection 1 or 1A , the combined net income or
base income, as the case may be, of a husband and wife from
sources taxable under this subchapter shall be considered.
Sec. 4. NEW SECTION . 422.33A Corporate tax imposed ——
alternative base income tax.
1. For purposes of this section, “base income” means the
taxable income as properly computed under the Internal Revenue
Code, with the following adjustments:
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H.F. 2062
a. Subtract to the extent included interest and dividend
income.
b. Subtract to the extent included net capital gain income.
2. Notwithstanding any other provision of law, in lieu of
the rates of taxation imposed under section 422.33, subsections
1 and 1A, a corporation doing business in this state, or
deriving income from sources within this state, may elect to be
subject to the state corporate income tax imposed on the base
income received by the corporation during the income year at
a rate of four percent.
3. Notwithstanding any other provision of law to the
contrary, a resident or nonresident making the election
under subsection 1 shall not be allowed any nonrefundable or
refundable credit allowed under this subchapter for the tax
year for which the election is made.
DIVISION II
CONFORMING CHANGES
Sec. 5. Section 257.21, subsection 2, Code 2022, is amended
to read as follows:
2. The instructional support income surtax shall be imposed
on the state individual income tax for the calendar year during
which the school’s budget year begins, or for a taxpayer’s
fiscal year ending during the second half of that calendar year
and after the date the board adopts a resolution to participate
in the program or the first half of the succeeding calendar
year, and shall be imposed on all individuals residing in the
school district on the last day of the applicable tax year.
As used in this section , “state individual income tax” means
the taxes computed under section 422.5 , less the amounts of
nonrefundable credits allowed under chapter 422, subchapter II ,
or the tax computed under section 422.5B .
Sec. 6. Section 422.16, subsection 8, Code 2022, is amended
to read as follows:
8. An employer or withholding agent shall be liable for
the payment of the tax required to be deducted and withheld
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H.F. 2062
or the amount actually deducted, whichever is greater, under
subsections 1 and 12 of this section ; and any amount deducted
and withheld as tax under subsections 1 and 12 of this section
during any calendar year upon the wages of any employee,
nonresident, or other person shall be allowed as a credit to
the employee, nonresident, or other person against the tax
imposed by section 422.5 , or section 422.5B, irrespective of
whether or not such tax has been, or will be, paid over by the
employer or withholding agent to the department as provided by
this chapter .
Sec. 7. Section 422.21, subsection 1, Code 2022, is amended
to read as follows:
1. Returns shall be in the form the director prescribes,
and shall be filed with the department on or before the last
day of the fourth month after the expiration of the tax year.
However, cooperative associations as defined in section 6072(d)
of the Internal Revenue Code shall file their returns on or
before the fifteenth day of the ninth month following the
close of the taxable year and nonprofit corporations subject
to the unrelated business income tax imposed by section
422.33, subsection 1A , shall file their returns on or before
the fifteenth day of the fifth month following the close of
the taxable year. If, under the Internal Revenue Code, a
corporation is required to file a return covering a tax period
of less than twelve months, the state return shall be for the
same period and is due forty-five days after the due date of
the federal tax return, excluding any extension of time to
file. In case of sickness, absence, or other disability, or
if good cause exists, the director may allow further time for
filing returns. The director shall cause to be prepared blank
forms for the returns and shall cause them to be distributed
throughout the state and to be furnished upon application,
but failure to receive or secure the form does not relieve
the taxpayer from the obligation of making a return that is
required. The department may as far as consistent with the
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Code draft income tax forms to conform to the income tax
forms of the internal revenue department of the United States
government. Each return by a taxpayer upon whom a tax is
imposed by section 422.5 or 422.5B shall show the county of the
residence of the taxpayer.
Sec. 8. Section 422.85, Code 2022, is amended to read as
follows:
422.85 Imposition of estimated tax.
A taxpayer subject to the tax imposed by sections 422.33 ,
422.33A, and 422.60 shall make payments of estimated tax for
the taxable year if the amount of tax payable, less credits,
can reasonably be expected to be more than one thousand
dollars for the taxable year. For purposes of this subchapter ,
“estimated tax” means the amount which the taxpayer estimates
to be the tax due and payable under subchapter III or V of this
chapter for the taxable year.
Sec. 9. Section 422D.2, Code 2022, is amended to read as
follows:
422D.2 Local income surtax.
A county may impose by ordinance a local income surtax as
provided in section 422D.1 at the rate set by the board of
supervisors, of up to one percent, on the state individual
income tax of each individual residing in the county at the
end of the individual’s applicable tax year. However, the
cumulative total of the percents of income surtax imposed on
any taxpayer in the county shall not exceed twenty percent.
The reason for imposing the surtax and the amount needed, as
determined by the board of supervisors after recommendation of
the county emergency medical services system advisory council,
shall be set out on the ballot and in the ordinance. The
surtax rate shall be set to raise only the amount needed. For
purposes of this section , “state individual income tax” means
the tax computed under section 422.5 , less the amounts of
nonrefundable credits allowed under chapter 422, subchapter II ,
or the tax computed under section 422.5B .
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DIVISION III
EFFECTIVE DATE AND APPLICABILITY
Sec. 10. EFFECTIVE DATE. This Act takes effect January 1,
2023.
Sec. 11. APPLICABILITY. This Act applies to tax years
beginning on or after January 1, 2023.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill relates to individual and corporate income taxes
by creating an alternative base income tax imposed at the
election of the taxpayer.
Division I relates to the computation and imposition of an
alternative base income tax.
In lieu of the regular individual net income tax computed
under Code sections 422.5 and 422.5A, a resident or nonresident
individual may elect to be subject to an alternative base
income tax as provided in the bill.
The state income tax of a taxpayer making an election shall
be an amount of tax equal to the taxpayer’s base income times
four percent. “Base income” is defined as taxable income
as properly computed for federal income tax purposes under
section 63 of the Internal Revenue Code, with the following
adjustments: less interest and dividend income, less net
capital gain income, and less social security benefits and
retirement income. An electing taxpayer shall not be allowed
any nonrefundable or refundable tax credit for the tax year for
which the election is made, except the credits for withheld tax
and estimated tax paid under Code section 422.16.
Taxpayers who are 65 years of age or older who elect the
alternative base income tax are not required to file an income
tax return if base income does not exceed $32,000 for a married
person filing jointly, a head of household, or a surviving
spouse, or $24,000 for all other persons. For purposes of
calculating base income for the filing threshold, taxpayers are
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required to add back any social security benefits or retirement
income otherwise exempt under the bill except for military
retirement pay. Taxpayers who meet these requirements and
who do not file a tax return are deemed to have elected to be
subject to the alternative base income tax.
In lieu of the regular corporate income tax computation in
Code section 422.33(1) and unrelated business income in Code
section 422.33(1A), the state income tax of a corporate income
taxpayer making an election shall be an amount of tax equal
to the taxpayer’s base income times 4 percent. “Base income”
is defined as taxable income as properly computed for federal
income tax purposes under the Internal Revenue Code, with the
following adjustments: less interest and dividend income and
less net capital gain income. An electing corporate income
taxpayer shall not be allowed any nonrefundable or refundable
tax credit for the tax year for which the election is made.
Division II makes miscellaneous conforming changes.
Division III provides that the bill takes effect January 1,
2023, for tax years beginning on or after that date.
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