Bill Text: IA HF604 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act relating to the individual income tax by providing an alternative base income tax and related alternative cumulative income surtax imposed at the election of the taxpayer and including effective date and retroactive applicability provisions. (Formerly HSB 215)
Sponsorship: Committee Bill
Status: (Introduced - Dead) 2015-06-04 - Referred to Ways & Means. H.J. 1135. [HF604 Detail]
Download: Iowa-2015-HF604-Introduced.html
House File 604 - Introduced HOUSE FILE BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 215) A BILL FOR 1 An Act relating to the individual income tax by providing 2 an alternative base income tax and related alternative 3 cumulative income surtax imposed at the election of the 4 taxpayer and including effective date and retroactive 5 applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 1400HV (1) 86 mm/sc PAG LIN 1 1 DIVISION I 1 2 ALTERNATIVE BASE INCOME TAX AND 1 3 ALTERNATIVE CUMULATIVE INCOME SURTAX 1 4 Section 1. Section 298.14, Code 2015, is amended to read as 1 5 follows: 1 6 298.14 School district income surtaxes. 1 7 1. a. For each fiscal year, the cumulative total of the 1 8 percents of surtax approved by the board of directors of a 1 9 school district and collected by the department of revenue 1 10 under sections 257.21, 257.29, and 298.2, and the enrichment 1 11 surtax under section 442.15, Code 1989, and an income surtax 1 12 collected by a political subdivision under chapter 422D, shall 1 13 not exceed twenty percent. 1 14 b. Notwithstanding paragraph "a", or any other provision 1 15 of law to the contrary, for a taxpayer who makes an election 1 16 under section 422.5A, subsection 2, and who is subject to an 1 17 income surtax as provided in section 257.21, 257.29, 298.2, 1 18 442.15, Code 1989, or chapter 422D, the appropriate governing 1 19 body shall impose, and the department of revenue shall collect, 1 20 an alternative cumulative income surtax from the taxpayer in an 1 21 amount equal to one hundred twenty=two percent of the amount 1 22 generated by each surtax imposed on the taxpayer by the school 1 23 district or political subdivision for the tax year in which the 1 24 election is made. 1 25 2. A school district income surtax fund is created in the 1 26 office of treasurer of state. Income surtaxes collected by 1 27 the department of revenue under sections 257.21, 257.29, and 1 28 298.2 and section 442.15, Code 1989, shall be deposited in the 1 29 school district income surtax fund to the credit of each school 1 30 district. A separate accounting of each surtax, by school 1 31 district, shall be maintained. 1 32 3. The director of the department of administrative 1 33 services shall draw warrants in payment of the surtaxes 1 34 collected in each school district. Warrants shall be payable 1 35 in two installments to be paid on approximately the first day 2 1 of December and the first day of February following collection 2 2 of the taxes and shall be delivered to the respective school 2 3 districts. 2 4 Sec. 2. NEW SECTION. 422.5A Tax imposed ==== alternative base 2 5 income tax. 2 6 1. For purposes of this section, "base income" means the 2 7 adjusted gross income before the net operating loss deduction 2 8 as properly computed for federal income tax purposes under the 2 9 Internal Revenue Code, with the following adjustments: 2 10 a. Subtract a standard deduction equal to six thousand two 2 11 hundred thirty=five dollars for a married person who files 2 12 separately or a single person or equal to twelve thousand four 2 13 hundred seventy dollars for a married couple who files a joint 2 14 return, a surviving spouse, or a head of household. 2 15 b. Subtract interest and dividends from federal securities. 2 16 c. Subtract, to the extent included, the amount of social 2 17 security benefits taxable under section 86 of the Internal 2 18 Revenue Code. 2 19 d. Subtract, to the extent included, the total amount of a 2 20 governmental or other pension or retirement pay, including but 2 21 not limited to defined benefit or defined contribution plans, 2 22 annuities, individual retirement accounts, plans maintained or 2 23 contributed to by an employer, or maintained or contributed 2 24 to by a self=employed person as an employer, and deferred 2 25 compensation plans or any earnings attributable to the deferred 2 26 compensation plans. 2 27 2. Notwithstanding any other provision of law, a resident 2 28 or nonresident may, in lieu of the taxes imposed under section 2 29 422.5, elect to be subject to state income tax as imposed and 2 30 computed pursuant to subsection 3. Such election must be made 2 31 not later than the due date for filing the return for a taxable 2 32 year, including extensions thereof, and under rules to be 2 33 prescribed by the director. 2 34 3. A tax is imposed upon every resident and nonresident 2 35 of the state making the election under subsection 2 which tax 3 1 shall be levied, collected, and paid annually in an amount 3 2 equal to the base income of the resident or nonresident times 3 3 five percent. 3 4 4. Notwithstanding any other provision of law to the 3 5 contrary, a resident or nonresident making the election 3 6 under subsection 2 shall not be allowed any nonrefundable or 3 7 refundable credit otherwise allowed under this division for the 3 8 tax year for which the election is made, except for the credits 3 9 for withheld tax and estimated tax paid under section 422.16. 3 10 5. A taxpayer making the election under subsection 2 shall 3 11 be subject to an alternative cumulative income surtax as 3 12 provided in section 298.14, if applicable. 3 13 6. a. The director shall determine for the 2016 calendar 3 14 year and each subsequent calendar year the annual and 3 15 cumulative standard deduction factors to be applied to tax 3 16 years beginning on or after January 1 of that calendar year. 3 17 The director shall compute the new dollar amounts of the 3 18 standard deductions specified in section 422.5A, subsection 3 19 1, paragraph "a", by the latest cumulative standard deduction 3 20 factor and round off the result to the nearest ten dollars. 3 21 The annual and cumulative standard deduction factors determined 3 22 by the director under this subsection are not rules as defined 3 23 in section 17A.2, subsection 11. 3 24 b. For purposes of this subsection and notwithstanding 3 25 section 422.4, subsection 2, paragraph "b", "cumulative standard 3 26 deduction factor" means the product of the annual standard 3 27 deduction factor for the 2016 calendar year and all annual 3 28 standard deduction factors for subsequent calendar years 3 29 as determined pursuant to this subsection. The cumulative 3 30 standard deduction factor applies to all tax years beginning 3 31 on or after January 1 of the calendar year for which the latest 3 32 annual standard deduction factor has been determined. 3 33 Sec. 3. Section 422.13, Code 2015, is amended by adding the 3 34 following new subsection: 3 35 NEW SUBSECTION. 1A. a. Notwithstanding subsection 1, 4 1 a resident or nonresident of this state who is at least 4 2 sixty=five years old on December 31 of the tax year and who 4 3 elects to be subject to the alternative base income tax in 4 4 subsection 422.5A, shall not be required to make and file a 4 5 return if the taxpayer's base income does not exceed thirty=two 4 6 thousand dollars in the case of married persons filing jointly 4 7 or filing separately on a combined return, heads of household, 4 8 and surviving spouses or twenty=four thousand dollars in the 4 9 case of all other persons. For purposes of this subsection, 4 10 "base income" means the same as defined in section 422.5A, 4 11 subsection 1, except that it includes all amounts of pensions 4 12 or other retirement income received from any source which is 4 13 not taxable under section 422.5A, but does not include military 4 14 retirement pay described in section 422.7, subsections 31A and 4 15 31B. 4 16 b. A taxpayer who is at least sixty=five years old on 4 17 December 31 of the tax year and whose base income does not 4 18 exceed the applicable amounts in paragraph "a" and who does 4 19 not make and file a return pursuant to this section shall be 4 20 deemed to have made the election required in section 422.5A, 4 21 subsection 2. 4 22 Sec. 4. Section 422.13, subsection 2, Code 2015, is amended 4 23 to read as follows: 4 24 2. For purposes of determining the requirement for filing 4 25 a return under subsection 1 or 1A, the combined net income or 4 26 base income, as the case may be, of a husband and wife from 4 27 sources taxable under this division shall be considered. 4 28 DIVISION II 4 29 CONFORMING CHANGES 4 30 Sec. 5. Section 68A.102, subsection 21, Code 2015, is 4 31 amended to read as follows: 4 32 21. "State income tax liability" means either the state 4 33 individual income tax imposed under section 422.5, less the 4 34 amounts of nonrefundable credits allowed under chapter 422, 4 35 division II, or the alternative base income tax imposed under 5 1 section 422.5A if applicable. 5 2 Sec. 6. Section 257.21, subsection 2, Code 2015, is amended 5 3 to read as follows: 5 4 2. The instructional support income surtax shall be imposed 5 5 on the state individual income tax for the calendar year during 5 6 which the school's budget year begins, or for a taxpayer's 5 7 fiscal year ending during the second half of that calendar year 5 8 and after the date the board adopts a resolution to participate 5 9 in the program or the first half of the succeeding calendar 5 10 year, and shall be imposed on all individuals residing in the 5 11 school district on the last day of the applicable tax year. As 5 12 used in this section, "state individual income tax" means either 5 13 the taxes computed under section 422.5, less the amounts of 5 14 nonrefundable credits allowed under chapter 422, division II, 5 15 except for the Iowa taxpayers trust fund tax credit allowed 5 16 under section 422.11E, or the tax computed under section 422.5A 5 17 if applicable. 5 18 Sec. 7. Section 422.16, subsection 8, Code 2015, is amended 5 19 to read as follows: 5 20 8. An employer or withholding agent shall be liable for 5 21 the payment of the tax required to be deducted and withheld 5 22 or the amount actually deducted, whichever is greater, under 5 23 subsections 1 and 12 of this section; and any amount deducted 5 24 and withheld as tax under subsections 1 and 12 of this section 5 25 during any calendar year upon the wages of any employee, 5 26 nonresident, or other person shall be allowed as a credit to 5 27 the employee, nonresident, or other person against the tax 5 28 imposed by section 422.5, or section 422.5A if applicable, 5 29 irrespective of whether or not such tax has been, or will 5 30 be, paid over by the employer or withholding agent to the 5 31 department as provided by this chapter. 5 32 Sec. 8. Section 422.21, subsection 1, Code 2015, is amended 5 33 to read as follows: 5 34 1. Returns shall be in the form the director prescribes, 5 35 and shall be filed with the department on or before the last 6 1 day of the fourth month after the expiration of the tax year. 6 2 However, cooperative associations as defined in section 6072(d) 6 3 of the Internal Revenue Code shall file their returns on or 6 4 before the fifteenth day of the ninth month following the 6 5 close of the taxable year and nonprofit corporations subject 6 6 to the unrelated business income tax imposed by section 6 7 422.33, subsection 1A, shall file their returns on or before 6 8 the fifteenth day of the fifth month following the close of 6 9 the taxable year. If, under the Internal Revenue Code, a 6 10 corporation is required to file a return covering a tax period 6 11 of less than twelve months, the state return shall be for the 6 12 same period and is due forty=five days after the due date of 6 13 the federal tax return, excluding any extension of time to 6 14 file. In case of sickness, absence, or other disability, or 6 15 if good cause exists, the director may allow further time for 6 16 filing returns. The director shall cause to be prepared blank 6 17 forms for the returns and shall cause them to be distributed 6 18 throughout the state and to be furnished upon application, 6 19 but failure to receive or secure the form does not relieve 6 20 the taxpayer from the obligation of making a return that is 6 21 required. The department may as far as consistent with the 6 22 Code draft income tax forms to conform to the income tax 6 23 forms of the internal revenue department of the United States 6 24 government. Each return by a taxpayer upon whom a tax is 6 25 imposed by section 422.5 or 422.5A shall show the county of the 6 26 residence of the taxpayer. 6 27 Sec. 9. Section 422D.2, Code 2015, is amended to read as 6 28 follows: 6 29 422D.2 Local income surtax. 6 30 A county may impose by ordinance a local income surtax as 6 31 provided in section 422D.1 at the rate set by the board of 6 32 supervisors, of up to one percent, on the state individual 6 33 income tax of each individual residing in the county at the 6 34 end of the individual's applicable tax year. However, the 6 35 cumulative total of the percents of income surtax imposed on 7 1 any taxpayer in the county shall not exceed twenty percent, 7 2 except as provided in section 298.14. The reason for imposing 7 3 the surtax and the amount needed shall be set out in the 7 4 ordinance. The surtax rate shall be set to raise only the 7 5 amount needed. For purposes of this section, "state individual 7 6 income tax" means the tax computed under section 422.5, less 7 7 the amounts of nonrefundable credits allowed under chapter 7 8 422, division II, except for the Iowa taxpayers trust fund tax 7 9 credit allowed under section 422.11E, or the tax computed under 7 10 section 422.5A if applicable. 7 11 DIVISION III 7 12 IMPLEMENTATION 7 13 Sec. 10. EFFECTIVE UPON ENACTMENT. This Act, being deemed 7 14 of immediate importance, takes effect upon enactment. 7 15 Sec. 11. RETROACTIVE APPLICABILITY. This Act applies 7 16 retroactively to January 1, 2015, for tax years beginning on 7 17 or after that date. 7 18 EXPLANATION 7 19 The inclusion of this explanation does not constitute agreement with 7 20 the explanation's substance by the members of the general assembly. 7 21 This bill relates to the individual income tax by creating 7 22 an alternative base income tax imposed at the election of the 7 23 taxpayer. 7 24 Division I relates to the computation and imposition of an 7 25 alternative base income tax. 7 26 In lieu of the regular personal net income tax computed and 7 27 imposed under Code section 422.5, a resident or nonresident 7 28 individual may elect to be subject to an alternative base 7 29 income tax as provided in the division. An election must be 7 30 made not later than the due date for filing the return for 7 31 a taxable year, including extensions, and under rules to be 7 32 prescribed by the director. 7 33 The state income tax of a taxpayer making an election 7 34 shall be an amount of tax equal to the taxpayer's base income 7 35 times 5 percent. "Base income" is defined as the taxpayer's 8 1 adjusted gross income before the net operating loss deduction 8 2 as properly computed for federal income tax purposes, less a 8 3 standard deduction of $6,235 for a married person who files 8 4 separately or a single person or $12,470 for a married couple 8 5 filing a joint return, a surviving spouse, or a head of 8 6 household, less interest and dividends from federal securities, 8 7 and less social security benefits and retirement income. The 8 8 division indexes the standard deduction amounts for future 8 9 inflation. A taxpayer shall not be allowed any nonrefundable 8 10 or refundable tax credit for the tax year for which the 8 11 election is made, except the credits for withheld tax and 8 12 estimated tax paid under Code section 422.16. 8 13 Taxpayers who are 65 years of age or older who elect the 8 14 alternative base income tax are not required to file an 8 15 income tax return if base income does not exceed $32,000 for 8 16 a married person filing jointly or filing separately on a 8 17 combined return, a head of household, or a surviving spouse, 8 18 or $24,000 for all other persons. For purposes of calculating 8 19 base income for the filing threshold, taxpayers are required 8 20 to add back any social security benefits or retirement income 8 21 otherwise exempt under the bill except for military retirement 8 22 pay. Taxpayers who meet these requirements and who do not file 8 23 a tax return are deemed to have elected to be subject to the 8 24 alternative base income tax. 8 25 If a taxpayer making an election is also subject to a local 8 26 income surtax, that taxpayer is subject to a local income 8 27 surtax rate that is 22 percent higher than the rate otherwise 8 28 imposed by the school district or political subdivision. 8 29 Division II relates to miscellaneous conforming changes. 8 30 The division makes conforming changes to the definitions of 8 31 "state income tax liability" for purposes of the Iowa election 8 32 campaign fund income tax checkoff in Code chapter 68A, and 8 33 "state individual income tax" for purposes of the emergency 8 34 medical services income surtax in Code chapter 422D, the 8 35 instructional support income surtax in Code section 257.21, 9 1 and, by reference, the educational improvement income surtax 9 2 in Code section 257.29 and the physical plant and equipment 9 3 income surtax in Code section 298.2, to include income tax 9 4 computed and imposed under the alternative system in new Code 9 5 section 422.5A. The division also amends Code sections 422.16 9 6 and 422.21 to include references to new Code section 422.5A 9 7 in provisions of those Code sections that reference the tax 9 8 imposed under Code section 422.5. 9 9 Division III relates to implementation of the bill. 9 10 The division provides that the bill takes effect upon 9 11 enactment and applies retroactively to January 1, 2015, for tax 9 12 years beginning on or after that date. LSB 1400HV (1) 86 mm/sc
