Bill Text: IA HF2097 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act relating to the taxation under the state corporate income tax, franchise tax, and insurance companies tax of compensation paid by a publicly held corporation to its chief executive officer, and including applicability provisions.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2018-01-24 - Subcommittee: Vander Linden, Kearns and Windschitl. H.J. 150. [HF2097 Detail]
Download: Iowa-2017-HF2097-Introduced.html
House File 2097 - Introduced HOUSE FILE BY JACOBY and KEARNS A BILL FOR 1 An Act relating to the taxation under the state corporate 2 income tax, franchise tax, and insurance companies tax 3 of compensation paid by a publicly held corporation to 4 its chief executive officer, and including applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5425YH (5) 87 mm/jh PAG LIN 1 1 Section 1. Section 422.35, Code 2018, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 14. a. For purposes of this subsection, 1 4 "compensation" means the total amount allowable under section 1 5 162(a)(1) of the Internal Revenue Code as salary or other 1 6 compensation for personal services actually rendered, 1 7 determined without regard to sections 162(m) or 280G of the 1 8 Internal Revenue Code. 1 9 b. If the taxpayer is a publicly held corporation as defined 1 10 in section 162(m)(2) of the Internal Revenue Code, the taxpayer 1 11 shall do all of the following: 1 12 (1) Add, to the extent allowed as a deduction in computing 1 13 federal taxable income, the amount paid or accrued during the 1 14 tax year as compensation of the chief executive officer of the 1 15 taxpayer, or the individual acting in such capacity. 1 16 (2) Add the amount paid or accrued during the tax year as 1 17 compensation of the chief executive officer of the taxpayer, or 1 18 the individual acting in such capacity. 1 19 Sec. 2. NEW SECTION. 432.11 Tax on chief executive officer 1 20 compensation of publicly held corporations. 1 21 1. For purposes of this section: 1 22 a. "Compensation" means the same as defined in section 1 23 422.35, subsection 14. 1 24 b. "Federal income tax year" means, with respect to an 1 25 insurance company or association, the calendar year, or the 1 26 fiscal year ending during such calendar year, upon the basis of 1 27 which the insurance company's or association's federal income 1 28 tax is computed. 1 29 2. Every insurance company or association of whatever kind 1 30 or character that is subject to the tax on gross premiums 1 31 imposed in this chapter and that is a publicly held corporation 1 32 as defined in section 162(m)(2) of the federal Internal Revenue 1 33 Code shall pay to the director of the department of revenue, or 1 34 to a depository designated by the director, as a tax, an amount 1 35 equal to one percent of the amount paid or accrued, as the case 2 1 may be, during a federal income tax year as compensation of 2 2 the chief executive officer, or the individual acting in such 2 3 capacity. 2 4 3. If the taxable income of the insurance company or 2 5 association for federal income tax purposes is derived from its 2 6 business carried on entirely within this state, the tax in this 2 7 section shall be imposed on the entire compensation, but if the 2 8 business is carried on partly within and partly without the 2 9 state, the portion of compensation reasonably attributable to 2 10 the business within the state shall be specifically allocated 2 11 or equitably apportioned within and without the state under 2 12 rules of the director of the department of revenue. 2 13 4. The tax imposed in this section shall be paid on or 2 14 before the due date under the federal Internal Revenue Code 2 15 for paying the federal income tax of the insurance company or 2 16 association for the applicable federal income tax year that is 2 17 the subject of the tax in this section, as provided by rules 2 18 adopted by the commissioner. The commissioner, in consultation 2 19 with the director of the department of revenue, shall create 2 20 and make available forms to be used in paying the tax imposed 2 21 in this section. 2 22 5. The commissioner may suspend or revoke the license of a 2 23 company or association that fails to pay its tax on or before 2 24 the due date. 2 25 Sec. 3. APPLICABILITY. This Act applies to tax years 2 26 beginning on or after January 1, 2019. 2 27 EXPLANATION 2 28 The inclusion of this explanation does not constitute agreement with 2 29 the explanation's substance by the members of the general assembly. 2 30 This bill relates to the taxation of compensation paid to 2 31 chief executive officers of publicly traded corporations under 2 32 the Iowa corporate income tax, franchise tax, and insurance 2 33 premiums tax. The bill defines "compensation" to be the total 2 34 amount allowable as a business expense deduction under the 2 35 Internal Revenue Code (IRC) for salary and compensation for 3 1 personal services actually rendered, determined without regard 3 2 to the deduction limitations in the IRC for certain excessive 3 3 employee compensation or excess parachute payments. 3 4 For purposes of calculating net income of a publicly held 3 5 corporation under the Iowa corporate income tax, and under 3 6 the franchise tax imposed on financial institutions, the bill 3 7 disallows a deduction for amounts paid or accrued during a tax 3 8 year as compensation of the chief executive officer, or the 3 9 individual acting in such capacity. The bill additionally 3 10 requires the publicly held corporation to add to net income the 3 11 amounts paid or accrued during the tax year as compensation of 3 12 the chief executive officer, or the individual acting in such 3 13 capacity. 3 14 Insurance companies and associations doing business in 3 15 Iowa are not subject to the Iowa corporate income tax or 3 16 the franchise tax, but are instead generally subject to a 1 3 17 percent gross premiums tax related to business done in Iowa 3 18 on a calendar year basis. The bill provides that any such 3 19 insurance company or association subject to the Iowa insurance 3 20 premiums tax that is a publicly held corporation shall also 3 21 be subject to a tax equal to 1 percent of the amount paid or 3 22 accrued during each federal income tax year as compensation of 3 23 the chief executive officer, or the individual acting in such 3 24 capacity. "Federal income tax year" is defined in the bill to 3 25 be the calendar year or fiscal year upon which an insurance 3 26 company or association computes its federal income tax. If 3 27 the entire federal taxable income of the insurance company or 3 28 association is derived in Iowa, then the tax is imposed on the 3 29 entire amount of the compensation, but if business is conducted 3 30 inside and outside of Iowa, only a portion of the compensation 3 31 is taxable in Iowa pursuant to allocation and apportionment 3 32 rules required to be adopted by the director of revenue. 3 33 The tax is due on or before the due date under the IRC for 3 34 paying the federal income tax of the insurance company or 3 35 association for the applicable federal income tax year that 4 1 is the subject of the compensation tax. The bill allows the 4 2 commissioner of insurance to suspend or revoke the license of 4 3 any insurance company or association that fails to pay the 4 4 compensation tax on or before the due date. 4 5 The bill applies to tax years beginning on or after January 4 6 1, 2019. LSB 5425YH (5) 87 mm/jh
