Bill Text: IA HSB671 | 2017-2018 | 87th General Assembly | Introduced

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Bill Title: A bill for an act relating to state and local revenue and finance by modifying the income taxes, the sales and use taxes and local option sales tax, the hotel and motel excise tax, the automobile rental excise tax, the Iowa educational savings plan trust, and the disabilities expenses savings plan trust, making penalties applicable, and including immediate effective date and retroactive and other applicability provisions.

Spectrum: Committee Bill

Status: (N/A - Dead) 2018-04-12 - Committee report, recommending amendment and passage. H.J. 785. [HSB671 Detail]

Download: Iowa-2017-HSB671-Introduced.html

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House Study Bill 671 - Introduced
SENATE/HOUSE FILE _____
BY (PROPOSED GOVERNOR BILL)
A BILL FOR
An Act relating to state and local revenue and finance by
modifying the income taxes, the sales and use taxes and
local option sales tax, the hotel and motel excise tax, the
automobile rental excise tax, the Iowa educational savings
plan trust, and the disabilities expenses savings plan
trust, making penalties applicable, and including immediate
effective date and retroactive and other applicability
provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
INCOME TAX CHANGES FOR TAX YEAR 2018
Section 1. EARNED INCOME TAX CREDIT FOR 2018.
Notwithstanding the definition of “Internal Revenue Code”
in section 422.3, for tax years beginning during the 2018
calendar year, any reference to the term “Internal Revenue
Code” in section 422.12B shall mean the Internal Revenue Code
of 1954, prior to the date of its redesignation as the Internal
Revenue Code of 1986 by the Tax Reform Act of 1986, or means
the Internal Revenue Code of 1986 as amended and in effect on
January 1, 2016, but shall not be construed to include any
amendment to the Internal Revenue Code enacted after January 1,
2016, including any amendment with retroactive applicability
or effectiveness.
Sec. 2. ACCOUNTING METHOD AND OTHER MISCELLANEOUS
COUPLING PROVISIONS FOR TAX YEAR 2018. Notwithstanding any
other provision of law to the contrary, amendments to the
Internal Revenue Code enacted in Pub. L. No. 115-97, §13102,
§13221, §13504, §13541, §13543, §13611, and §13613, apply in
calculating federal adjusted gross income or federal taxable
income, as applicable, for state tax purposes for purposes of
chapter 422 for tax years beginning during the 2018 calendar
year to the extent those amendments affect the calculation of
federal adjusted gross income or federal taxable income, as
applicable, for federal tax purposes for tax years beginning
during the 2018 calendar year.
Sec. 3. TEACHER EXPENSE DEDUCTION. Notwithstanding any
other provision of law to the contrary, for tax years beginning
during the 2018 calendar year, a taxpayer is allowed to take
the deduction for certain expenses of elementary and secondary
school teachers allowed under section 62(a)(2)(D) of the
Internal Revenue Code, as amended by Pub. L. No. 114-113,
division Q, §104, in computing net income for state tax
purposes.
Sec. 4. EFFECTIVE DATE. This division of this Act, being
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deemed of immediate importance, takes effect upon enactment.
Sec. 5. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2018, for tax years
beginning on or after that date, but before January 1, 2019.
DIVISION II
INDIVIDUAL INCOME TAX CHANGES BEGINNING IN TAX YEAR 2019
Sec. 6. Section 422.4, subsection 1, paragraphs b and c,
Code 2018, are amended to read as follows:
b. “Cumulative inflation factor” means the product of the
annual inflation factor for the 1988 2019 calendar year and
all annual inflation factors for subsequent calendar years
as determined pursuant to this subsection . The cumulative
inflation factor applies to all tax years beginning on or after
January 1 of the calendar year for which the latest annual
inflation factor has been determined.
c. The annual inflation factor for the 1988 2019 calendar
year is one hundred percent.
Sec. 7. Section 422.4, subsection 2, paragraph b, Code 2018,
is amended to read as follows:
b. “Cumulative standard deduction factor” means the product
of the annual standard deduction factor for the 1989 calendar
year years set forth in section 422.21, subsection 5, paragraph
“b” , and all annual standard deduction factors for subsequent
calendar years as determined pursuant to this subsection .
The cumulative standard deduction factor applies to all tax
years beginning on or after January 1 of the calendar year for
which the latest annual standard deduction factor has been
determined.
Sec. 8. Section 422.4, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 9A. “Internal Revenue Code” means the
Internal Revenue Code of 1954, prior to the date of its
redesignation as the Internal Revenue Code of 1986 by the Tax
Reform Act of 1986, or means the Internal Revenue Code of 1986
as amended and in effect on January 1, 2018. This definition
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shall not be construed to include any amendment to the
Internal Revenue Code enacted after the date specified in the
preceding sentence, including any amendment with retroactive
applicability or effectiveness.
Sec. 9. Section 422.4, subsection 16, Code 2018, is amended
to read as follows:
16. The words “taxable income” mean the net income as
defined in section 422.7 minus the deductions allowed by
section 422.9 , in the case of individuals; in the case of
estates or trusts, the words “taxable income” mean the taxable
income (without a deduction for personal exemption) as
computed for federal income tax purposes under the Internal
Revenue Code, but with the following adjustments specified in
section 422.7 plus the Iowa income tax deducted in computing
the federal taxable income and minus federal income taxes as
provided in section 422.9 . :
a. Add back the personal exemption deduction taken in
computing federal taxable income.
b. Make the adjustments specified in section 422.7.
c. Add back Iowa income tax deducted in computing federal
taxable income.
d. Subtract federal income taxes as provided in section
422.9, if available.
e. Add back seventy-five percent of the qualified business
income deduction under section 199A of the Internal Revenue
Code taken in calculating federal taxable income.
Sec. 10. Section 422.5, subsection 1, Code 2018, is amended
to read as follows:
1. a. A tax is imposed upon every resident and nonresident
of the state which tax shall be levied, collected, and paid
annually upon and with respect to the entire taxable income
as defined in this division at rates as follows: provided in
section 422.5A.
a. On all taxable income from zero through one thousand
dollars, thirty-six hundredths of one percent.
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b. On all taxable income exceeding one thousand dollars but
not exceeding two thousand dollars, seventy-two hundredths of
one percent.
c. On all taxable income exceeding two thousand dollars
but not exceeding four thousand dollars, two and forty-three
hundredths percent.
d. On all taxable income exceeding four thousand dollars but
not exceeding nine thousand dollars, four and one-half percent.
e. On all taxable income exceeding nine thousand dollars
but not exceeding fifteen thousand dollars, six and twelve
hundredths percent.
f. On all taxable income exceeding fifteen thousand dollars
but not exceeding twenty thousand dollars, six and forty-eight
hundredths percent.
g. On all taxable income exceeding twenty thousand dollars
but not exceeding thirty thousand dollars, six and eight-tenths
percent.
h. On all taxable income exceeding thirty thousand dollars
but not exceeding forty-five thousand dollars, seven and
ninety-two hundredths percent.
i. On all taxable income exceeding forty-five thousand
dollars, eight and ninety-eight hundredths percent.
j. b. (1) The tax imposed upon the taxable income of a
nonresident shall be computed by reducing the amount determined
pursuant to paragraphs “a” through “i” paragraph “a” by the
amounts of nonrefundable credits under this division and by
multiplying this resulting amount by a fraction of which the
nonresident’s net income allocated to Iowa, as determined in
section 422.8, subsection 2 , paragraph “a” , is the numerator and
the nonresident’s total net income computed under section 422.7
is the denominator. This provision also applies to individuals
who are residents of Iowa for less than the entire tax year.
(2) (a) The tax imposed upon the taxable income of a
resident shareholder in an S corporation or of an estate
or trust with a situs in Iowa that is a shareholder in an S
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corporation, which S corporation has in effect for the tax
year an election under subchapter S of the Internal Revenue
Code and carries on business within and without the state,
may be computed by reducing the amount determined pursuant
to paragraphs “a” through “i” paragraph “a” by the amounts of
nonrefundable credits under this division and by multiplying
this resulting amount by a fraction of which the resident’s
or estate’s or trust’s net income allocated to Iowa, as
determined in section 422.8, subsection 2 , paragraph “b” , is
the numerator and the resident’s or estate’s or trust’s total
net income computed under section 422.7 is the denominator. If
a resident shareholder, or an estate or trust with a situs in
Iowa that is a shareholder, has elected to take advantage of
this subparagraph (2), and for the next tax year elects not to
take advantage of this subparagraph, the resident or estate or
trust shareholder shall not reelect to take advantage of this
subparagraph for the three tax years immediately following the
first tax year for which the shareholder elected not to take
advantage of this subparagraph, unless the director consents to
the reelection. This subparagraph also applies to individuals
who are residents of Iowa for less than the entire tax year.
(b) This subparagraph (2) shall not affect the amount of
the taxpayer’s checkoffs under this division , the credits from
tax provided under this division , and the allocation of these
credits between spouses if the taxpayers filed separate returns
or separately on combined returns.
Sec. 11. NEW SECTION . 422.5A Tax rates —— net tax receipts
calculation —— revenue targets.
1. Tax rate categories. One of the categories of tax rates
in category I, II, III, IV, or V, below apply for each tax year
beginning on or after January 1, 2019, as determined pursuant
to subsections 2 through 9:
I II III IV V
a. On all
taxable income
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from 0 through
$1,628: 0.32% 0.32% 0.30% 0.30% 0.30%
b. On all
taxable income
exceeding $1,628
but not exceeding
$3,256: 0.64% 0.64% 0.60% 0.60% 0.60%
c. On all
taxable income
exceeding $3,256
but not exceeding
$6,512: 2.10% 2.10% 2.00% 2.00% 2.00%
d. On all
taxable income
exceeding $6,512
but not exceeding
$14,652: 4.05% 4.05% 4.00% 4.00% 4.00%
e. On all
taxable income
exceeding $14,652
but not exceeding
$24,420: 5.40% 5.40% 5.30% 5.30% 5.20%
f. On all
taxable income
exceeding $24,420
but not exceeding
$48,840: 5.70% 5.70% 5.60% 5.60% 5.40%
g. On all
taxable income
exceeding $48,840
but not exceeding
$150,000: 6.70% 6.70% 6.30% 6.30% 6.30%
h. On all
taxable income
exceeding
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$150,000: 7.60% 7.40% 7.00% 7.00% 6.90%
2. Net tax receipts calculation.
a. For purposes of this section, “net tax receipts” means
total tax receipts adjusted by net accruals, less the sum of
tax refunds and school infrastructure transfers made on an
accrual basis, as computed for purposes of the comprehensive
annual financial reports of the state.
b. Net tax receipts shall be calculated by the department
of revenue, in consultation with the department of management,
for each fiscal year of the fiscal period beginning on or
after July 1, 2018, but prior to July 1, 2024, in accordance
with rules adopted by the director of revenue. The director
of revenue shall adopt rules pursuant to chapter 17A for
calculating net tax receipts as defined in paragraph “a” ,
including rules defining “total tax receipts” , “net accruals” ,
“tax refunds” , and “school infrastructure transfers” for purposes
of the calculation of net tax receipts, including the types
and categories of receipts that will be included within each
definition and in the calculation of net tax receipts.
c. The department of revenue shall submit an annual report
to the governor and general assembly by November 1 following
the close of each fiscal year of the fiscal period beginning on
or after July 1, 2018, but prior to July 1, 2024, which report
shall identify the net tax receipts for the fiscal year and
the individual income tax rates that will be in effect for tax
years beginning on or after January 1 of the following calendar
year, and shall include a detailed description of the net tax
receipts calculation made by the department of revenue.
3. Tax rates beginning in 2019. The tax rates in category I
provided in subsection 1 shall apply for tax years beginning on
or after January 1, 2019.
4. Fiscal year 2019 revenue target. If one or more of the
contingencies in paragraph “a” or “b” of this subsection 4
are met for the fiscal year ending June 30, 2019, then this
subsection 4 shall apply for tax years beginning on or after
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January 1, 2020, notwithstanding subsection 3.
a. If net tax receipts for the fiscal year ending June 30,
2019, equal or exceed seven billion one hundred six million
five hundred thousand dollars, then the tax rates in category
II provided in subsection 1 shall apply for tax years beginning
on or after January 1, 2020.
b. Notwithstanding paragraph “a” , if net tax receipts for
the fiscal year ending June 30, 2019, equal or exceed seven
billion three hundred twenty-three million eight hundred
thousand dollars, then the tax rates in category III provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2020.
5. Fiscal year 2020 revenue target. If one or more of the
contingencies in paragraphs “a” through “d” of this subsection
5 are met for the fiscal year ending June 30, 2020, then this
subsection 5 shall apply for tax years beginning on or after
January 1, 2021, notwithstanding subsections 3 and 4.
a. If the tax rates in category I provided in subsection 1
applied for tax years beginning on or after January 1, 2020,
and if net tax receipts for the fiscal year ending June 30,
2020, equal or exceed seven billion three hundred nineteen
million seven hundred thousand dollars, then the tax rates in
category II provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2021.
b. Notwithstanding paragraph “a” , if the tax rates in
category I provided in subsection 1 applied for tax years
beginning on or after January 1, 2020, and if net tax receipts
for the fiscal year ending June 30, 2020, equal or exceed
seven billion five hundred forty-three million five hundred
thousand dollars, then the tax rates in category III provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2021.
c. If the tax rates in category II provided in subsection 1
applied for tax years beginning on or after January 1, 2020,
and if net tax receipts for the fiscal year ending June 30,
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2020, equal or exceed seven billion three hundred twenty-three
million eight hundred thousand dollars, then the tax rates in
category III provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2021.
d. Notwithstanding paragraphs “a” through “c” , if net tax
receipts for the fiscal year ending June 30, 2020, equal or
exceed seven billion five hundred twenty-five million five
hundred thousand dollars, then the tax rates in category IV
provided in subsection 1 shall apply for tax years beginning on
or after January 1, 2021.
6. Fiscal year 2021 revenue target. If one or more of the
contingencies in paragraphs “a” through “e” of this subsection
are met for the fiscal year ending June 30, 2021, then this
subsection 6 shall apply for tax years beginning on or after
January 1, 2022, notwithstanding subsections 3, 4, and 5.
a. If the tax rates in category I provided in subsection 1
applied for tax years beginning on or after January 1, 2021,
and the net tax receipts for the fiscal year ending June 30,
2021, equal or exceed seven billion five hundred thirty-nine
million three hundred thousand dollars, the tax rates in
category II provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2022.
b. Notwithstanding paragraph “a” , if the tax rates in
category I or II provided in subsection 1 applied for tax years
beginning on or after January 1, 2021, and the net tax receipts
for the fiscal year ending June 30, 2021, equal or exceed seven
billion five hundred forty-three million five hundred thousand
dollars, the tax rates in category III provided in subsection
1 shall apply for tax years beginning on or after January 1,
2022.
c. Notwithstanding paragraphs “a” and “b” , if the tax rates
in category I or II provided in subsection 1 applied for tax
years beginning on or after January 1, 2021, and the net tax
receipts for the fiscal year ending June 30, 2021, equal or
exceed seven billion seven hundred fifty-one million three
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hundred thousand dollars, the tax rates in category IV provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2022.
d. If the tax rates in category III provided in subsection
1 applied for tax years beginning on or after January 1, 2021,
and the net tax receipts for the fiscal year ending June 30,
2021, equal or exceed seven billion five hundred twenty-five
million five hundred thousand dollars, the tax rates in
category IV provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2022.
e. Notwithstanding paragraphs “a” through “d” , if the net
tax receipts for the fiscal year ending June 30, 2021, equal
or exceed seven billion seven hundred sixty-five million four
hundred thousand dollars, the tax rates in category V provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2022.
7. Fiscal year 2022 revenue target. If one or more of the
contingencies in paragraphs “a” through “e” of this subsection
are met for the fiscal year ending June 30, 2022, then this
subsection 7 shall apply for tax years beginning on or after
January 1, 2023, notwithstanding subsections 3, 4, 5, and 6.
a. If the tax rates in category I provided in subsection 1
applied for tax years beginning on or after January 1, 2022,
and the net tax receipts for the fiscal year ending June 30,
2022, equal or exceed seven billion seven hundred sixty-five
million five hundred thousand dollars, the tax rates in
category II provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2023.
b. Notwithstanding paragraph “a” , if the tax rates in
category I or II provided in subsection 1 applied for tax years
beginning on or after January 1, 2022, and the net tax receipts
for the fiscal year ending June 30, 2022, equal or exceed seven
billion seven hundred sixty-nine million eight hundred thousand
dollars, the tax rates in category III provided in subsection
1 shall apply for tax years beginning on or after January 1,
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2023.
c. Notwithstanding paragraphs “a” and “b” , if the tax rates
in category I, II, or III provided in subsection 1 applied for
tax years beginning on or after January 1, 2022, and the net
tax receipts for the fiscal year ending June 30, 2022, equal
or exceed seven billion seven hundred fifty-one million three
hundred thousand dollars, the tax rates in category IV provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2023.
d. Notwithstanding paragraphs “a” through “c” , if the
tax rates in category I, II, or III provided in subsection 1
applied for tax years beginning on or after January 1, 2022,
and the net tax receipts for the fiscal year ending June 30,
2022, equal or exceed seven billion nine hundred ninety-eight
million four hundred thousand dollars, the tax rates in
category V provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2023.
e. If the tax rates in category IV provided in subsection 1
applied for tax years beginning on or after January 1, 2022,
and the net tax receipts for the fiscal year ending June 30,
2022, equal or exceed seven billion seven hundred sixty-five
million four hundred thousand dollars, the tax rates in
category V provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2023.
8. Fiscal year 2023 revenue target. If one or more of the
contingencies in paragraphs “a” through “d” of this subsection
are met for the fiscal year ending June 30, 2023, then this
subsection 8 shall apply for tax years beginning on or after
January 1, 2024, notwithstanding subsections 3, 4, 5, 6, and 7.
a. If the tax rates in category I provided in subsection 1
applied for tax years beginning on or after January 1, 2023,
and the net tax receipts for the fiscal year ending June 30,
2023, equal or exceed seven billion nine hundred ninety-eight
million five hundred thousand dollars, the tax rates in
category II provided in subsection 1 shall apply for tax years
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beginning on or after January 1, 2024.
b. Notwithstanding paragraph “a” , if the tax rates in
category I or II provided in subsection 1 applied for tax years
beginning on or after January 1, 2023, and the net tax receipts
for the fiscal year ending June 30, 2023, equal or exceed eight
billion two million nine hundred thousand dollars, the tax
rates in category III provided in subsection 1 shall apply for
tax years beginning on or after January 1, 2024.
c. Notwithstanding paragraphs “a” and “b” , if the tax rates
in category I, II, or III provided in subsection 1 applied for
tax years beginning on or after January 1, 2023, and the net
tax receipts for the fiscal year ending June 30, 2023, equal or
exceed seven billion nine hundred eighty-three million eight
hundred thousand dollars, the tax rates in category IV provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2024.
d. Notwithstanding paragraphs “a” through “c” , if the tax
rates in category I, II, III, or IV provided in subsection 1
applied for tax years beginning on or after January 1, 2023,
and the net tax receipts for the fiscal year ending June 30,
2023, equal or exceed seven billion nine hundred ninety-eight
million four hundred thousand dollars, the tax rates in
category V provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2024.
9. Fiscal year 2024 revenue target. If one or more of the
contingencies in paragraphs “a” through “d” of this subsection
are met for the fiscal year ending June 30, 2024, then this
subsection 9 shall apply for tax years beginning on or after
January 1, 2025, notwithstanding subsections 3, 4, 5, 6, 7, and
8.
a. If the tax rates in category I provided in subsection 1
applied for tax years beginning on or after January 1, 2024,
and the net tax receipts for the fiscal year ending June 30,
2024, equal or exceed eight billion two hundred thirty-eight
million five hundred thousand dollars, the tax rates in
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category II provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2025.
b. Notwithstanding paragraph “a” , if the tax rates in
category I or II provided in subsection 1 applied for tax years
beginning on or after January 1, 2024, and the net tax receipts
for the fiscal year ending June 30, 2024, equal or exceed eight
billion two hundred forty-three million dollars, the tax rates
in category III provided in subsection 1 shall apply for tax
years beginning on or after January 1, 2025.
c. Notwithstanding paragraphs “a” and “b” , if the tax rates
in category I, II, or III provided in subsection 1 applied for
tax years beginning on or after January 1, 2024, and the net
tax receipts for the fiscal year ending June 30, 2024, equal
or exceed eight billion two hundred twenty-three million three
hundred thousand dollars, the tax rates in category IV provided
in subsection 1 shall apply for tax years beginning on or after
January 1, 2025.
d. Notwithstanding paragraphs “a” through “c” , if the tax
rates in category I, II, III, or IV provided in subsection 1
applied for tax years beginning on or after January 1, 2024,
and the net tax receipts for the fiscal year ending June 30,
2024, equal or exceed eight billion two hundred thirty-eight
million four hundred thousand dollars, the tax rates in
category V provided in subsection 1 shall apply for tax years
beginning on or after January 1, 2025.
Sec. 12. Section 422.5, subsection 2, Code 2018, is amended
by striking the subsection.
Sec. 13. Section 422.5, subsection 3, paragraph b, Code
2018, is amended to read as follows:
b. In lieu of the computation in subsection 1 or 2 , or in
paragraph “a” of this subsection , if the married persons’,
filing jointly or filing separately on a combined return,
head of household’s, or surviving spouse’s net income exceeds
thirteen thousand five hundred dollars, the regular tax imposed
under this division shall be the lesser of the maximum state
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individual income tax rate for the tax year times the portion
of the net income in excess of thirteen thousand five hundred
dollars or the regular tax liability computed without regard
to this sentence. Taxpayers electing to file separately shall
compute the alternate tax described in this paragraph using the
total net income of the husband and wife. The alternate tax
described in this paragraph does not apply if one spouse elects
to carry back or carry forward the loss as provided in section
422.9, subsection 3 .
Sec. 14. Section 422.5, subsection 3B, paragraph b, Code
2018, is amended to read as follows:
b. In lieu of the computation in subsection 1 , 2, or 3 , if
the married persons’, filing jointly or filing separately on
a combined return, head of household’s, or surviving spouse’s
net income exceeds thirty-two thousand dollars, the regular tax
imposed under this division shall be the lesser of the maximum
state individual income tax rate for the tax year times the
portion of the net income in excess of thirty-two thousand
dollars or the regular tax liability computed without regard
to this sentence. Taxpayers electing to file separately shall
compute the alternate tax described in this paragraph using the
total net income of the husband and wife. The alternate tax
described in this paragraph does not apply if one spouse elects
to carry back or carry forward the loss as provided in section
422.9, subsection 3 .
Sec. 15. Section 422.5, subsection 6, Code 2018, is amended
to read as follows:
6. Upon determination of the latest cumulative inflation
factor, the director shall multiply each dollar amount set
forth in subsection 1 , paragraphs “a” through “i” section
422.5A, subsection 1, by this cumulative inflation factor,
shall round off the resulting product to the nearest one
dollar, and shall incorporate the result into the income tax
forms and instructions for each tax year beginning on or after
January 1, 2019 .
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Sec. 16. Section 422.7, subsection 39A, unnumbered
paragraph 1, Code 2018, is amended to read as follows:
The additional first-year depreciation allowance authorized
in section 168(k) of the Internal Revenue Code, as enacted by
Pub. L. No. 110-185, §103, Pub. L. No. 111-5, §1201, Pub. L.
No. 111-240, §2022, Pub. L. No. 111-312, §401, Pub. L. No.
112-240, §331, and Pub. L. No. 113-295, §125, Pub. L. No.
114-113, division Q, §143, and Pub. L. No. 115-97, §13201, does
not apply in computing net income for state tax purposes. If
the taxpayer has taken the additional first-year depreciation
allowance for purposes of computing federal adjusted gross
income, then the taxpayer shall make the following adjustments
to federal adjusted gross income when computing net income for
state tax purposes:
Sec. 17. Section 422.7, Code 2018, is amended by adding the
following new subsections:
NEW SUBSECTION . 51. a. The increased expensing allowance
under section 179 of the Internal Revenue Code applies in
computing net income for state tax purposes for tax years
beginning on or after January 1, 2019, subject to the
limitations in this subsection.
b. If the taxpayer has taken the increased expensing
allowance under section 179 of the Internal Revenue Code for
purposes of computing federal adjusted gross income for tax
years beginning on or after January 1, 2019, then the taxpayer
shall make the following adjustments to federal adjusted gross
income when computing net income for state tax purposes for the
same tax year:
(1) Add the total amount of expense deduction taken on
section 179 property allowable for federal tax purposes under
section 179 of the Internal Revenue Code.
(2) Subtract the amount of expense deduction on section
179 property allowable for federal tax purposes under section
179 of the Internal Revenue Code, not to exceed one hundred
thousand dollars. The subtraction in this subparagraph shall
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be reduced, but not below zero, by the amount by which the
total cost of section 179 property placed in service by the
taxpayer during the tax year exceeds four hundred thousand
dollars.
(3) Any other adjustments to gains or losses necessary to
reflect adjustments made in subparagraphs (1) and (2).
c. The director shall adopt rules pursuant to chapter 17A
to administer this subsection.
NEW SUBSECTION . 52. a. For tax years beginning on or
after January 1, 2019, a taxpayer may elect to take advantage
of this subsection if the taxpayer’s total expensing allowance
deduction for federal tax purposes under section 179 of the
Internal Revenue Code that is allocated to the taxpayer from
one or more partnerships, S corporations, or limited liability
companies electing to have the income taxed directly to the
individual exceeds one hundred thousand dollars and would,
except as provided in this subsection, be limited for purposes
of computing net income for state tax purposes pursuant to
subsection 51.
b. A taxpayer who elects to take advantage of this
subsection shall make the following adjustments to federal
adjusted gross income when computing net income for state tax
purposes:
(1) Add the total amount of section 179 expense
deduction allocated to the taxpayer from all partnerships, S
corporations, or limited liability companies electing to have
the income taxed directly to the individual, to the extent the
allocated amount was allowed as a deduction to the taxpayer for
federal tax purposes for the tax year.
(2) From the amount added in subparagraph (1), subtract
the first one hundred thousand dollars of expensing allowance
deduction on section 179 property.
(3) The remaining amount, equal to the difference between
the amount added in subparagraph (1), and the amount subtracted
in subparagraph (2), may be deducted by the taxpayer but such
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deduction shall be amortized equally over five tax years
beginning in the following tax year.
(4) Any other adjustments to gains or losses necessary to
reflect adjustments made in subparagraphs (1) through (3).
c. A taxpayer who elects to take advantage of this
subsection shall not take the increased expensing allowance
under section 179 of the Internal Revenue Code for any section
179 property placed in service by the taxpayer in computing
adjusted gross income for state tax purposes. If the taxpayer
has taken any such deduction for purposes of computing federal
adjusted gross income, the taxpayer shall make the following
adjustments to federal adjusted gross income when computing net
income for state tax purposes:
(1) Add the total amount of expense deduction for federal
tax purposes taken on section 179 property placed in service by
the taxpayer under section 179 of the Internal Revenue Code.
(2) Subtract the amount of depreciation allowable on such
property under the modified accelerated cost recovery system
described in section 168 of the Internal Revenue Code, without
regard to section 168(k) of the Internal Revenue Code. The
taxpayer shall continue to take depreciation on the applicable
property in future tax years to the extent allowed under the
modified accelerated cost recovery system described in section
168 of the Internal Revenue Code, without regard to section
168(k) of the Internal Revenue Code.
(3) Any other adjustments to gains or losses necessary to
reflect the adjustments made in subparagraphs (1) and (2).
d. The election made under this subsection is for one tax
year and the taxpayer may elect or not elect to take advantage
of this subsection in any subsequent tax year. However, not
electing to take advantage of this subsection in a subsequent
tax year shall not affect the taxpayer’s ability to claim the
tax deduction under paragraph “b” , subparagraph (3), that
originated from a previous tax year.
e. The director shall adopt rules pursuant to chapter 17A
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to administer this subsection.
Sec. 18. Section 422.8, subsection 2, paragraph a, Code
2018, is amended to read as follows:
a. Nonresident’s net income allocated to Iowa is the net
income, or portion of net income, which is derived from a
business, trade, profession, or occupation carried on within
this state or income from any property, trust, estate, or
other source within Iowa. However, income derived from a
business, trade, profession, or occupation carried on within
this state and income from any property, trust, estate, or
other source within Iowa shall not include distributions from
pensions, including defined benefit or defined contribution
plans, annuities, individual retirement accounts, and deferred
compensation plans or any earnings attributable thereto so long
as the distribution is directly related to an individual’s
documented retirement and received while the individual is a
nonresident of this state. If a business, trade, profession,
or occupation is carried on partly within and partly without
the state, only the portion of the net income which is fairly
and equitably attributable to that part of the business,
trade, profession, or occupation carried on within the state
is allocated to Iowa for purposes of section 422.5, subsection
1 , paragraph “j” “b” , and section 422.13 and income from any
property, trust, estate, or other source partly within and
partly without the state is allocated to Iowa in the same
manner, except that annuities, interest on bank deposits and
interest-bearing obligations, and dividends are allocated
to Iowa only to the extent to which they are derived from a
business, trade, profession, or occupation carried on within
the state. Net income described in section 29C.24, subsection
3 , paragraph “a” , subparagraph (3), and paragraph “b” ,
subparagraph (2), shall not be allocated and apportioned to the
state, as provided in section 29C.24 .
Sec. 19. Section 422.8, subsection 4, Code 2018, is amended
by striking the subsection.
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Sec. 20. Section 422.9, unnumbered paragraph 1, Code 2018,
is amended to read as follows:
1. In computing taxable income of individuals, there
shall be deducted from net income the larger of the following
amounts : computed under subsection 1A or 2, plus the amount
computed under subsection 2A.
Sec. 21. Section 422.9, subsection 1, Code 2018, is amended
by striking the subsection.
Sec. 22. Section 422.9, Code 2018, is amended by adding the
following new subsections:
NEW SUBSECTION . 1A. a. An optional standard deduction
equal to the sum of the amount in subparagraph (1) or (2), plus
the amounts in subparagraphs (3) and (4) as applicable:
(1) For a married person who files separately or a single
person, four thousand dollars.
(2) For a married couple who file a joint return, a
surviving spouse, or a head of household, eight thousand
dollars.
(3) If an individual described in subparagraph (1) or (2) is
at least sixty-five years old on December 31 of the tax year,
an additional amount equal to one of the following:
(a) For each tax year beginning on or after January 1, 2019,
but before January 1 of the first tax year for which the tax
rates in tax category III, IV, or V, as provided in section
422.5A, subsection 1, take effect, if at all, one thousand five
hundred dollars per individual who is at least sixty-five on
December 31 of the tax year.
(b) For each tax year beginning on or after January 1 of the
first tax year for which the tax rates in tax category III, IV,
or V, as provided in section 422.5A, subsection 1, take effect,
if at all, two thousand seventy dollars per individual who is
at least sixty-five on December 31 of the tax year.
(4) If an individual described in subparagraph (1) or (2)
is blind on December 31 of the tax year as described in section
422.12, subsection 2, paragraph “a” , subparagraph (5), an
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additional amount equal to one of the following:
(a) For each tax year beginning on or after January 1, 2019,
but before January 1 of the first tax year for which the tax
rates in tax category III, IV, or V, as provided in section
422.5A, subsection 1, take effect, if at all, one thousand five
hundred dollars per individual who is blind on December 31 of
the tax year.
(b) For each tax year beginning on or after January 1 of the
first tax year for which the tax rates in tax category III, IV,
or V, as provided in section 422.5A, subsection 1, take effect,
if at all, two thousand seventy dollars per individual who is
blind on December 31 of the tax year.
b. The optional standard deduction in this subsection
shall be applied after the deduction for federal income tax as
provided in subsection 2, paragraph “b” , and shall not exceed
the amount remaining after deduction of the federal income tax.
This paragraph is repealed January 1, 2022.
NEW SUBSECTION . 2A. a. Twenty-five percent of the amount
deductible by the taxpayer for federal income tax purposes
under section 199A of the Internal Revenue Code.
b. Notwithstanding paragraph “a” , and section 422.4,
subsection 16, paragraph “e” , for an entity electing or required
to file a composite return under section 422.13, subsection 5,
the deduction allowed under this subsection for purposes of
the composite return shall be an amount equal to twenty-five
percent of the deduction that would be allowable for federal
income tax purposes under section 199A of the Internal Revenue
Code by an individual taxpayer reporting the same items of
income and loss that are included in the composite return.
Sec. 23. Section 422.9, subsection 2, paragraphs b, h, and
i, Code 2018, are amended to read as follows:
b. (1) Add Subject to the limitations in subparagraphs
(2) and (3), add the amount of federal income taxes paid or
accrued, as the case may be, during the tax year and subtract
any federal income tax refunds received during the tax year.
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(2) Where married persons, who have filed a joint federal
income tax return, file separately, such total shall be divided
between them according to the portion of the total paid or
accrued, as the case may be, by each. Federal income taxes
paid for a tax year in which an Iowa return was not required
to be filed shall not be added and federal income tax refunds
received from a tax year in which an Iowa return was not
required to be filed shall not be subtracted.
(3) For tax years beginning on or after January 1, 2019,
the deduction of federal income tax is limited and shall be
calculated as follows:
(a) For tax years beginning in the 2019 calendar year,
add an amount equal to the sum of the federal income tax paid
during the tax year to the extent payment is for a tax year
beginning prior to January 1, 2019, and twenty-five percent of
the federal income tax paid during the tax year to the extent
payment is for a tax year beginning in the 2019 calendar year,
and subtract any federal income tax refunds received during the
tax year.
(b) For each tax year beginning on or after January 1,
2020, add an amount equal to the sum of twenty-five percent
of the federal income tax paid during the tax year to the
extent payment is for a tax year during which the tax rates in
tax category I as provided in section 422.5A, subsection 1,
applied, and fifteen percent of the federal income tax paid
during the tax year to the extent payment is for a tax year
during which the tax rates in tax category II as provided in
section 422.5A, subsection 1, applied, and subtract any federal
income tax refunds received during the tax year to the extent
the federal income tax was deducted for a prior tax year.
(c) Federal income tax paid during a tax year shall not be
deducted if the payment is for a tax year during which the tax
rates in category III, IV, or V, as provided in section 422.5A,
subsection 1, applied.
h. For purposes of calculating the deductions in this
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subsection that are authorized under the Internal Revenue Code,
and to the extent that any of such deductions is determined by
an individual’s federal adjusted gross income, the individual’s
federal adjusted gross income is computed in accordance with
section 422.7, subsections 39, 39A, 39B, 51, 52, and 53 .
i. The deduction for state sales and use taxes is allowable
only if the taxpayer elected to deduct the state sales and use
taxes in lieu of state income taxes under section 164 of the
Internal Revenue Code. A deduction for state sales and use
taxes is not allowed if the taxpayer has taken the deduction
for state income taxes or claimed the standard deduction under
section 63 of the Internal Revenue Code. This paragraph
applies to taxable years beginning after December 31, 2003, and
before January 1, 2008, and to taxable years beginning after
December 31, 2009, and before January 1, 2015 December 31,
2018 .
Sec. 24. Section 422.9, subsection 2, Code 2018, is amended
by adding the following new paragraph:
NEW PARAGRAPH . l. The limitation on the deduction of
certain taxes in section 164(b)(6) of the Internal Revenue
Code does not apply in computing taxable income for state tax
purposes. A taxpayer is allowed to deduct taxes in computing
taxable income as otherwise provided in this subsection without
regard to section 164(b)(6), as enacted by Pub. L. No. 115-97,
§11042.
Sec. 25. Section 422.9, subsection 3, paragraph d, Code
2018, is amended to read as follows:
d. Notwithstanding paragraph “a” , for a taxpayer who is
engaged in the trade or business of farming as defined in
section 263A(e)(4) of the Internal Revenue Code and has a loss
from farming as defined in section 172(b)(1)(F) 172(b)(1)(B) of
the Internal Revenue Code including modifications prescribed by
rule by the director, the Iowa loss from the trade or business
of farming is a net operating loss which may be carried back
five taxable years prior to the taxable year of the loss.
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Sec. 26. Section 422.9, subsection 5, Code 2018, is amended
to read as follows:
5. A taxpayer affected by section 422.8 shall , if the
optional standard deduction is not used, be permitted to deduct
only such portion of the total referred to in subsection
subsections 2 above and 2A as is fairly and equitably allocable
to Iowa under the rules prescribed by the director.
Sec. 27. Section 422.9, subsections 6 and 7, Code 2018, are
amended by striking the subsections.
Sec. 28. Section 422.11B, Code 2018, is amended to read as
follows:
422.11B Minimum tax credit.
1. a. There For tax years beginning before January 1, 2020,
there is allowed as a credit against the tax determined in
section 422.5, subsection 1 , paragraphs “a” through “j” for a
tax year an amount equal to the minimum tax credit for that tax
year.
b. The minimum tax credit for a tax year is the excess, if
any, of the net minimum tax imposed for all prior tax years
beginning on or after January 1, 1987, but before January 1,
2019, over the amount allowable as a credit under this section
for those prior tax years.
2. a. The allowable credit under subsection 1 for a
tax year beginning before January 1, 2019, shall not exceed
the excess, if any, of the tax determined in section 422.5,
subsection 1 , paragraphs “a” through “j” over the state
alternative minimum tax as determined in section 422.5,
subsection 2 , Code 2018 . The allowable credit under subsection
1 for a tax year beginning in the 2019 calendar year shall not
exceed the tax determined under section 422.5, subsection 1.
b. The net minimum tax for a tax year is the excess, if
any, of the tax determined in section 422.5, subsection 2 ,
Code 2018, for the tax year over the tax determined in section
422.5, subsection 1 , paragraphs “a” through “j” for the tax
year.
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3. This section is repealed January 1, 2020, for tax years
beginning on or after January 1, 2020.
Sec. 29. Section 422.13, subsection 1, paragraph c, Code
2018, is amended by striking the paragraph.
Sec. 30. Section 422.21, subsection 5, Code 2018, is amended
to read as follows:
5. a. The director shall determine for the 1989 2019
and each subsequent calendar year the annual and cumulative
inflation factors for each calendar year to be applied to tax
years beginning on or after January 1 of that calendar year.
The director shall compute the new dollar amounts as specified
to be adjusted in section 422.5 by the latest cumulative
inflation factor and round off the result to the nearest one
dollar. The annual and cumulative inflation factors determined
by the director are not rules as defined in section 17A.2,
subsection 11 .
b. The director shall determine for the 1990 2020 calendar
year and each subsequent calendar year the annual and
cumulative standard deduction factors to be applied to tax
years beginning on or after January 1 of that calendar year for
purposes of the standard deduction amounts in section 422.9,
subsection 1A, paragraph “a” , subparagraphs (1) and (2), and
subparagraph (3), subparagraph division (a), and subparagraph
(4), subparagraph division (a) . The director shall determine
for the calendar following the first calendar year for which
the tax rates in tax category III, IV, or V, as provided in
section 422.5A, subsection 1, take effect, if at all, and
for each subsequent calendar year, the annual and cumulative
standard deduction factors to be applied to tax years beginning
on or after January 1 of that calendar year for purposes of the
standard deduction amounts in section 422.9, subsection 1A,
paragraph “a” , subparagraph (3), subparagraph division (b),
and subparagraph (4), subparagraph division (b). The director
shall compute the new dollar amounts of the standard deductions
specified in section 422.9, subsection 1 , by the applicable
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latest cumulative standard deduction factor and round off the
result to the nearest ten dollars. The annual and cumulative
standard deduction factors determined by the director are not
rules as defined in section 17A.2, subsection 11 .
Sec. 31. EFFECTIVE DATE. This division of this Act takes
effect January 1, 2019.
Sec. 32. APPLICABILITY. This division of this Act applies
to tax years beginning on or after January 1, 2019.
DIVISION III
CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN TRUST AND IOWA ABLE
SAVINGS PLAN TRUST
Sec. 33. Section 12D.1, Code 2018, is amended to read as
follows:
12D.1 Purpose and definitions.
1. The general assembly finds that the general welfare and
well-being of the state are directly related to educational
levels and skills of the citizens of the state, and that a
vital and valid public purpose is served by the creation and
implementation of programs which encourage and make possible
the attainment of higher formal education by the greatest
number of citizens of the state. The state has limited
resources to provide additional programs for higher education
funding and the continued operation and maintenance of the
state’s public institutions of higher education and the general
welfare of the citizens of the state will be enhanced by
establishing a program which allows citizens of the state to
invest money in a public trust for future application to the
payment of higher education costs qualified education expenses .
The creation of the means of encouragement for citizens to
invest in such a program represents the carrying out of a
vital and valid public purpose. In order to make available
to the citizens of the state an opportunity to fund future
higher formal education needs, it is necessary that a public
trust be established in which moneys may be invested for future
educational use.
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2. As used in this chapter , unless the context otherwise
requires:
a. “Account balance limit” means the maximum allowable
aggregate balance of accounts established for the same
beneficiary. Account earnings, if any, are included in the
account balance limit.
b. “Administrative fund” means the administrative fund
established under section 12D.4 .
c. “Beneficiary” means the individual designated by a
participation agreement to benefit from advance payments of
higher education costs qualified education expenses on behalf
of the beneficiary.
d. “Benefits” means the payment of higher education costs
qualified education expenses on behalf of a beneficiary by the
trust during the beneficiary’s attendance at an institution of
higher education a qualified educational institution .
e. “Higher education costs” means the same as “qualified
higher education expenses” as defined in section 529(e)(3) of
the Internal Revenue Code .
f. e. “Institution of higher education” means an institution
described in section 481 of the federal Higher Education Act of
1965, 20 U.S.C. §1088, which is eligible to participate in the
United States department of education’s student aid programs.
g. f. “Internal Revenue Code” means the same as defined
in section 12I.1 .
h. g. “Iowa educational savings plan trust” or “trust” means
the trust created under section 12D.2 .
i. h. “Participant” means an individual, individual’s legal
representative, trust, estate, or an organization described
in section 501(c)(3) of the Internal Revenue Code and exempt
from taxation under section 501(a) of the Internal Revenue
Code, that has entered into a participation agreement under
this chapter for the advance payment of higher education costs
qualified education expenses on behalf of a beneficiary.
j. i. “Participation agreement” means an agreement between
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a participant and the trust entered into under this chapter .
k. j. “Program fund” means the program fund established
under section 12D.4 .
k. “Qualified education expenses” means the same as
“qualified higher education expenses” as defined in section
529(e)(3) of the Internal Revenue Code, as amended by Pub. L.
No. 115-97, and shall include elementary and secondary school
expenses for tuition described in section 529(c)(7) of the
Internal Revenue Code, subject to the limitations imposed by
section 529(e)(3)(A) of the Internal Revenue Code.
l. “Qualified educational institution” means an institution
of higher education, or any elementary or secondary public,
private, or religious school described in section 529(c)(7) of
the Internal Revenue Code.
l. m. “Tuition and fees” “Tuition” means the quarter , or
semester , or annual charges imposed to attend an institution
of higher education a qualified educational institution and
required as a condition of enrollment or attendance .
Sec. 34. Section 12D.2, subsections 2, 5, 9, and 14, Code
2018, are amended to read as follows:
2. Enter into agreements with any institution of higher
education qualified educational institution , the state, or any
federal or other state agency, or other entity as required to
implement this chapter .
5. Carry out studies and projections so the treasurer of
state may advise participants regarding present and estimated
future higher education costs qualified education expenses
and levels of financial participation in the trust required
in order to enable participants to achieve their educational
funding objectives.
9. Make payments to institutions of higher education
qualified educational institutions , participants, or
beneficiaries, pursuant to participation agreements on behalf
of beneficiaries.
14. Establish, impose, and collect administrative fees
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and charges in connection with transactions of the trust, and
provide for reasonable service charges , including penalties for
cancellations and late payments with respect to participation
agreements .
Sec. 35. Section 12D.3, subsections 1 and 2, Code 2018, are
amended to read as follows:
1. a. Each participation agreement may require a
participant to agree to invest a specific amount of money in
the trust for a specific period of time for the benefit of a
specific beneficiary. A participant shall not be required to
make an annual contribution on behalf of a beneficiary. The
maximum contribution that may be deducted for Iowa income tax
purposes shall not exceed two thousand dollars per beneficiary
per year adjusted annually to reflect increases in the consumer
price index. The treasurer of state shall set an account
balance limit to maintain compliance with section 529 of the
Internal Revenue Code. A contribution shall not be permitted
to the extent it causes the aggregate balance of all accounts
established for the same beneficiary under the trust to exceed
the applicable account balance limit.
b. Participation agreements may be amended to provide for
adjusted levels of payments based upon changed circumstances or
changes in educational plans.
2. The execution of a participation agreement by the trust
shall not guarantee in any way that higher education costs
qualified education expenses will be equal to projections
and estimates provided by the trust or that the beneficiary
named in any participation agreement will attain any of the
following:
a. Be admitted to an institution of higher education a
qualified educational institution .
b. If admitted, be determined a resident for tuition
purposes by the institution of higher education qualified
educational institution .
c. Be allowed to continue attendance at the institution of
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higher education qualified educational institution following
admission.
d. Graduate from the institution of higher education
qualified educational institution .
Sec. 36. Section 12D.3, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 5. A participant may designate a successor
in accordance with rules adopted by the treasurer of state.
The designated successor shall succeed to the ownership of the
account in the event of the death of the participant. In the
event a participant dies and has not designated a successor to
the account, the following criteria shall apply:
a. The beneficiary of the account, if eighteen years of
age or older, shall become the owner of the account as well as
remain the beneficiary upon filing the appropriate forms in
accordance with rules adopted by the treasurer of state.
b. If the beneficiary of the account is under the age of
eighteen, account ownership shall be transferred to the first
surviving parent or other legal guardian of the beneficiary to
file the appropriate forms in accordance with rules adopted by
the treasurer of state.
Sec. 37. Section 12D.4, Code 2018, is amended to read as
follows:
12D.4 Program and administrative funds —— investment and
payments.
1. a. The treasurer of state shall segregate moneys
received by the trust into two funds: the program fund and the
administrative fund.
b. All moneys paid by participants in connection with
participation agreements shall be deposited as received into
separate accounts within the program fund.
c. Contributions to the trust made by participants may only
be made in the form of cash.
d. A participant or beneficiary shall not provide investment
direction regarding program contributions or earnings held by
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the trust may, directly or indirectly, direct the investment of
any contributions to the trust or any earnings thereon no more
than two times in a calendar year .
e. The amount of cash distributions from the trust and all
other qualified state tuition programs under section 529 of
the Internal Revenue Code to a beneficiary during any taxable
year shall, in the aggregate, include no more than ten thousand
dollars in expenses for tuition in connection with enrollment
at an elementary or secondary public, private, or religious
school incurred during the taxable year.
2. Moneys accrued by participants in the program fund of
the trust may be used for payments to any institution of higher
education qualified educational institution . Payments can be
made to the qualified educational institution, the participant,
or the beneficiary.
Sec. 38. Section 12D.6, subsection 1, paragraph a, Code
2018, is amended to read as follows:
a. A participant retains ownership of all payments made
under a participation agreement up to the date of utilization
for payment of higher education costs qualified education
expenses for the beneficiary.
Sec. 39. Section 12D.6, subsections 2, 3, and 5, Code 2018,
are amended to read as follows:
2. In the event the program is terminated prior to payment
of higher education costs qualified education expenses for the
beneficiary, the participant is entitled to a refund of the
participant’s account balance.
3. The institution of higher education qualified
educational institution shall obtain ownership of the payments
made for the higher education costs qualified education
expenses paid to the institution at the time each payment is
made to the institution.
5. A participant may transfer ownership rights to another
eligible individual, including a gift of the ownership rights
to a minor beneficiary participant, or may transfer funds to
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another plan under the trust or to an ABLE account as permitted
under section 529(c)(3)(C) of the Internal Revenue Code .
The transfer shall be made and the property distributed in
accordance with rules adopted by the treasurer of state or with
the terms of the participation agreement.
Sec. 40. Section 12D.7, Code 2018, is amended to read as
follows:
12D.7 Effect of payments on determination of need and
eligibility for student financial aid.
A student loan program, student grant program, or other
program administered by any agency of the state, except as
may be otherwise provided by federal law or the provisions
of any specific grant applicable to that law, shall not take
into account and shall not consider amounts available for
the payment of higher education costs qualified education
expenses pursuant to the Iowa educational savings plan trust in
determining need and eligibility for student aid.
Sec. 41. Section 12D.9, subsection 1, paragraph a, Code
2018, is amended to read as follows:
a. Pursuant to section 12D.3, subsection 1 , paragraph “a” ,
a participant may make contributions to an account which is
established for the purpose of meeting the qualified higher
education expenses of the designated beneficiary of the
account.
Sec. 42. Section 422.7, subsection 32, paragraph c, Code
2018, is amended by striking the paragraph and inserting in
lieu thereof the following:
c. (1) Add, to the extent previously deducted as a
contribution to the trust, the amount resulting from a
withdrawal or transfer made by the taxpayer from the Iowa
educational savings plan trust for purposes other than any of
the following:
(a) The payment of qualified higher education expenses.
(b) The payment of tuition to an elementary or secondary
school if the tuition amounts are qualified education expenses.
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(c) A change in beneficiaries under, or transfer to another
account within, the Iowa educational savings plan trust, or a
transfer to the Iowa ABLE savings plan trust, provided such
change or transfer is permitted under section 12D.6, subsection
5.
(2) For purposes of this paragraph:
(a) “Elementary or secondary school” means an elementary
or secondary school in this state which is accredited under
section 256.11, and adheres to the provisions of the federal
Civil Rights Act of 1964 and chapter 216.
(b) “Institution of higher education” and “tuition” all mean
the same as defined in section 12D.1, subsection 2.
(c) (i) “Qualified higher education expenses” means the same
as defined in section 529(e)(3) of the Internal Revenue Code.
(ii) For purposes of this subparagraph division (c),
“Internal Revenue Code” means the Internal Revenue Code of
1954, prior to the date of its redesignation as the Internal
Revenue Code of 1986 by the Tax Reform Act of 1986, or means
the Internal Revenue Code of 1986 as amended and in effect on
January 1, 2018. This definition shall not be construed to
include any amendment to the Internal Revenue Code enacted
after the date specified in the preceding sentence, including
any amendment with retroactive applicability or effectiveness.
Sec. 43. Section 422.7, subsection 34, Code 2018, is amended
to read as follows:
34. a. (1) Subtract the amount contributed during the tax
year on behalf of a designated beneficiary that is a resident
of this state to the Iowa ABLE savings plan trust or to the
qualified ABLE program with which the state has contracted
pursuant to section 12I.10 , not to exceed the maximum
contribution level established in section 12I.3, subsection 1 ,
paragraph “d” , or section 12I.10, subsection 2 , paragraph “a” ,
as applicable.
(2) This paragraph “a” shall not apply to any amount
of contribution that represents a transfer from the Iowa
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educational savings plan trust created in chapter 12D that
meets the requirements of subsection 32, paragraph “c” ,
subparagraph (1), subparagraph division (c), and that was
previously deducted as a contribution to the Iowa educational
savings plan trust.
b. Add the amount resulting from the cancellation of a
participation agreement refunded to the taxpayer as an account
owner in the Iowa ABLE savings plan trust or the qualified
ABLE program with which the state has contracted pursuant to
section 12I.10 to the extent previously deducted pursuant
to this subsection by the taxpayer or any other person as a
contribution to the trust or qualified ABLE program , or to the
extent the amount was previously deducted by the taxpayer or
any other person pursuant to subsection 32, paragraph “a” , and
qualified as a transfer under paragraph “a” , subparagraph (2),
of this subsection .
c. Add the amount resulting from a withdrawal made by a
taxpayer from the Iowa ABLE savings plan trust or the qualified
ABLE program with which the state has contracted pursuant to
section 12I.10 for purposes other than the payment of qualified
disability expenses to the extent previously deducted pursuant
to this subsection by the taxpayer or any other person as a
contribution to the trust or qualified ABLE program , or to the
extent the amount was previously deducted by the taxpayer or
any other person pursuant to subsection 32, paragraph “a” , and
qualified as a transfer under paragraph “a” , subparagraph (2),
of this subsection .
Sec. 44. Section 627.6, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 17. The debtor’s interest, whether as
participant or beneficiary, in contributions and assets,
including the accumulated earnings and market increases in
value, held in an account in the Iowa educational savings plan
trust organized under chapter 12D.
Sec. 45. EFFECTIVE DATE. This division of this Act, being
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deemed of immediate importance, takes effect upon enactment.
Sec. 46. RETROACTIVE APPLICABILITY.
1. Except as provided in subsection 2, this division of this
Act applies retroactively to January 1, 2018, for withdrawals
from the Iowa educational savings plan trust made on or after
that date.
2. The sections of this division of this Act amending
section 422.7 apply retroactively to January 1, 2018, for tax
years beginning on or after that date, and for withdrawals from
the Iowa educational savings plan trust made on or after that
date.
DIVISION IV
SALES AND USE TAXES
Sec. 47. Section 15J.4, subsection 3, paragraph f, Code
2018, is amended to read as follows:
f. The total aggregate amount of state sales tax revenues
and state hotel and motel tax revenues that may be approved by
the board for remittance to all municipalities and that may
be transferred to the state reinvestment district fund under
section 423.2, subsection 11 , 423.2A or section 423A.6 , and
remitted to all municipalities having a reinvestment district
under this chapter shall not exceed one hundred million
dollars.
Sec. 48. Section 15J.5, subsection 1, paragraph a, Code
2018, is amended to read as follows:
a. The department shall calculate quarterly the amount of
new state sales tax revenues for each district established in
the state to be deposited in the state reinvestment district
fund created in section 15J.6 , pursuant to section 423.2,
subsection 11 , paragraph “b” 423.2A, subsection 2 , subject to
remittance limitations established by the board pursuant to
section 15J.4, subsection 3 .
Sec. 49. Section 15J.6, subsection 1, Code 2018, is amended
to read as follows:
1. A state reinvestment district fund is established in the
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state treasury under the control of the department consisting
of the new state sales tax revenues collected within each
district and deposited in the fund pursuant to section 423.2,
subsection 11 , paragraph “b” 423.2A, subsection 2 , and the
new state hotel and motel tax revenues collected within each
district and deposited in the fund pursuant to section 423A.6 .
Moneys deposited in the fund are appropriated to the department
for the purposes of this section . Moneys in the fund shall
only be used for the purposes of this section .
Sec. 50. Section 418.11, subsection 1, Code 2018, is amended
to read as follows:
1. The department of revenue shall calculate quarterly the
amount of increased sales tax revenues for each governmental
entity approved to use sales tax increment revenues and the
amount of such revenues to be transferred to the sales tax
increment fund pursuant to section 423.2, subsection 11 ,
paragraph “b” 423.2A, subsection 2 .
Sec. 51. Section 418.12, subsection 1, Code 2018, is amended
to read as follows:
1. A sales tax increment fund is established as a separate
and distinct fund in the state treasury under the control of
the department of revenue consisting of the amount of the
increased state sales and services tax revenues collected by
the department of revenue within each applicable area specified
in section 418.11, subsection 3 , and deposited in the fund
pursuant to section 423.2, subsection 11 , paragraph “b” 423.2A,
subsection 2 . Moneys deposited in the fund are appropriated
to the department of revenue for the purposes of this section .
Moneys in the fund shall only be used for the purposes of this
section .
Sec. 52. Section 421.26, Code 2018, is amended to read as
follows:
421.26 Personal liability for tax due.
If a licensee or other person under section 452A.65 , a
retailer or purchaser under chapter 423A , 423B , or 423E , or
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section sections 423.14, 423.14A, 423.29, 423.31 , 423.32, or
423.33 , or a retailer or purchaser under section 423.32 , or
a user under section 423.34 , or a permit holder or licensee
under section 453A.13 , 453A.16 , or 453A.44 fails to pay a tax
under those sections when due, an officer of a corporation
or association, notwithstanding section 489.304 , a member or
manager of a limited liability company, or a partner of a
partnership, having control or supervision of or the authority
for remitting the tax payments and having a substantial legal
or equitable interest in the ownership of the corporation,
association, limited liability company, or partnership, who has
intentionally failed to pay the tax is personally liable for
the payment of the tax, interest, and penalty due and unpaid.
However, this section shall not apply to taxes on accounts
receivable. The dissolution of a corporation, association,
limited liability company, or partnership shall not discharge a
person’s liability for failure to remit the tax due.
Sec. 53. Section 423.1, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 22A. “Information services” means every
activity, process, or function by which a seller accumulates,
prepares, organizes, conveys, analyzes, or delivers data,
facts, knowledge, procedures, information, and other similar
services to a purchaser through any tangible, intangible,
or electronic medium. Information accumulated, prepared,
or organized for a purchaser is an information service even
though it may incorporate preexisting components of data or
other information. “Information services” includes but is not
limited to database files, research information, genealogical
information, and other similar services.
Sec. 54. Section 423.1, subsection 24, paragraph a, Code
2018, is amended to read as follows:
a. “Lease or rental” means any transfer of possession
or control of , or access to, tangible personal property or
specified digital products for a fixed or indeterminate term
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for consideration. A “lease or rental” may include future
options to purchase or extend.
Sec. 55. Section 423.1, subsection 37, Code 2018, is amended
to read as follows:
37. “Place of business” means any warehouse, store,
place, office, building, or structure where goods, wares, or
merchandise tangible personal property, specified digital
products, or services are offered for sale at retail or where
any taxable amusement is conducted, or each office where gas,
water, heat, communication, or electric services are offered
for sale at retail. When a retailer or amusement operator
sells merchandise by means of vending machines or operates
music or amusement devices by coin-operated machines at more
than one location within the state, the office, building, or
place where the books, papers, and records of the taxpayer are
kept shall be deemed to be the taxpayer’s place of business.
Sec. 56. Section 423.1, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 36A. “Personal property” includes but is
not limited to tangible personal property and specified digital
products.
Sec. 57. Section 423.1, subsection 43, paragraph a,
subparagraph (3), Code 2018, is amended to read as follows:
(3) Taking possession or making first use of digital goods
specified digital products , whichever comes first.
Sec. 58. Section 423.1, subsection 47, Code 2018, is amended
to read as follows:
47. “Retailer” means and includes every person engaged
in the business of selling tangible personal property ,
specified digital products, or taxable services at retail, or
the furnishing of gas, electricity, water, or communication
service, and tickets or admissions to places of amusement
and athletic events or operating amusement devices or other
forms of commercial amusement from which revenues are derived.
However, when in the opinion of the director it is necessary
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for the efficient administration of this chapter to regard
any salespersons, representatives, truckers, peddlers, or
canvassers as agents of the dealers, distributors, supervisors,
employers, or persons under whom they operate or from whom
they obtain tangible personal property , services, or specified
digital products sold by them irrespective of whether or not
they are making sales on their own behalf or on behalf of such
dealers, distributors, supervisors, employers, or persons,
the director may so regard them, and may regard such dealers,
distributors, supervisors, employers, or persons as retailers
for the purposes of this chapter . “Retailer” includes a seller
obligated to collect sales or use tax , including any person
obligated to collect sales and use tax pursuant to section
423.14A .
Sec. 59. Section 423.1, subsection 48, paragraph a, Code
2018, is amended to read as follows:
a. “Retailer maintaining a place of business in this state”
or any like term includes any of the following:
(1) A retailer having or maintaining within this state,
directly or by a subsidiary, an office, distribution house,
sales house, warehouse, or other place of business, or any
representative operating within this state under the authority
of the retailer or its subsidiary, irrespective of whether that
place of business or representative is located here permanently
or temporarily, or whether the retailer or subsidiary is
admitted to do business within this state pursuant to chapter
490 .
(2) A person obligated to collect sales and use tax pursuant
to section 423.14A.
Sec. 60. Section 423.1, subsection 48, paragraph b,
subparagraph (1), unnumbered paragraph 1, Code 2018, is amended
to read as follows:
A retailer shall be presumed to be maintaining a place of
business in this state , as defined in for purposes of paragraph
“a” , subparagraph (1), if any person that has substantial nexus
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in this state, other than a person acting in its capacity as a
common carrier, does any of the following:
Sec. 61. Section 423.1, subsection 48, paragraph b,
subparagraph (1), subparagraph division (b), Code 2018, is
amended to read as follows:
(b) Maintains an office, distribution facility, warehouse,
storage place, or similar place of business in this state to
facilitate the delivery of personal property or services sold
by the retailer to the retailer’s customers.
Sec. 62. Section 423.1, subsection 50, Code 2018, is amended
to read as follows:
50. “Sales” or “sale” means any transfer, exchange, or
barter, conditional or otherwise, in any manner or by any means
whatsoever, for consideration , including but not limited to any
such transfer, exchange, or barter on a subscription basis .
Sec. 63. Section 423.1, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 55A. “Sold at retail in the state” and
other references to sales “in the state” or “in this state”
includes but is not limited to sales sourced to this state
under this chapter.
Sec. 64. Section 423.1, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 55B. a. “Specified digital products” means
electronically transferred digital audio-visual works, digital
audio works, digital books, or other digital products.
b. For purposes of this subsection:
(1) “Digital audio-visual works” means a series of related
images which, when shown in succession, impart an impression of
motion, together with accompanying sounds, if any.
(2) “Digital audio works” means works that result from
the fixation of a series of musical, spoken, or other sounds,
including but not limited to ringtones. For purposes of this
subparagraph, “ringtones” means digitized sound files that are
downloaded onto a device and that may be used to alert the
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customer with respect to a communication.
(3) “Digital books” means works that are generally
recognized in the ordinary and usual sense as books.
(4) “Electronically transferred” means obtained or accessed
by the purchaser by means other than tangible storage media,
including but not limited to a specified digital product
purchased through a computer software application, commonly
referred to as an in-app purchase, or through another specified
digital product, or through any other means.
(5) “Other digital products” means greeting cards, images,
video or electronic games or entertainment, news or information
products, and computer software applications.
Sec. 65. Section 423.1, Code 2018, is amended by adding the
following new subsection:
NEW SUBSECTION . 57A. “Subscription” means any arrangement
in which a person has the right or ability to access,
receive, use, obtain, purchase, or otherwise acquire tangible
personal property, specified digital products, or services
on a permanent or less than permanent basis, regardless of
whether the person actually accesses, receives, uses, obtains,
purchases, or otherwise acquires such tangible personal
property, specified digital product, or service.
Sec. 66. Section 423.1, subsections 62, 63, and 64, Code
2018, are amended to read as follows:
62. “Use” means and includes the exercise by any person of
any right or power over or access to tangible personal property
or a specified digital product incident to the ownership of
that property , or any right or power over or access to the
product or result of a service . A retailer’s or building
contractor’s sale of manufactured housing for use in this
state, whether in the form of tangible personal property or
of realty, is a use of that property for the purposes of this
chapter .
63. “Use tax” means the tax levied under subchapter III of
this chapter for which the retailer collects and remits tax to
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the department .
64. “User” means the immediate recipient of the personal
property or services who is entitled to exercise a right of or
power over or access to the personal property, or the product
or result of such services.
Sec. 67. Section 423.2, subsection 1, paragraph a,
subparagraph (1), Code 2018, is amended to read as follows:
(1) Sales of engraving, photography, retouching, printing,
and binding services.
Sec. 68. Section 423.2, subsection 6, Code 2018, is amended
to read as follows:
6. a. The sales price of any of the following enumerated
services is subject to the tax imposed by subsection 5 :
a. alteration Alteration and garment repair ; armored .
b. Armored car ; vehicle .
c. Vehicle repair ; battery .
d. Battery , tire, and allied ; investment .
e. Investment counseling ; service .
f. Service charges of all financial institutions ; barber .
For the purposes of this paragraph, “financial institutions”
means all national banks, federally chartered savings and loan
associations, federally chartered savings banks, federally
chartered credit unions, banks organized under chapter 524,
credit unions organized under chapter 533, and all banks,
savings banks, credit unions, and savings and loan associations
chartered or otherwise created under the laws of any state and
doing business in Iowa.
g. Barber and beauty ; boat .
h. Boat repair ; vehicle .
i. Vehicle wash and wax ; campgrounds; carpentry; roof .
j. Campgrounds.
k. Carpentry.
l. Roof , shingle, and glass repair ; dance .
m. Dance schools and dance studios ; dating .
n. Dating services ; dry .
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o. Dry cleaning, pressing, dyeing, and laundering excluding
the use of self-pay washers and dryers ; electrical .
p. Electrical and electronic repair and installation ;
excavating .
q. Excavating and grading ; farm .
r. Farm implement repair of all kinds ; flying .
s. Flying service ; furniture .
t. Furniture , rug, carpet, and upholstery repair and
cleaning ; fur .
u. Fur storage and repair ; golf .
v. Golf and country clubs and all commercial recreation ;
gun .
w. Gun and camera repair ; house .
x. House and building moving ; household .
y. Household appliance, television, and radio repair ;
janitorial .
z. Janitorial and building maintenance or cleaning ; jewelry .
aa. Jewelry and watch repair ; lawn .
ab. Lawn care, landscaping, and tree trimming and removal ; .
ac. Personal transportation service, including but not
limited to taxis, driver service, ride sharing service, rides
for hire, and limousine service , including driver; machine .
ad. Machine operator ; machine .
ae. Machine repair of all kinds ; motor .
af. Motor repair ; motorcycle .
ag. Motorcycle , scooter, and bicycle repair ; oilers .
ah. Oilers and lubricators ; office .
ai. Office and business machine repair ; painting .
aj. Painting , papering, and interior decorating ; parking .
ak. Parking facilities ; pay .
al. Pay television ; pet , including but not limited to
streaming video, video on-demand, and pay-per-view.
am. Pet grooming ; pipe .
an. Pipe fitting and plumbing ; wood .
ao. Wood preparation ; executive .
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ap. Executive search agencies ; private .
aq. Private employment agencies, excluding services for
placing a person in employment where the principal place of
employment of that person is to be located outside of the
state ; reflexology; security .
ar. Reflexology.
as. Security and detective services, excluding private
security and detective services furnished by a peace officer
with the knowledge and consent of the chief executive officer
of the peace officer’s law enforcement agency ; sewage .
at. Sewage services for nonresidential commercial
operations ; sewing .
au. Sewing and stitching ; shoe .
av. Shoe repair and shoeshine ; sign .
aw. Sign construction and installation ; storage .
ax. Storage of household goods, mini-storage, and
warehousing of raw agricultural products ; swimming .
ay. Swimming pool cleaning and maintenance ; tanning .
az. Tanning beds or salons ; taxidermy .
ba. Taxidermy services ; telephone .
bb. Telephone answering service ; test .
bc. Test laboratories, including mobile testing laboratories
and field testing by testing laboratories, and excluding tests
on humans or animals and excluding environmental testing
services ; termite .
bd. Termite , bug, roach, and pest eradicators ; tin .
be. Tin and sheet metal repair ; transportation .
bf. Transportation service consisting of the rental of
recreational vehicles or recreational boats, or the rental of
vehicles subject to registration which are registered for a
gross weight of thirteen tons or less for a period of sixty
days or less, or the rental of aircraft for a period of sixty
days or less ; .
bg. Turkish baths, massage, and reducing salons, excluding
services provided by massage therapists licensed under chapter
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152C ; water .
bh. Water conditioning and softening ; weighing; welding;
well .
bi. Weighing.
bj. Welding.
bk. Well drilling ; wrapping .
bl. Wrapping , packing, and packaging of merchandise other
than processed meat, fish, fowl, and vegetables ; wrecking .
bm. Wrecking service ; wrecker .
bn. Wrecker and towing.
b. For the purposes of this subsection , “financial
institutions” means all national banks, federally chartered
savings and loan associations, federally chartered savings
banks, federally chartered credit unions, banks organized under
chapter 524 , credit unions organized under chapter 533 , and
all banks, savings banks, credit unions, and savings and loan
associations chartered or otherwise created under the laws of
any state and doing business in Iowa.
bo. Photography.
bp. Retouching.
bq. Storage of tangible or electronic files, documents, or
other records.
br. Information services.
bs. Services arising from or related to installing,
maintaining, servicing, repairing, operating, upgrading, or
enhancing specified digital products.
bt. Video game services and tournaments.
bu. Software as a service.
Sec. 69. Section 423.2, subsection 8, Code 2018, is amended
by adding the following new paragraph:
NEW PARAGRAPH . d. A transaction that otherwise meets
the definition of “bundled transaction” as defined in this
subsection is not a bundled transaction if it is any of the
following:
(1) The retail sale of tangible personal property and a
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service where the tangible personal property is essential
to the use of the service, and is provided exclusively in
connection with the service, and the true object of the
transaction is the service.
(2) The retail sale of services where one service is
provided that is essential to the use or receipt of a second
service and the first service is provided exclusively in
connection with the second service and the true object of the
transaction is the second service.
(3) (a) A transaction that includes taxable products and
nontaxable products and the purchase price or sales price of
the taxable products is de minimis.
(b) For purposes of this subparagraph, “de minimis” means
the seller’s purchase or sales price of the taxable products
is ten percent or less of the total purchase price or sales
price of the bundled products. Sellers shall use either the
purchase price or the sale price of the products to determine
if the taxable products are de minimis. Sellers may not use
a combination of the purchase price and sales price of the
products to determine if the taxable products are de minimis.
(4) The retail sale of exempt tangible personal property and
taxable tangible personal property where all of the following
apply:
(a) The transaction includes food and food ingredients,
drugs, durable medical equipment, mobility enhancing equipment,
prosthetic devices, or medical supplies.
(b) The seller’s purchase price or sales price of the
taxable tangible personal property is fifty percent or less
of the total purchase price or sales price of the bundled
tangible personal property. Sellers may not use a combination
of the purchase price and sales price of the tangible personal
property when making the fifty percent determination for a
transaction.
Sec. 70. Section 423.2, Code 2018, is amended by adding the
following new subsection:
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NEW SUBSECTION . 9A. a. A tax of six percent is imposed on
the sales price of specified digital products sold at retail
in the state. The tax applies whether the purchaser obtains
permanent use or less than permanent use of the specified
digital product, whether the sale is conditioned or not
conditioned upon continued payment from the purchaser, and
whether the sale is on a subscription basis or is not on a
subscription basis.
b. The sale of a digital code that may be used to obtain
or access a specified digital product shall be taxed in the
same manner as the specified digital product. For purposes
of this paragraph, “digital code” means a method that permits
a purchaser to obtain or access at a later date a specified
digital product.
Sec. 71. Section 423.2, subsections 10, 11, and 12, Code
2018, are amended by striking the subsections.
Sec. 72. NEW SECTION . 423.2A Deposit and transfer of
revenues.
1. a. All revenues arising under the operation of the
provisions of this subchapter II shall be deposited into the
general fund of the state.
b. Subsequent to the deposit into the general fund of
the state, the director shall credit an amount equal to the
product of the sales tax rate imposed in section 423.2 times
the sales price of the tangible personal property or services
furnished to purchasers at a baseball and softball complex that
has received an award under section 15F.207 and that meets
the qualifications of section 423.4, subsection 10, into the
baseball and softball complex sales tax rebate fund created
under section 423.4, subsection 10, paragraph “e” . The director
shall credit the moneys beginning the first day of the quarter
following July 1, 2016. This paragraph is repealed thirty
days following the date on which five million dollars in total
rebates have been provided under section 423.4, subsection 10.
2. Subsequent to the deposit into the general fund of the
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state pursuant to subsection 1, the department shall do the
following in the order prescribed:
a. Transfer the revenues collected under chapter 423B.
b. Transfer from the remaining revenues the amounts required
under Article VII, section 10, of the Constitution of the State
of Iowa to the natural resources and outdoor recreation trust
fund created in section 461.31, if applicable.
c. Transfer one-sixth of the remaining revenues to the
secure an advanced vision for education fund created in section
423F.2. This paragraph “c” is repealed December 31, 2029.
d. Transfer to the baseball and softball complex sales tax
rebate fund that portion of the sales tax receipts described
in subsection 1, paragraph “b” , remaining after the transfers
required under paragraphs “a” , “b” , and “c” of this subsection
2. This paragraph is repealed thirty days following the date
on which five million dollars in total rebates have been
provided under section 423.4, subsection 10.
e. Beginning the first day of the calendar quarter
beginning on the reinvestment district’s commencement date,
subject to remittance limitations established by the economic
development authority board pursuant to section 15J.4,
subsection 3, transfer to a district account created in the
state reinvestment district fund for each reinvestment district
established under chapter 15J, the amount of new state sales
tax revenue, determined in section 15J.5, subsection 1,
paragraph “b” , in the district, that remains after the prior
transfers required under this subsection 2. Such transfers
shall cease pursuant to section 15J.8.
f. Subject to the limitation on the calculation and
deposit of sales tax increment revenues in section 418.12,
beginning the first day of the quarter following adoption
of the resolution pursuant to section 418.4, subsection 3,
paragraph “d” , transfer to the account created in the sales tax
increment fund for each governmental entity approved to use
sales tax increment revenues under chapter 418, that portion
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of the increase in sales tax revenue, determined in section
418.11, subsection 2, paragraph “d” , in the applicable area of
the governmental entity, that remains after the other transfers
required under this subsection 2.
g. Beginning the first day of the quarter following July
1, 2014, transfer to the raceway facility tax rebate fund
created in section 423.4, subsection 11, paragraph “e” , that
portion of the sales tax receipts collected and remitted upon
sales of tangible personal property or services furnished by
retailers at a raceway facility meeting the qualifications of
section 423.4, subsection 11, that remains after the transfers
required in paragraphs “a” through “f” of this subsection
2. This subparagraph is repealed June 30, 2025, or thirty
days following the date on which an amount of total rebates
specified in section 423.4, subsection 11, paragraph “c” ,
subparagraph (4), subparagraph division (a) or (b), whichever
is applicable, has been provided or thirty days following the
date on which rebates cease as provided in section 423.4,
subsection 11, paragraph “c” , subparagraph (5), whichever is
earliest.
3. Of the amount of sales tax revenue actually transferred
per quarter pursuant to subsection 2, paragraphs “e” and “f” ,
the department shall retain an amount equal to the actual cost
of administering the transfers under subsection 2, paragraphs
“e” and “f” , or twenty-five thousand dollars, whichever is
less. The amount retained by the department pursuant to this
subsection shall be divided pro rata each quarter between
the amounts that would have been transferred pursuant to
subsection 2, paragraphs “e” and “f” , without the deduction
made by operation of this subsection. Revenues retained by
the department pursuant to this subsection shall be considered
repayment receipts as defined in section 8.2.
Sec. 73. Section 423.3, subsections 1 and 17, Code 2018, are
amended to read as follows:
1. The sales price from sales of tangible personal property ,
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specified digital products, and services furnished which this
state is prohibited from taxing under the Constitution or laws
of the United States or under the Constitution of this state.
17. The sales price of all goods, wares, or merchandise,
tangible personal property, specified digital products, or
services, used for educational purposes sold to any private
nonprofit educational institution in this state. For the
purpose of this subsection , “educational institution” means an
institution which primarily functions as a school, college,
or university with students, faculty, and an established
curriculum. The faculty of an educational institution must be
associated with the institution and the curriculum must include
basic courses which are offered every year. “Educational
institution” includes an institution primarily functioning as
a library.
Sec. 74. Section 423.3, subsection 18, unnumbered paragraph
1, Code 2018, is amended to read as follows:
The sales price of tangible personal property or specified
digital products sold, or of services furnished, to the
following nonprofit corporations:
Sec. 75. Section 423.3, subsections 20, 21, 22, 23, 26, 27,
28, and 31, Code 2018, are amended to read as follows:
20. The sales price of tangible personal property or
specified digital products sold, or of services furnished, to
nonprofit legal aid organizations.
21. The sales price of goods, wares, or merchandise,
tangible personal property, of specified digital products,
or of services, used for educational, scientific, historic
preservation, or aesthetic purpose sold to a nonprofit private
museum.
22. The sales price from sales of goods, wares, or
merchandise, tangible personal property, of specified digital
products, or from services furnished, to a nonprofit private
art center to be used in the operation of the art center.
23. The sales price of tangible personal property or
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specified digital products sold, or of services furnished, by a
fair organized under chapter 174 .
26. The sales price of tangible personal property or
specified digital products sold, or of services furnished, to a
statewide nonprofit organ procurement organization, as defined
in section 142C.2 .
27. The sales price of tangible personal property or
specified digital products sold, or of services furnished, to a
nonprofit hospital licensed pursuant to chapter 135B to be used
in the operation of the hospital.
28. The sales price of tangible personal property or
specified digital products sold, or of services furnished, to
a freestanding nonprofit hospice facility which operates a
hospice program as defined in 42 C.F.R. ch. IV, §418.3 , which
property or services are to be used in the hospice program.
31. a. The sales price of goods, wares, or merchandise
tangible personal property or specified digital products sold
to and of services furnished, and used for public purposes
sold to a tax-certifying or tax-levying body of the state or
a governmental subdivision of the state, including regional
transit systems, as defined in section 324A.1 , the state board
of regents, department of human services, state department of
transportation, any municipally owned solid waste facility
which sells all or part of its processed waste as fuel to a
municipally owned public utility, and all divisions, boards,
commissions, agencies, or instrumentalities of state, federal,
county, or municipal government which have no earnings going to
the benefit of an equity investor or stockholder, except any
of the following:
(1) a. The sales price of goods, wares, or merchandise
tangible personal property or specified digital products sold
to, or of services furnished, and used by or in connection with
the operation of any municipally owned public utility engaged
in selling gas, electricity, heat, pay television service, or
communication service to the general public.
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(2) b. The sales price of furnishing of sewage services to
a county or municipality on behalf of nonresidential commercial
operations.
(3) c. The furnishing of solid waste collection and
disposal service to a county or municipality on behalf of
nonresidential commercial operations located within the county
or municipality.
b. The exemption provided by this subsection shall also
apply to all such sales of goods, wares, or merchandise or of
services furnished and subject to use tax.
Sec. 76. Section 423.3, subsection 32, unnumbered paragraph
1, Code 2018, is amended to read as follows:
The sales price of tangible personal property or specified
digital products sold, or of services furnished, by a county or
city. This exemption does not apply to any of the following:
Sec. 77. Section 423.3, subsection 36, unnumbered paragraph
1, Code 2018, is amended to read as follows:
The sales price from sales of tangible personal property
or specified digital products or of the sale or furnishing of
electrical energy, natural or artificial gas, or communication
service to another state or political subdivision of another
state if the other state provides a similar reciprocal
exemption for this state and political subdivision of this
state.
Sec. 78. Section 423.3, subsection 39, paragraph a,
subparagraphs (1) and (2), Code 2018, are amended to read as
follows:
(1) Sales of tangible personal property or specified
digital products , or the furnishing of services, of a
nonrecurring nature, by the owner, if the seller, at the time
of the sale, is not engaged for profit in the business of
selling tangible personal property , specified digital products,
or services taxed under section 423.2 .
(2) The sale of all or substantially all of the tangible
personal property , or specified digital products, or services
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held or used by a seller in the course of the seller’s trade or
business for which the seller is required to hold a sales tax
permit when the seller sells or otherwise transfers the trade
or business to another person who shall engage in a similar
trade or business.
Sec. 79. Section 423.3, subsection 63, Code 2018, is amended
to read as follows:
63. The sales price from the sale of tangible personal
property , specified digital products, or services which will be
given as prizes to players in games of skill, games of chance,
raffles, and bingo games as defined in chapter 99B .
Sec. 80. Section 423.3, subsections 65, 66, and 67, Code
2018, are amended by striking the subsections.
Sec. 81. Section 423.3, subsection 78, paragraph a,
unnumbered paragraph 1, Code 2018, is amended to read as
follows:
The sales price from sales or rental the sale of tangible
personal property, specified digital products, or services
rendered by any entity where the profits from the sales or
rental sale of the tangible personal property, specified
digital products, or services rendered, are used by or donated
to a nonprofit entity that is exempt from federal income
taxation pursuant to section 501(c)(3) of the Internal Revenue
Code, a government entity, or a nonprofit private educational
institution, and where the entire proceeds from the sales,
rental, sale or services are expended for any of the following
purposes:
Sec. 82. Section 423.3, subsection 79, Code 2018, is amended
to read as follows:
79. The sales price from the sale or rental of tangible
personal property or specified digital products, or from
services furnished , to a recognized community action agency as
provided in section 216A.93 to be used for the purposes of the
agency.
Sec. 83. Section 423.3, Code 2018, is amended by adding the
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following new subsections:
NEW SUBSECTION . 103. a. The sales price of specified
digital products sold, and of enumerated services described in
section 423.2, subsection 6, paragraphs “bq” , “br” , “bs” , and
“bu” furnished, to a commercial enterprise for use exclusively
by the commercial enterprise. The use of a specified digital
product or service fails to qualify as a use exclusively by the
commercial enterprise if its use for noncommercial purposes is
more than de minimis.
b. For purposes of this subsection:
(1) “Commercial enterprise” means the same as defined in
section 423.3, subsection 47, paragraph “d” , subparagraph (1).
(2) “De minimis” and “noncommercial purposes” shall be
defined by the director by rule.
NEW SUBSECTION . 104. The sales price of specified digital
products sold to a non-end user. For purposes of this
subsection, “non-end user” means a person who receives by
contract a specified digital product for further commercial
broadcast, rebroadcast, transmission, retransmission,
licensing, relicensing, distribution, redistribution, or
exhibition of the product, in whole or in part, to another
person.
Sec. 84. Section 423.4, subsection 3, unnumbered paragraph
1, Code 2018, is amended to read as follows:
A relief agency may apply to the director for refund of the
amount of sales or use tax imposed and paid upon sales to it
of any goods, wares, merchandise, tangible personal property
or specified digital products, or services furnished, used for
free distribution to the poor and needy.
Sec. 85. Section 423.4, subsection 3, paragraph a,
subparagraph (1), Code 2018, is amended to read as follows:
(1) On forms furnished by the department, and filed within
the time as the director shall provide by rule, the relief
agency shall report to the department the total amount or
amounts, valued in money, expended directly or indirectly
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for goods, wares, merchandise, tangible personal property or
specified digital products, or services furnished, used for
free distribution to the poor and needy.
Sec. 86. Section 423.4, subsection 10, paragraph e, Code
2018, is amended to read as follows:
e. There is established within the state treasury under the
control of the department a baseball and softball complex sales
tax rebate fund consisting of the amount of state sales tax
revenues transferred pursuant to section 423.2, subsection 11 ,
paragraph “b” , subparagraph (4) 423.2A, subsection 2, paragraph
“d” . An account is created within the fund for each baseball
and softball complex receiving an award under section 15F.207
and meeting the qualifications of this subsection . Moneys
in the fund shall only be used to provide rebates of state
sales tax pursuant to this subsection , and only the state sales
tax revenues in the baseball and softball complex rebate fund
are subject to rebate under this subsection . The amount of
rebates paid from each baseball and softball complex’s account
within the fund shall not exceed the amount of the award under
section 15F.207 , and not more than five million dollars in
total rebates shall be paid from the fund. Any moneys in the
fund which represent state sales tax revenue for which the time
period in paragraph “c” for receiving a rebate has expired,
or which otherwise represent state sales tax revenue that has
become ineligible for rebate pursuant to this subsection , shall
immediately revert to the general fund of this state.
Sec. 87. Section 423.4, subsection 11, paragraph b,
subparagraph (1), Code 2018, is amended to read as follows:
(1) Sales tax imposed and collected by retailers upon
sales of tangible personal property or services furnished to
purchasers at the raceway facility. Notwithstanding the state
sales tax imposed in section 423.2 , a sales tax rebate issued
pursuant to this subparagraph shall not exceed the amounts
transferred to the raceway facility tax rebate fund pursuant to
section 423.2, subsection 11 , paragraph “b” , subparagraph (7)
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423.2A, subsection 2, paragraph “g” .
Sec. 88. Section 423.4, subsection 11, paragraph b,
subparagraph (2), subparagraph division (c), Code 2018, is
amended to read as follows:
(c) Notwithstanding the state sales tax imposed in section
423.2 , a sales tax rebate issued pursuant to this subparagraph
shall not exceed the amounts remaining after the transfers
required under section 423.2, subsection 11 , paragraph “b” ,
subparagraphs (1) through (6) 423.2A, subsection 2, paragraphs
“a” through “f” , have been made from the total amount of sales
tax for which the rebate is requested.
Sec. 89. Section 423.4, subsection 11, paragraph e, Code
2018, is amended to read as follows:
e. There is established within the state treasury under
the control of the department a raceway facility tax rebate
fund consisting of the amount of state sales tax revenues
transferred pursuant to section 423.2, subsection 11 , paragraph
“b” , subparagraph (7) 423.2A, subsection 2, paragraph “g” . An
account is created within the fund for each raceway facility
meeting the qualifications of this subsection . Moneys in the
fund shall only be used to provide rebates of state sales tax
pursuant to paragraph “b” , subparagraph (1). The total amount
of rebates paid from the fund shall not exceed the amount
specified in paragraph “c” , subparagraph (4), subparagraph
division (a) or (b), whichever is applicable. Any moneys in
the fund which represent state sales tax revenue for which the
time period in paragraph “c” for receiving a rebate has expired,
or which otherwise represent state sales tax revenue that has
become ineligible for rebate pursuant to this subsection shall
immediately revert to the general fund of the state.
Sec. 90. Section 423.5, subsection 1, paragraph a, Code
2018, is amended to read as follows:
a. The use in this state of tangible personal property
as defined in section 423.1 , including aircraft subject to
registration under section 328.20 , purchased for use in this
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state. For the purposes of this subchapter , the furnishing
or use of the following services is also treated as the use
of tangible personal property: optional service or warranty
contracts, except residential service contracts regulated under
chapter 523C , vulcanizing, recapping, or retreading services,
engraving, photography, retouching, printing, or binding
services, and communication service when furnished or delivered
to consumers or users within this state.
Sec. 91. Section 423.5, subsection 1, paragraph d, Code
2018, is amended to read as follows:
d. Purchases of tangible personal property or specified
digital products made from the government of the United States
or any of its agencies by ultimate consumers shall be subject
to the tax imposed by this section . Services purchased from
the same source or sources shall be subject to the service
tax imposed by this subchapter and apply to the user of the
services.
Sec. 92. Section 423.5, subsection 1, Code 2018, is amended
by adding the following new paragraph:
NEW PARAGRAPH . f. (1) The use in this state of specified
digital products. The tax applies whether the purchaser
obtains permanent use or less than permanent use of the
specified digital product, whether the use is conditioned or
not conditioned upon continued payment from the purchaser,
and whether the use is on a subscription basis or is not on a
subscription basis.
(2) The use of a digital code that may be used to obtain
or access a specified digital product shall be taxed in the
same manner as the specified digital product. For purposes of
this subparagraph, “digital code” means the same as defined in
section 423.2, subsection 9A.
Sec. 93. Section 423.5, subsection 3, Code 2018, is amended
to read as follows:
3. For the purpose of the proper administration of the use
tax and to prevent its evasion, evidence that tangible personal
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property was or specified digital products were sold by any
person for delivery in this state shall be prima facie evidence
that such tangible personal property was or specified digital
products were sold for use in this state.
Sec. 94. Section 423.5, subsection 4, Code 2018, is amended
by striking the subsection.
Sec. 95. Section 423.6, unnumbered paragraph 1, Code 2018,
is amended to read as follows:
The use in this state of the following tangible personal
property , specified digital products, and services is exempted
from the tax imposed by this subchapter :
Sec. 96. Section 423.6, subsections 1, 2, 4, and 6, Code
2018, are amended to read as follows:
1. Tangible personal property , specified digital products,
and enumerated services, the sales price from the sale of which
are required to be included in the measure of the sales tax, if
that tax has been paid to the department or the retailer. This
exemption does not include vehicles subject to registration or
subject only to the issuance of a certificate of title.
2. The sale of tangible personal property , specified
digital products, or the furnishing of services in the regular
course of business.
4. All articles of tangible personal property and all
specified digital products brought into the state of Iowa by a
nonresident individual for the individual’s use or enjoyment
while within the state.
6. Tangible personal property , specified digital products,
or services the sales price of which is exempt from the sales
tax under section 423.3 , except section 423.3, subsections 39
and 73 , as it relates to the sale, but not the lease or rental,
of vehicles subject only to the issuance of a certificate of
title and as it relates to aircraft subject to registration
under section 328.20 .
Sec. 97. Section 423.14, subsection 2, paragraphs b and c,
Code 2018, are amended to read as follows:
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b. The tax upon the use of all tangible personal property
and specified digital products other than that enumerated in
paragraph “a” , which is sold by a seller who is a retailer
maintaining a place of business in this state, or by such other
retailer or agent as the director shall authorize pursuant to
section 423.30 or its agent that is not otherwise required
to collect sales tax under the provisions of this chapter ,
shall be collected by the retailer or agent and remitted to the
department, pursuant to the provisions of paragraph “e” , and
sections 423.24 , 423.29 , 423.30 , 423.32 , and 423.33 .
c. The tax upon the use of all tangible personal property
and specified digital products not paid pursuant to paragraphs
“a” and “b” shall be paid to the department directly by any
person using the property within this state, pursuant to the
provisions of section 423.34 .
Sec. 98. NEW SECTION . 423.14A Persons required to collect
sales and use tax —— supplemental conditions, requirements, and
responsibilities.
1. For purposes of this section, “Iowa sales” means sales
of tangible personal property, services, or specified digital
products sourced to this state pursuant to section 423.15,
423.16, 423.17, 423.19, or 423.20, or that are otherwise sold
in this state or for delivery into this state.
2. In addition to and not in lieu of any application of
this chapter to sellers who are retailers and sellers who are
retailers maintaining a place of business in this state, any
person described in subsection 3, or the person’s agents,
shall be considered a retailer in this state and a retailer
maintaining a place of business in this state for purposes of
this chapter on or after January 1, 2019, and shall be subject
to all requirements of this chapter imposed on retailers and
retailers maintaining a place of business in this state,
including but not limited to the requirement to collect and
remit sales and use taxes pursuant to sections 423.14 and
423.29, and local option taxes under chapter 423B.
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3. a. A retailer that has gross revenue from Iowa sales
equal to or exceeding one hundred thousand dollars for the
immediately preceding calendar year or the current calendar
year.
b. A retailer that makes Iowa sales in two hundred or more
separate transactions for the immediately preceding calendar
year or the current calendar year.
c. (1) A retailer that owns, licenses, or uses software
or data files that are installed or stored on property used
in this state. For purposes of this subparagraph, “software
or data files” include but are not limited to software that is
affirmatively downloaded by a user, software that is downloaded
as a result of the use of a website, preloaded software, and
cookies.
(2) A retailer that uses in-state software to make Iowa
sales. For purposes of this subparagraph, “in-state software”
means computer software that is stored on property located in
this state or that is distributed within this state for the
purpose of facilitating a sale by the retailer.
(3) A retailer that provides, or enters into an agreement
with another person to provide, a content distribution network
in this state to facilitate, accelerate, or enhance the
delivery of the retailer’s internet site to purchasers. For
purposes of this subparagraph, “content distribution network”
means a system of distributed servers that deliver internet
sites and other internet content to a user based on the
geographic location of the user, the origin of the internet
site or internet content, and a content delivery server.
(4) This paragraph “c” shall not apply to a retailer that
has gross revenue from Iowa sales of less than one hundred
thousand dollars for the immediately preceding calendar year
or the current calendar year.
d. (1) A retailer that makes Iowa sales through a
marketplace provider. This subparagraph shall not apply to a
retailer that has gross revenue from Iowa sales of less than
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ten thousand dollars for the immediately preceding calendar
year or the current calendar year.
(2) A marketplace provider that makes or facilitates Iowa
sales for one or more retailers equal to or exceeding one
hundred thousand dollars, or in two hundred or more separate
transactions, for the immediately preceding calendar year or
the current calendar year.
(3) Retailers and marketplace providers subject to this
paragraph may enter into agreements regarding the fulfillment
of the requirements of this chapter.
(4) A marketplace provider shall collect sales and use tax
on the entire sales price or purchase price paid by a purchaser
on each Iowa sale made or facilitated by the marketplace
provider that is subject to sales and use tax, regardless of
the amount of the sales price or purchase price that will
ultimately accrue to or benefit the marketplace provider,
another retailer, or any other person. This sales and use tax
collection responsibility of a marketplace provider applies but
shall not be limited to sales facilitated through a computer
software application, commonly referred to as in-app purchases,
or through a specified digital product.
(5) If a retail sale subject to the sales and use tax
involves both a marketplace provider and another retailer
that is required to collect and remit sales and use tax,
the marketplace provider and any other retailer involved in
the transaction shall be jointly and severally liable for
collecting and remitting sales and use tax under this chapter.
(6) (a) For purposes of this paragraph, “marketplace
provider” means a person who facilitates a retail sale by
satisfying subparagraph divisions (i) and (ii) as follows:
(i) The person directly or indirectly does any of the
following:
(A) Lists, makes available, or advertises tangible personal
property, services, or specified digital products for sale by a
retailer in any forum.
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(B) Transmits or otherwise communicates an offer or
acceptance of a retail sale of tangible personal property,
services, or specified digital products between a retailer and
a purchaser.
(C) Owns, rents, licenses, makes available, or operates
any electronic or physical infrastructure or any property,
process, method, copyright, trademark, or patent that connects
retailers to purchasers for the purpose of making retail sales
of tangible personal property, services, or specified digital
products.
(D) Provides a platform or other marketplace for making
retail sales of tangible personal property, services, or
specified digital products, or otherwise facilitates retail
sales of tangible personal property, services, or specified
digital products, regardless of ownership or control of the
tangible personal property, services, or specified digital
products that are the subject of the retail sale.
(E) Provides software development or research and
development activities related to any activity described in
this subparagraph subdivision (i), if such software development
or research and development activities are directly related
to the physical or electronic marketplace provided by a
marketplace provider.
(F) Provides or offers fulfillment or storage services for
a retailer.
(G) Sets prices for a retailer’s sale of tangible personal
property, services, or specified digital products.
(H) Provides or offers customer service to a retailer or
a retailer’s customers, or accepts or assists with returns or
exchanges of tangible personal property, services, or specified
digital products sold by a retailer.
(ii) The person directly or indirectly does any of the
following:
(A) Collects the sales price or purchase price of a retail
sale of tangible personal property, services, or specified
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digital products.
(B) Provides payment processing services for a retail sale
of tangible personal property, services, or specified digital
products.
(C) Charges, collects, or otherwise receives selling
fees, listing fees, referral fees, closing fees, fees for
inserting or making available tangible personal property,
services, or specified digital products on a marketplace, or
other consideration from the facilitation of a retail sale of
tangible personal property, services, or specified digital
products, regardless of ownership or control of the tangible
personal property, services, or specified digital products that
are the subject of the retail sale.
(D) Through terms and conditions, agreements, or
arrangements with a third party, collects payment in connection
with a retail sale of tangible personal property, services,
or specified digital products from a purchaser and transmits
that payment to the retailer, regardless of whether the person
collecting and transmitting such payment receives compensation
or other consideration in exchange for the service.
(E) Provides a virtual currency that purchasers are allowed
or required to use to purchase tangible personal property,
services, or specified digital products.
(b) For purposes of this paragraph, “marketplace provider”
includes but is not limited to a digital distribution service,
digital distribution platform, online portal, or an application
store.
e. (1) A retailer that makes Iowa sales through the use of
a solicitor. For purposes of this paragraph, “solicitor” means
a person that directly or indirectly solicits business for a
retailer.
(2) (a) A retailer is deemed to have a solicitor in
this state if the retailer enters into an agreement with a
resident under which the resident, for a commission, fee, or
other similar consideration, directly or indirectly refers
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potential customers, whether by link on an internet site,
or otherwise, to the retailer. This determination may be
rebutted by a showing of proof that the resident with whom the
retailer has an agreement did not engage in any solicitation
in this state on behalf of the retailer that would satisfy the
nexus requirement of the United States Constitution during the
calendar year in question.
(b) This subparagraph (2) shall not apply to a retailer that
has Iowa gross revenue from Iowa sales of ten thousand dollars
or less for the immediately preceding calendar year or the
current calendar year.
(c) For purposes of this subparagraph (2):
(i) “Iowa gross revenue” means gross revenue from Iowa
sales to purchasers who were referred to the retailer by all
solicitors who are residents.
(ii) “Resident” includes an individual who is a resident
of this state, as defined in section 422.4, and any business
that owns any tangible or intangible property with a situs in
this state, or that has one or more employees performing or
providing services for the business in this state.
(d) This paragraph “e” does not apply to chapter 422 and
does not expand or contract the state’s jurisdiction to tax a
trade or business under chapter 422.
f. A retailer that owns, controls, rents, licenses, makes
available, or uses any tangible or intangible property in this
state or with a situs in this state, to make or otherwise
facilitate a retail sale.
g. (1) Any person that enters into a contract or agreement
with a governmental entity, including but not limited to
contracts for the provision of financial assistance or
incentives such as a tax credit, forgivable loan, grant, tax
rebate, or any other thing of value. For purposes of this
subparagraph, “governmental entity” means any unit of government
in the executive, legislative, or judicial branch, or any
political subdivision of the state, including but not limited
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to a city, county, township, or school district.
(2) Every bid submitted and each contract or agreement
executed by a state agency shall contain a certification by
the bidder or contractor stating that the bidder or contractor
is registered with the department pursuant to this chapter
and will collect and remit Iowa sales and use tax due under
this chapter. In the certification, the bidder or contractor
shall also acknowledge that the state agency may declare the
contractor or bid void if the certification is false or becomes
false. Fraudulent certification, by act or omission, may
result in the state agency or its representative filing for
damages for breach of contract.
h. Any affiliate of any retailer that is required to collect
and remit sales and use tax under this chapter, provided the
affiliate makes retail sales.
Sec. 99. Section 423.15, unnumbered paragraph 1, Code 2018,
is amended to read as follows:
All sales of products tangible personal property, services,
or specified digital products , except those sales enumerated
in section 423.16 , shall be sourced according to this section
by sellers obligated to collect Iowa sales and use tax. The
sourcing rules described in this section apply to sales of
tangible personal property, specified digital goods products ,
and all services other than telecommunications services. This
section only applies to determine a seller’s obligation to pay
or collect and remit a Iowa sales or use tax with respect to
the seller’s sale of a product. This section does not affect
the obligation of a purchaser or lessee to remit tax on the use
of the product to the taxing jurisdictions in which the use
occurs. A seller’s obligation to collect Iowa sales tax or
Iowa use tax only occurs if the sale is sourced to this state.
Whether Iowa sales tax applies to a sale sourced to Iowa shall
be determined based on the location at which the sale is
consummated by delivery or, in the case of a service, where the
first use of the service occurs made by a seller subject to
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section 423.1, subsection 48, or section 423.14A .
Sec. 100. Section 423.15, subsection 1, paragraph e, Code
2018, is amended to read as follows:
e. When paragraphs “a” , “b” , “c” , and “d” do not apply,
including the circumstance where the seller is without
sufficient information to apply the previous rules, then the
location will be determined by the address from which tangible
personal property was shipped, from which the specified digital
good product or the computer software delivered electronically
was first available for transmission by the seller, or from
which the service was provided disregarding for these purposes
any location that merely provided the digital transfer of the
product sold.
Sec. 101. Section 423.22, Code 2018, is amended to read as
follows:
423.22 Taxation in another state.
If any person who causes tangible personal property or
specified digital products to be brought into this state or
who uses in this state services enumerated in section 423.2
has already paid a tax in another state in respect to the sale
or use of the property or the performance of the service, or
an occupation tax in respect to the property or service, in
an amount less than the tax imposed by subchapter II or III ,
the provisions of those subchapters shall apply, but at a rate
measured by the difference only between the rate fixed by
subchapter II or III and the rate by which the previous tax on
the sale or use, or the occupation tax, was computed. If the
tax imposed and paid in the other state is equal to or more than
the tax imposed by those subchapters, then a tax is not due in
this state on the personal property or service.
Sec. 102. Section 423.29, subsection 1, Code 2018, is
amended to read as follows:
1. Every seller who is a retailer and who is making taxable
sales of tangible personal property or specified digital
products in Iowa shall, at the time of selling the property
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making the sale , collect the sales tax. Every seller who
is a retailer maintaining a place of business in this state
that is not otherwise required to collect sales tax under the
provisions of this chapter and who is selling tangible personal
property or specified digital products for use in Iowa shall,
at the time of making the sale, whether within or without the
state, collect the use tax. Sellers required to collect sales
or use tax shall give to any purchaser a receipt for the tax
collected in the manner and form prescribed by the director.
Sec. 103. Section 423.30, subsection 1, Code 2018, is
amended to read as follows:
1. The director may, upon application, authorize the
collection of the use tax by any seller who is a retailer not
maintaining a place of business within this state and not
registered under the agreement, who, to the satisfaction of
the director, furnishes adequate security to ensure collection
and payment of the tax. Such sellers shall be issued, without
charge, permits to collect tax subject to any regulations
which the director shall prescribe. When so authorized, it
shall be the duty of foreign sellers to collect the tax upon
all tangible personal property and specified digital products
sold, to the retailer’s knowledge, for use within this state,
in the same manner and subject to the same requirements as a
retailer maintaining a place of business within this state.
The authority and permit may be canceled when, at any time, the
director considers the security inadequate, or that tax can
more effectively be collected from the person using property
in this state.
Sec. 104. Section 423.31, subsection 1, Code 2018, is
amended to read as follows:
1. Each person subject to this section and section 423.36
and in accordance with the provisions of this section and
section 423.36 shall, on or before the last day of the month
following the close of each calendar quarter during which
such person is or has become or ceased being subject to the
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provisions of this section and section 423.36 , make, sign, and
file a return for the calendar quarter in the form as may be
required. Returns shall show information relating to sales
prices including goods, wares, tangible personal property,
specified digital products, and services converted to the
use of such person, the amounts of sales prices excluded and
exempt from the tax, the amounts of sales prices subject to
tax, a calculation of tax due, and any other information for
the period covered by the return as may be required. Returns
shall be signed by the retailer or the retailer’s authorized
agent and must be certified by the retailer to be correct in
accordance with forms and rules prescribed by the director.
Sec. 105. Section 423.31, subsection 5, paragraph a, Code
2018, is amended to read as follows:
a. Upon making application and receiving approval from
the director, a parent corporation person and its affiliated
corporations affiliates that make retail sales of tangible
personal property , specified digital products, or taxable
enumerated services may make deposits and file a consolidated
sales tax return for the affiliated group, pursuant to rules
adopted by the director. A parent corporation person and each
affiliate corporation that files a consolidated return are
jointly and severally liable for all tax, penalty, and interest
found due for the tax period for which a consolidated return is
filed or required to be filed.
Sec. 106. Section 423.32, subsection 1, paragraph b, Code
2018, is amended to read as follows:
b. The deposit form is due on or before the twentieth day of
the month following the month of collection, except a deposit
is not required for the third month of the calendar quarter,
and the total quarterly amount, less the amounts deposited for
the first two months of the quarter, is due with the quarterly
report on the last day of the month following the month of
collection. At that time, the retailer shall file with the
department a return for the preceding quarterly period in the
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form prescribed by the director showing the purchase price of
the tangible personal property , specified digital products, and
services sold by the retailer during the preceding quarterly
period, the use of which is subject to the use tax imposed
by this chapter , and other information the director deems
necessary for the proper administration of the use tax.
Sec. 107. Section 423.33, subsection 3, Code 2018, is
amended to read as follows:
3. Event sponsor’s liability for sales tax. A person
sponsoring a flea market or a craft, antique, coin, or stamp
show or similar event shall obtain from every retailer selling
tangible personal property , specified digital products,
or taxable services at the event proof that the retailer
possesses a valid sales tax permit or secure from the retailer
a statement, taken in good faith, that tangible personal
property , specified digital products, or services offered for
sale are not subject to sales tax. Failure to do so renders
a sponsor of the event liable for payment of any sales tax,
interest, and penalty due and owing from any retailer selling
property or services at the event. Sections 423.31 , 423.32 ,
423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and 423.42 apply to the
sponsors. For purposes of this subsection , a “person sponsoring
a flea market or a craft, antique, coin, or stamp show or similar
event” does not include an organization which sponsors an
event determined to qualify as an event involving casual sales
pursuant to section 423.3, subsection 39 , or the state fair or
a fair as defined in section 174.1 .
Sec. 108. Section 423.33, Code 2018, is amended by adding
the following new subsection:
NEW SUBSECTION . 4. Liability of affiliates.
a. Notwithstanding any other provision of law to the
contrary, if any retailer required to collect and remit sales
and use tax pursuant to sections 423.14, 423.14A, and 423.29,
or any other provision of this chapter, fails to do so, all
affiliates that directly, indirectly, or constructively control
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the retailer shall be jointly and severally liable for any tax,
penalty, and interest under this chapter, regardless of whether
the affiliate is a retailer.
b. Pursuant to paragraph “a” , the department may elect
to assess the full amount of any tax, penalty, and interest
against the retailer, an affiliate of the retailer described
in paragraph “a” , or any combination of the retailer and the
retailer’s affiliates described in paragraph “a” .
c. Notwithstanding any other provision of law to the
contrary, the department has the discretion to deem an
affiliate of a retailer an agent or alter ego of that retailer.
d. Notwithstanding any other provision of law to the
contrary, the department has the discretion to disregard or
look through any organizational structure of an enterprise in
order to assess and collect any tax, penalty, and interest
against an affiliate that is acting to benefit an affiliate or
an enterprise of which the affiliate is a part.
Sec. 109. Section 423.34, Code 2018, is amended to read as
follows:
423.34 Liability of user.
Any person who uses any tangible personal property ,
specified digital products, or services enumerated in section
423.2 upon which the use tax has not been paid, either to the
county treasurer or to a retailer or direct to the department
as required by this subchapter , shall be liable for the payment
of tax, and shall on or before the last day of the month next
succeeding each quarterly period pay the use tax upon all
property or services used by the person during the preceding
quarterly period in the manner and accompanied by such returns
as the director shall prescribe. All of the provisions of
sections 423.32 and 423.33 with reference to the returns and
payments shall be applicable to the returns and payments
required by this section .
Sec. 110. Section 423.36, subsection 1, Code 2018, is
amended to read as follows:
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1. A person shall not engage in or transact business as a
retailer making taxable sales of tangible personal property ,
specified digital products, or furnishing services within
this state or as a retailer making taxable sales of tangible
personal property , specified digital products, or furnishing
services for use within this state, unless a permit has been
issued to the retailer under this section , except as provided
in subsection 7 . Every person desiring to engage in or
transact business as a retailer shall file with the department
an application for a permit to collect sales or use tax. Every
application for a sales or use tax permit shall be made upon
a form prescribed by the director and shall set forth any
information the director may require. The application shall
be signed by an owner of the business if a natural person; in
the case of a retailer which is an association or partnership,
by a member or partner; and in the case of a retailer which
is a corporation, by an executive officer or some person
specifically authorized by the corporation to sign the
application, to which shall be attached the written evidence of
the person’s authority.
Sec. 111. Section 423.36, subsection 2, paragraph a, Code
2018, is amended to read as follows:
a. Notwithstanding subsection 1 , if any person will make
taxable sales of tangible personal property , specified digital
products, or furnish services to any state agency, that person
shall, prior to the sale, apply for and receive a permit to
collect sales or use tax pursuant to this section . A state
agency shall not purchase tangible personal property , specified
digital products, or services from any person unless that
person has a valid, unexpired permit issued pursuant to this
section and is in compliance with all other requirements in
this chapter imposed upon retailers, including but not limited
to the requirement to collect and remit sales and use tax and
file sales and use tax returns.
Sec. 112. Section 423.36, subsection 7, paragraph b, Code
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2018, is amended to read as follows:
b. Persons engaged in selling tangible personal property ,
specified digital products, or furnishing services shall not be
required to obtain or retain a sales tax permit for a place of
business at which taxable sales of tangible personal property ,
specified digital products, or taxable performance of services
will not occur.
Sec. 113. Section 423.36, subsection 9, paragraph a, Code
2018, is amended to read as follows:
a. Except as provided in paragraph “b” , purchasers, users,
and consumers of tangible personal property , specified digital
products, or enumerated services taxed pursuant to subchapter
II or III of this chapter or chapter 423B may be authorized,
pursuant to rules adopted by the director, to remit tax owed
directly to the department instead of the tax being collected
and paid by the seller. To qualify for a direct pay tax permit,
the purchaser, user, or consumer must accrue a tax liability
of more than four thousand dollars in tax under subchapters
II and III in a semimonthly period and make deposits and file
returns pursuant to section 423.31 . This authority shall not
be granted or exercised except upon application to the director
and then only after issuance by the director of a direct pay
tax permit.
Sec. 114. Section 423.40, subsection 2, Code 2018, is
amended to read as follows:
2. a. Any person who knowingly sells tangible personal
property, specified digital products, tickets or admissions
to places of amusement and athletic events, or gas, water,
electricity, or communication service at retail, or engages in
the furnishing of services enumerated in section 423.2 , in this
state without procuring a permit to collect tax, as provided
in section 423.36 , or who violates section 423.24 and the
officers of any corporation who so act are guilty of a serious
misdemeanor.
b. A person who knowingly sells tangible personal property,
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specified digital products, tickets or admissions to places of
amusement and athletic events, or gas, water, electricity, or
communication service at retail, or engages in the furnishing
of services enumerated in section 423.2 , in this state after
the person’s sales tax permit has been revoked and before it
has been restored as provided in section 423.36, subsection 6 ,
and the officers of any corporation who so act are guilty of an
aggravated misdemeanor.
Sec. 115. Section 423.41, Code 2018, is amended to read as
follows:
423.41 Books —— examination.
Every retailer required or authorized to collect taxes
imposed by this chapter and every person using in this state
tangible personal property, specified digital products,
services, or the product of services shall keep records,
receipts, invoices, and other pertinent papers as the director
shall require, in the form that the director shall require,
for as long as the director has the authority to examine and
determine tax due. The director or any duly authorized agent
of the department may examine the books, papers, records,
and equipment of any person either selling tangible personal
property , specified digital products, or services or liable
for the tax imposed by this chapter , and investigate the
character of the business of any person in order to verify
the accuracy of any return made, or if a return was not made
by the person, ascertain and determine the amount due under
this chapter . These books, papers, and records shall be made
available within this state for examination upon reasonable
notice when the director deems it advisable and so orders. If
the taxpayer maintains any records in an electronic format,
the taxpayer shall comply with reasonable requests by the
director or the director’s authorized agents to provide those
electronic records in a standard record format. The preceding
requirements shall likewise apply to users and persons
furnishing services enumerated in section 423.2 .
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Sec. 116. Section 423.45, subsection 4, paragraphs a, b, and
e, Code 2018, are amended to read as follows:
a. The department shall issue or the seller may separately
provide exemption certificates in the form prescribed by the
director, including certificates not made of paper, which
conform to the requirements of paragraph “c” , to assist
retailers in properly accounting for nontaxable sales of
tangible personal property , specified digital products,
or services to purchasers for a nontaxable purpose. The
department shall also allow the use of exemption certificates
for those circumstances in which a sale is taxable but the
seller is not obligated to collect tax from the buyer.
b. The sales tax liability for all sales of tangible
personal property and specified digital products and all sales
of services is upon the seller and the purchaser unless the
seller takes from the purchaser a valid exemption certificate
stating under penalty of perjury that the purchase is for a
nontaxable purpose and is not a retail sale as defined in
section 423.1 , or the seller is not obligated to collect tax
due, or unless the seller takes a fuel exemption certificate
pursuant to subsection 5 . If the tangible personal property ,
specified digital products, or services are purchased tax free
pursuant to a valid exemption certificate and the tangible
personal property , specified digital products, or services are
used or disposed of by the purchaser in a nonexempt manner, the
purchaser is solely liable for the taxes and shall remit the
taxes directly to the department and sections 423.31 , 423.32 ,
423.37 , 423.38 , 423.39 , 423.40 , 423.41 , and 423.42 shall apply
to the purchaser.
e. If the circumstances change and as a result the tangible
personal property , specified digital products, or services are
used or disposed of by the purchaser in a nonexempt manner or
the purchaser becomes obligated to pay the tax, the purchaser
is liable solely for the taxes and shall remit the taxes
directly to the department in accordance with this subsection .
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Sec. 117. Section 423.57, Code 2018, is amended to read as
follows:
423.57 Statutes applicable.
The director shall administer this subchapter as it relates
to the taxes imposed in this chapter in the same manner and
subject to all the provisions of, and all of the powers,
duties, authority, and restrictions contained in sections
423.14 , 423.14A, 423.15 , 423.16 , 423.17 , 423.19 , 423.20 ,
423.21 , 423.22 , 423.23 , 423.24 , 423.25 , 423.29 , 423.31 , 423.32 ,
423.33 , 423.34 , 423.34A , 423.35 , 423.37 , 423.38 , 423.39 ,
423.40 , 423.41 , and 423.42 , section 423.43, subsection 1 , and
sections 423.45 , 423.46 , and 423.47 .
Sec. 118. Section 423.58, Code 2018, is amended to read as
follows:
423.58 Collection, permit, and tax return exemption for
certain out-of-state businesses.
Notwithstanding sections 423.14 , 423.14A, 423.29 , 423.31 ,
423.32 , and 423.36 , a person meeting the requirements of
section 29C.24 is not required to obtain a sales or use tax
permit, collect and remit sales and use tax, or make and file
applicable sales or use tax returns, as provided in section
29C.24, subsection 3 , paragraph “a” , subparagraph (2).
Sec. 119. Section 423B.5, subsection 1, Code 2018, is
amended to read as follows:
1. A local sales and services tax at the rate of not more
than one percent may be imposed by a county on the sales price
taxed by the state under chapter 423, subchapter II . A local
sales and services tax shall be imposed on the same basis as
the state sales and services tax or in the case of the use of
natural gas, natural gas service, electricity, or electric
service on the same basis as the state use tax and shall not
be imposed on the sale of any property or on any service not
taxed by the state, except the tax shall not be imposed on
the sales price from the sale of motor fuel or special fuel
as defined in chapter 452A which is consumed for highway use
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or in watercraft or aircraft if the fuel tax is paid on the
transaction and a refund has not or will not be allowed,
on the sales price from the sale of equipment by the state
department of transportation, or on the sales price from the
sale or use of natural gas, natural gas service, electricity,
or electric service in a city or county where the sales price
from the sale of natural gas or electric energy is subject to
a franchise fee or user fee during the period the franchise
or user fee is imposed. A local sales and services tax is
applicable to transactions within those incorporated and
unincorporated areas of the county where it is imposed and ,
which transactions include but are not limited to sales sourced
pursuant to sections 423.15, 423.17, 423.19, or 423.20, to a
location within that incorporated or unincorporated area of the
county. The tax shall be collected by all persons required
to collect state sales taxes. All cities contiguous to each
other shall be treated as part of one incorporated area and the
tax would be imposed in each of those contiguous cities only
if the majority of those voting in the total area covered by
the contiguous cities favors its imposition. In the case of a
local sales and services tax submitted to the registered voters
of two or more contiguous counties as provided in section
423B.1, subsection 4 , paragraph “c” , all cities contiguous to
each other shall be treated as part of one incorporated area,
even if the corporate boundaries of one or more of the cities
include areas of more than one county, and the tax shall be
imposed in each of those contiguous cities only if a majority
of those voting on the tax in the total area covered by the
contiguous cities favored its imposition.
Sec. 120. Section 423B.6, subsection 2, paragraph b, Code
2018, is amended to read as follows:
b. The ordinance of a county board of supervisors imposing
a local sales and services tax shall adopt by reference the
applicable provisions of the appropriate sections of chapter
423 . All powers and requirements of the director to administer
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the state sales tax law and use tax law are applicable to the
administration of a local sales and services tax law and the
local excise tax, including but not limited to the provisions
of section 422.25, subsection 4 , sections 422.30 , 422.67 ,
and 422.68 , section 422.69, subsection 1 , sections 422.70
through 422.75 , section 423.14, subsection 1 and subsection
2 , paragraphs “b” through “e” , and sections 423.14A, 423.15 ,
423.23 , 423.24 , 423.25 , 423.31 through 423.35 , 423.37 through
423.42 , 423.46 , and 423.47 . Local officials shall confer
with the director of revenue for assistance in drafting the
ordinance imposing a local sales and services tax. A certified
copy of the ordinance shall be filed with the director as soon
as possible after passage.
Sec. 121. LEGISLATIVE INTENT. It is the intent of the
general assembly that the provisions of this division of this
Act amending the definition of “place of business” in section
423.1, subsection 37, and “sales” in section 423.1, subsection
50, enacting definitions of “sold at retail in the state” in
section 423.1, subsection 55A, and “subscription” in section
423.1, subsection 57A, and amending the enumerated service of
pay television in 423.2, subsection 6, paragraph “al”, are
conforming amendments consistent with current state law, and
that the amendments do not change the application of current
law but instead reflect current law both before and after the
enactment of this division of this Act.
Sec. 122. RELATIONSHIP TO EXISTING LAW FOR TAXATION OF
SPECIFIED DIGITAL PRODUCTS. The provisions of this division of
this Act relating to the imposition of tax on the sale or use of
“specified digital products”, as defined in this division of
this Act, shall not be construed as affecting the taxability
or nontaxability under other provisions of existing law of
sales or uses occurring prior to the enactment of this division
of this Act of products meeting the definition of “specified
digital products”, as defined in this division of this Act.
Sec. 123. EFFECTIVE DATE.
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1. Except as provided in subsection 2, this division of this
Act takes effect January 1, 2019.
2. The following take effect July 1, 2018:
a. The sections of this division of this Act amending
section 423.1, subsections 37 and 50.
b. The sections of this division of this Act enacting
section 423.1, subsections 55A and 57A.
c. The section of this division of this Act amending section
423.2, subsection 1, paragraph “a”, subparagraph (1).
d. The provision amending the enumerated service of pay
television to include but not be limited to streaming video,
video on-demand, and pay-per-view, in the section of this
division of this Act amending section 423.2, subsection 6.
e. The provisions adding photography and retouching to the
list of enumerated services subject to the sales tax in the
section of this division of this Act amending section 423.2,
subsection 6.
f. The section of this division of this Act enacting section
423.2, subsection 8, paragraph “d”.
g. The section of this division of this Act amending section
423.5, subsection 1, paragraph “a”.
h. The section of this division of this Act entitled
“legislative intent” which describes the intent of the general
assembly with respect to certain amendments in this division of
this Act to the definition of “place of business” in section
423.1, subsection 37, “sales” in section 423.1, subsection 50,
the enactment of a definition for “subscription” in section
423.1, subsection 57A, and “sold at retail” in section 423.1,
subsection 55A, and amendments to the enumerated service of pay
television in section 423.2, subsection 6, paragraph “al”.
DIVISION V
HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE RENTAL EXCISE TAX
CHANGES
Sec. 124. Section 423A.2, subsection 1, Code 2018, is
amended to read as follows:
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1. For the purposes of this chapter , unless the context
otherwise requires:
a. “Department” means the department of revenue.
b. “Lessor” means any of the following:
(1) A person engaged in the business of renting lodging to
users.
(2) A person who acquires a right to or interest in any
lodging with an intent to rent the lodging to another person.
(3) A person who actually or constructively rents lodging,
regardless of who owns or controls the lodging.
(4) A lodging facilitator.
(5) A retailer or retailer maintaining a place of business
in this state as defined in section 423.1, including those
persons who meet the requirements of section 423.14A, which
retailer or retailer maintaining a place of business in this
state would be responsible for collection and payment of the
hotel and motel tax if it were a sales or use tax under chapter
423.
c. “Lodging” means rooms, apartments, or sleeping quarters
in a hotel, motel, inn, public lodging house, rooming house,
cabin, apartment, residential property, or manufactured or
mobile home which is tangible personal property, or in a
tourist court, or in any place where sleeping accommodations
are furnished to transient guests for rent, whether with or
without meals. Lodging does not include rooms that are not
used for sleeping accommodations.
d. “Lodging facilitator” means any person who facilitates
the renting of lodging to users by satisfying subparagraphs (1)
and (2) as follows:
(1) The person directly or indirectly does any of the
following:
(a) Lists, makes available, or advertises lodging for rent
by a lessor in any forum.
(b) Transmits or otherwise communicates an offer or
acceptance between a lessor or user.
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(c) Owns, rents, licenses, makes available, or operates any
electronic or physical infrastructure or any property, process,
method, copyright, trademark, or patent that connects lessors
and users to each other.
(d) Provides a platform or other marketplace for renting
lodging or otherwise facilitates the renting of lodging,
regardless of ownership or control of the lodging.
(e) Provides software development or research and
development activities related to any activity described in
this subparagraph (1), if such software development or research
and development activities are directly related to the physical
or electronic marketplace provided by a lodging facilitator.
(f) Provides or offers fulfillment or storage services for a
lessor.
(g) Sets prices for a lessor’s rental of lodging.
(h) Provides or offers customer service to a lessor or
a lessor’s customers, or accepts or assists with returns,
exchanges, cancellations, or rescheduling of the rental of
lodging by a lessor.
(2) The person directly or indirectly does any of the
following:
(a) Collects the sales price for the renting of the lodging.
(b) Provides payment processing services for the renting of
lodging.
(c) Charges, collects, or otherwise receives booking fees,
advertising revenues, or other consideration from the renting
of lodging or the facilitation of the renting of lodging,
regardless of ownership or control of the lodging.
(d) Through terms and conditions, agreements, or
arrangements with a third party, collects payment in connection
with a rental of lodging from a user and transmits that payment
to the lessor, regardless of whether the person collecting
and transmitting such payment receives compensation or other
consideration in exchange for the service.
(e) Provides a virtual currency that users are allowed or
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required to use to rent lodging.
d. e. “Person” means the same as the term is defined in
section 423.1 .
e. f. “Renting” , “rental” , or “rent” means a transfer of
possession or control of lodging for a fixed or indeterminate
term for consideration and includes any kind of direct or
indirect charge for such lodging or its use.
f. g. “Sales price” means the consideration for renting of
lodging and means the same as the term is defined in section
423.1 all direct or indirect consideration, including but
not limited to cash, credit, property, and services, paid in
connection with any charge of any description associated with
the renting of lodging or with communicating, negotiating,
reserving, booking, facilitating, or otherwise arranging to
rent lodging, including but not limited to booking fees,
reservation fees, service fees, cleaning fees, linen fees,
towel fees, and nonrefundable deposits . When determining “sales
price” , no deduction shall be taken for any of the following:
(1) The lessor’s cost of the property rented.
(2) The cost of materials used, labor or service cost,
interest, losses, all costs of transportation to the lessor,
all taxes imposed on the lessor, or any other expenses of the
lessor.
(3) Charges by the lessor for any services necessary to
complete the rental transaction.
g. h. “User” means a person to whom lodging is rented.
Sec. 125. NEW SECTION . 423A.3A Collection and remittance by
lodging facilitators —— joint and several liability.
If a transaction for the rental of lodging involves both a
lodging facilitator and another lessor, all of the following
shall apply:
1. The lodging facilitator shall collect the state-imposed
tax under section 423A.3 and the locally imposed tax under
section 423A.4 on the entire sales price paid by the user,
regardless of the amount of the sales price that will
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ultimately accrue to or benefit the lodging facilitator,
another lessor, or any other person.
2. The lodging facilitator and any other lessor involved
in the transaction shall be jointly and severally liable for
collecting and remitting the tax under sections 423A.3 and
423A.4.
Sec. 126. Section 423A.5, Code 2018, is amended to read as
follows:
423A.5 Exemptions.
1. There are exempted from the provisions of this chapter
and from the computation of any amount of tax imposed by
section 423A.3 this chapter all of the following:
a. 1. The sales price from the renting of lodging which is
rented by the same person for a period of more than thirty-one
consecutive days.
b. 2. The sales price from the renting of sleeping rooms
in dormitories and in memorial unions at all universities and
colleges located in the state of Iowa.
2. There is exempted from the provisions of this chapter and
from the computation of any amount of tax imposed by section
423A.4 all of the following:
a. The sales price from the renting of lodging or rooms
exempt under subsection 1 .
b. 3. The sales price of lodging furnished to the guests of
a religious institution if the property is exempt under section
427.1, subsection 8 , and the purpose of renting is to provide a
place for a religious retreat or function and not a place for
transient guests generally.
Sec. 127. Section 423A.6, subsection 4, Code 2018, is
amended to read as follows:
4. Section 422.25, subsection 4 , sections 422.30 , 422.67 ,
and 422.68 , section 422.69, subsection 1 , sections 422.70 ,
422.71 , 422.72 , 422.74 , and 422.75 , section 423.14, subsection
1 , and sections 423.23 , 423.24 , 423.25 , 423.31 , 423.33 ,
423.35 , 423.37 through 423.42 , and 423.47 , consistent with the
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provisions of this chapter , apply with respect to the taxes
authorized under this chapter , in the same manner and with the
same effect as if the state and local hotel and motel taxes
were retail sales taxes within the meaning of those statutes.
Notwithstanding this subsection , the director shall provide for
quarterly filing of returns and for other than quarterly filing
of returns both as prescribed in section 423.31 . The director
may require all persons who are engaged in the business of
deriving any sales price subject to tax under this chapter to
register with the department. All taxes collected under this
chapter by a retailer , lessor, or any individual other person
are deemed to be held in trust for the state of Iowa and the
local jurisdictions imposing the taxes.
Sec. 128. Section 423C.2, subsection 3, Code 2018, is
amended to read as follows:
3. “Lessor” means a any of the following:
a. A person engaged in the business of renting automobiles
to users. “Lessor” includes a
b. A motor vehicle dealer licensed pursuant to chapter
322 who rents automobiles to users. For this purpose, the
objective of making a profit is not necessary to make the
renting activity a business.
c. A person who acquires a right to or interest in any
automobile with an intent to rent the automobile to another
person.
d. A person who actually or constructively rents
automobiles, regardless of who owns or controls the
automobiles.
e. A rental facilitator.
f. A retailer or retailer maintaining a place of business in
this state as defined in section 423.1, including those persons
who meet the requirements of section 423.14A, which retailer or
retailer maintaining a place of business in this state would be
responsible for collection and payment of the automobile rental
excise tax if it were a sales or use tax under chapter 423.
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Sec. 129. Section 423C.2, Code 2018, is amended by adding
the following new subsection:
NEW SUBSECTION . 06. “Rental facilitator” means any person
who facilitates the renting of an automobile to users by
satisfying paragraphs “a” and “b” as follows:
a. The person directly or indirectly does any of the
following:
(1) Lists, makes available, or advertises automobiles for
rent by a lessor in any forum.
(2) Transmits or otherwise communicates an offer or
acceptance between a lessor or user.
(3) Owns, rents, licenses, makes available, or operates any
electronic or physical infrastructure or any property, process,
method, copyright, trademark, or patent that connects lessors
and users to each other.
(4) Provides a platform or other marketplace for
renting automobiles or otherwise facilitates the renting
of automobiles, regardless of ownership or control of the
automobile.
(5) Provides software development or research and
development activities related to any activity described in
this paragraph “a” , if such software development or research and
development activities are directly related to the physical or
electronic marketplace provided by a rental facilitator.
(6) Provides or offers fulfillment or storage services for a
lessor.
(7) Sets prices for a lessor’s rental of automobiles.
(8) Provides or offers customer service to a lessor or
a lessor’s customers, or accepts or assists with returns,
exchanges, cancellations, or rescheduling of the rental of
automobiles by a lessor.
b. The person directly or indirectly does any of the
following:
(1) Collects the rental price for the renting of an
automobile.
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(2) Provides payment processing services for the renting of
an automobile.
(3) Charges, collects, or otherwise receives booking
fees, advertising revenues, or other consideration from the
renting of an automobile or the facilitation of the renting
of an automobile, regardless of ownership or control of the
automobile.
(4) Through terms and conditions, agreements, or
arrangements with a third party, collects payment in connection
with a rental of automobiles from a user and transmits that
payment to the lessor, regardless of whether the person
collecting and transmitting such payment receives compensation
or other consideration in exchange for the service.
(5) Provides a virtual currency that users are allowed or
required to use to rent automobiles.
Sec. 130. Section 423C.2, subsection 6, Code 2018, is
amended by striking the subsection and inserting in lieu
thereof the following:
6. “Rental price” means all direct or indirect
consideration, including but not limited to cash, credit,
property, and services, paid in connection with any charge of
any description associated with the renting of an automobile
or with communicating, negotiating, reserving, booking,
facilitating, or otherwise arranging to rent an automobile,
including but not limited to booking fees, reservation fees,
service fees, and nonrefundable deposits. When determining
“rental price” , no deduction shall be taken for any of the
following:
a. The lessor’s cost of the property rented.
b. The cost of materials used, labor or service cost,
interest, losses, all costs of transportation to the lessor,
all taxes imposed on the lessor, or any other expenses of the
lessor.
c. Charges by the lessor for any services necessary to
complete the rental transaction.
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Sec. 131. NEW SECTION . 423C.3A Collection and remittance by
rental facilitators —— joint and several liability.
If a transaction for the rental of an automobile involves
both a rental facilitator and another lessor, all of the
following shall apply:
1. The rental facilitator shall collect the tax under
section 423C.3 on the entire rental price paid by the user,
regardless of the amount of the rental price that will
ultimately accrue to or benefit the rental facilitator, another
lessor, or any other person.
2. The rental facilitator and any other lessor involved
in the transaction shall be jointly and severally liable for
collecting and remitting the tax under section 423C.3.
Sec. 132. LEGISLATIVE INTENT. It is the intent of the
general assembly that the provision of this division of this
Act amending the definition of “lodging” in section 423A.2,
subsection 1, paragraph “c”, is a conforming amendment
consistent with current state law, and that the amendment
does not change the application of current law but instead
reflects current law both before and after the enactment of
this division of this Act.
Sec. 133. EFFECTIVE DATE.
1. Except as provided in subsection 2, this division of this
Act takes effect January 1, 2019.
2. The following take effect July 1, 2018:
a. The provision amending the definition of “lodging” in the
section of this division of this Act amending section 423A.2,
subsection 1, paragraph “c”.
b. The section of this division of this Act entitled
“legislative intent” which describes the intent of the general
assembly with respect to the amendment in this division of
this Act to the definition of “lodging” in section 423A.2,
subsection 1, paragraph “c”.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
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the explanation’s substance by the members of the general assembly.
This bill makes numerous changes to income taxes, the
sales and use taxes and local option sales tax, the hotel and
motel excise tax, the automobile rental excise tax, the Iowa
educational savings plan trust, and the Iowa ABLE savings plan
trust.
DIVISION I —— INCOME TAX CHANGES FOR TAX YEAR 2018. The
federal Protecting Americans From Tax Hikes Act (PATH Act)
enacted by Congress in 2015 made permanent certain increased
phase-out amounts and increased credit percentages of the
federal earned income tax credit (EITC) that were scheduled to
expire in 2018, and made permanent the deduction for certain
expenses incurred by elementary and secondary school teachers
that was scheduled to expire in 2015. To date, Iowa has
not coupled with these federal changes for purposes of the
teacher expense deduction or for calculating the Iowa EITC.
Division I couples with these federal EITC and teacher expense
deduction changes for purposes of the Iowa EITC and Iowa net
income calculation for tax year 2018. Division I also couples
for tax year 2018 with certain accounting method and other
miscellaneous changes made in the federal Tax Cuts and Jobs Act
of 2017 for purposes of the individual and corporate income
taxes, and the franchise tax, to the extent those amendments
affect the calculation of federal adjusted gross income or
federal taxable income for federal tax purposes for tax year
2018. These include amendments contained in the following
sections of the federal Tax Cuts and Jobs Act: §13102 (small
business accounting method changes), §13221 (accounting method
rules for the taxable year of inclusion), §13504 (repeal of
technical termination of partnerships), §13541 (electing small
business trust), §13543 (treatment of S corporation conversion
to C corporation), §13611 (repeal of special rule permitting
recharacterization of Roth IRA conversions), and §13613
(extended rollover period for qualified plan loans).
The division takes effect upon enactment and applies
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retroactively to January 1, 2018, for tax years beginning on or
after that date, but prior to January 1, 2019.
DIVISION II —— INDIVIDUAL INCOME TAX CHANGES BEGINNING IN
TAX YEAR 2019. Division II makes numerous changes to the Iowa
individual income tax beginning in tax year 2019.
TAX RATE AND TAX BRACKET CHANGES. Current law provides nine
regular tax brackets containing progressively higher amounts
of taxable income that are taxed at progressively higher tax
rates, from a low of 0.36 percent, to a high of 8.98 percent.
The taxable income amounts in each tax bracket are indexed to
inflation and increased each year. For tax years beginning on
or after January 1, 2019, the bill reduces the tax rate in each
bracket, reduces the number of brackets to eight, and increases
the taxable income amount in the top bracket to $150,000, as
follows:
Income over: But not over: Tax rate category I:
1) $0 $1,628 0.32%
2) $1,628 $3,256 0.64%
3) $3,256 $6,512 2.10%
4) $6,512 $14,652 4.05%
5) $14,652 $24,420 5.40%
6) $24,420 $48,840 5.70%
7) $48,840 $150,000 6.70%
8) $150,000 or more 7.60%
The bill provides that the income amounts in each of the
eight brackets listed above will be indexed to inflation and
increased each year beginning in tax year 2020.
The tax rates in tax category I listed above apply for all
tax years beginning on or after January 1, 2019, until such
time as a different tax rate category takes effect as described
below.
Beginning with the fiscal year ending June 30, 2019, the
bill sets forth six additional tax rate categories labeled
as tax rate category II, III, IV, and V, and provides that
each progressively higher tax rate category may take effect in
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future tax years if certain net tax receipt revenue targets are
met or exceeded as provided in the bill. The possible tax rate
categories for each of the income brackets listed above are as
follows:
II III IV V
1) 0.32% 0.30% 0.30% 0.30%
2) 0.64% 0.60% 0.60% 0.60%
3) 2.10% 2.00% 2.00% 2.00%
4) 4.05% 4.00% 4.00% 4.00%
5) 5.40% 5.30% 5.30% 5.20%
6) 5.70% 5.60% 5.60% 5.40%
7) 6.70% 6.30% 6.30% 6.30%
8) 7.40% 7.00% 7.00% 6.90%
Whether a particular tax rate category takes effect in
future tax years depends on the net tax receipts for the
previous fiscal year and the tax rate category in effect for
the previous tax year, as described in the bill. A net tax
receipt calculation for a fiscal year will not cause the tax
rate category in effect for a future tax year to drop to a lower
tax rate category than is currently in effect.
By operation of law, the tax rate category applicable to tax
year 2025 will also apply to all future tax years.
The bill requires the department of revenue (department), in
consultation with the department of management, to calculate
net tax receipts each applicable fiscal year and submit an
annual report to the governor and general assembly identifying
net tax receipts for the fiscal year, which tax rate category
will be in effect for future tax years, and describing in
detail the net tax receipts calculation made by the department.
The bill defines “net tax receipts” and requires the director
of the department to adopt rules for calculating net tax
receipts and defining various related terms.
INTERNAL REVENUE CODE (IRC) COUPLING. Under current law
with the exception of the solar energy credit and the state
research activities credit, Code references to the IRC include
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the IRC in effect on January 1, 2015, meaning federal income
tax revisions made by Congress in 2015 through 2017 are not
applicable for Iowa tax purposes, including revisions made in
the PATH Act of 2015 and the federal Tax Cuts and Jobs Act of
2017. The bill adopts, or couples with, these revisions for
purposes of the individual income tax beginning in tax year
2019, except for certain revisions as described below. The
coupling is accomplished generally by updating the definition
of IRC as it applies to the individual income tax to mean
the IRC as amended and in effect on January 1, 2018. The
updated definition does not apply to the state solar energy
system credit in Code section 422.11L, or the state individual
research activities credit in Code section 422.10, because both
of those credits contain their own definition of IRC.
Code section 422.9 provided individuals a deduction from
net income for state sales and use taxes if the individual
chose to deduct sales and use tax in lieu of state income taxes
or the standard deduction for federal income tax purposes.
The deduction was set to expire under both federal and Iowa
law beginning in tax year 2016. The federal deduction was
made permanent by the PATH Act of 2015, and the bill couples
with these federal changes to the deduction, thus making it
permanent for tax year 2019 and beyond.
The federal deduction for other taxes paid was limited to
$10,000 per year under most circumstances by the federal Tax
Cuts and Jobs Act of 2017, but the bill decouples from this
limitation. Taxpayers will be allowed to deduct other taxes
paid in computing state itemized deductions to the same extent
as is allowed under current state law, without regard to the
$10,000 limitation described above.
BONUS DEPRECIATION DECOUPLING. The bill decouples, for Iowa
individual income tax purposes, from the federal additional
first-year depreciation allowance in section 168(k) of the IRC
(bonus depreciation) which was extended and modified by the
federal PATH Act of 2015 and the federal Tax Cuts and Jobs Act
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of 2017. By decoupling, taxpayers who claim bonus depreciation
for federal tax purposes are required to add such depreciation
amounts back to Iowa net income, but are then allowed under
existing state law to deduct the amount of depreciation that
would otherwise be allowable under federal law, without regard
to the bonus depreciation allowance.
IRC §179 DEDUCTION. The IRC §179 deduction provides a tax
deduction in lieu of depreciation for certain property placed
in service during a tax year. Under current law, for Iowa
tax purposes, the maximum IRC §179 deduction per tax year is
$25,000. This maximum deduction is incrementally reduced when
a taxpayer’s eligible property placed in service during the tax
year exceeds $200,000 (investment limitation).
The federal Tax Cuts and Jobs Act of 2017 made several
changes to the IRC §179 deduction, including increasing the
statutory maximum deduction to $1 million, and increasing
the statutory investment limitation to $2.5 million. The
bill couples for Iowa individual income tax purposes with the
changes made to the IRC §179 deduction in the federal Tax Cuts
and Jobs Act beginning in tax year 2019, but limits the maximum
deduction to $100,000, and sets the investment limitation at
$400,000.
If the total IRC §179 deduction allocated to a taxpayer from
one or more partnerships, S corporations, or limited liability
companies exceeds $100,000 in a tax year, the bill allows the
taxpayer to deduct the amount in excess of $100,000 evenly over
a five-year tax period beginning in the subsequent tax year.
Taxpayers who elect to take advantage of this provision are
not allowed to take the IRC §179 deduction for the tax year
of the election on any eligible property placed in service by
the taxpayer, but are allowed to deduct depreciation on such
amounts that would otherwise be allowable under federal law,
without regard to the bonus depreciation allowance.
Under current Iowa law, for previous tax years, individual
taxpayers were required to recompute their Iowa itemized
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deductions under Code section 422.9(2) to account for
differences between the federal and Iowa treatment of the
IRC §179 deduction. The bill provides that taxpayers must
make those same adjustments to federal adjusted gross income
beginning in tax year 2019.
ALTERNATIVE MINIMUM TAX (AMT) REPEAL. Current law imposes
an AMT to the extent it exceeds an individual’s regular
tax liability. The AMT is generally calculated by adding
certain “preference” items (deductions, exemptions, and other
adjustments) back to taxable income, applying an exemption
amount, and then multiplying the resulting income amount by an
AMT rate. The bill repeals the AMT for the individual income
tax beginning in tax year 2019. The bill makes corresponding
amendments to other individual income tax provisions in the
Code to strike references to the AMT in the calculation of the
resident tax credit for income tax paid to another jurisdiction
and in the requirement for nonresidents subject to the AMT to
file an Iowa income tax return.
Current law also provides an alternative minimum tax credit,
which allows AMT paid by an individual in prior tax years to be
claimed against regular tax liability in future tax years if
the individual is not subject to the AMT in that year. With
the repeal of the individual AMT in 2019, the bill allows a
taxpayer to claim any remaining alternative minimum tax credit
against the individual’s regular tax liability for the 2019 tax
year, and the bill then repeals the alternative minimum tax
credit beginning in tax year 2020.
FEDERAL DEDUCTIBILITY LIMITATION AND POSSIBLE REPEAL. When
calculating taxable income under current law for purposes of
the individual income tax, individuals are allowed to deduct
federal income taxes paid, net of any federal income tax
refunds received. The bill limits the deduction beginning in
the 2019 tax year, depending on the tax rate category in effect
for the tax year. Individuals are permitted to deduct 100
percent of federal income taxes paid for tax year 2018 (whether
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paid in calendar year 2018 or 2019), and either 25 percent
or 15 percent of federal income taxes paid for a tax year in
which the rates in tax rate category I or II, respectively,
were applicable (whether paid during the tax year or during the
following calendar year), net of any federal income tax refunds
received during those years to the extent the federal income
tax was deducted for a prior tax year. Federal income tax paid
during a tax year is not deductible to the extent the payment
is for a tax year during which the tax rates in category III,
IV, or V, were applicable.
STANDARD DEDUCTION INCREASES. When calculating taxable
income for purposes of the individual income tax, individuals
are allowed to choose between a standard deduction or itemized
deductions. The standard deduction under current law for tax
year 2018 is $2,030 for a single person or a married person who
files separately, and is $5,000 for a married couple filing
jointly, a surviving spouse, or a head of household. These
amounts are indexed to inflation and increased each year.
The bill increases the standard deduction amounts beginning
in tax year 2019 to $4,000 for a single person or a married
person who files separately, and to $8,000 for a married couple
filing jointly, a surviving spouse, or a head of household.
The bill also provides for an additional standard deduction
amount for each individual who at the close of the tax year
is 65 or older or is blind. The determination of whether an
individual is blind is the same as for the personal exemption
credit under Code section 422.12. The additional standard
deduction amount is $1,500 per person, and is doubled if the
person is both 65 or older and blind at the end of the tax year.
The bill increases each of these additional standard deduction
amounts to $2,070 per person in the event the tax rates in
category III, IV, or V, become effective in future tax years.
The bill indexes these standard deduction amounts, including
the additional standard deduction amounts, to inflation so they
will be increased in future tax years.
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QUALIFIED BUSINESS INCOME DEDUCTION. The federal Tax Cuts
and Jobs Act of 2017 created a deduction in calculating federal
taxable income for noncorporate taxpayers of up to 20 percent
of certain domestic qualified business income earned by a
taxpayer from a partnership, S corporation, limited liability
company, other pass-through entity, or a sole proprietorship.
The deduction is calculated under section 199A of the IRC
and includes numerous limitations based on the type of trade
or business involved, the income of the trade or business,
and the income of the taxpayer claiming the deduction. The
federal deduction applies to tax years 2018 through 2025, and
is available to a taxpayer regardless of whether the taxpayer
claims the standard deduction or itemized deductions for
federal tax purposes.
The bill provides a deduction in computing Iowa taxable
income for purposes of the individual income tax equal to 25
percent of the taxpayer’s qualified business income deduction
allowed for federal income tax purposes beginning in tax
year 2019. With regard to individuals, the Iowa deduction
is available regardless of whether the individual claims
the standard deduction or itemized deductions for Iowa tax
purposes. With regard to an estate or trust, the starting
point for calculating Iowa income tax will include the full
amount of the federal qualified business income deduction, so
the bill requires the estate or trust to add back 75 percent of
such amount when calculating Iowa taxable income.
The bill provides special rules for calculating the
qualified business income deduction in the case of an entity
filing an Iowa composite income tax return on behalf of all of
the entity’s nonresident partners, members, beneficiaries, or
shareholders. In such cases, the deduction on the composite
return shall be an amount equal to 25 percent of the federal
qualified business income deduction that would be allowable to
an individual reporting the same items of income and loss that
are included on the composite return.
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EFFECTIVE DATE AND APPLICABILITY. The division takes effect
January 1, 2019, and applies to tax years beginning on or after
that date.
DIVISION III —— CHANGES TO IOWA EDUCATIONAL SAVINGS PLAN
TRUST AND IOWA ABLE SAVINGS PLAN TRUST. Division III makes
several changes to the Iowa educational savings plan trust in
Code chapter 12D (Iowa 529 plan), the disabilities expenses
savings plan trust in Code chapter 12I (Iowa ABLE plan), and
the income tax treatment of contributions to and withdrawals
from such plans.
IRC §529, which governs state tuition programs, previously
required that in order for a state tuition program to be
considered qualified and therefore eligible for certain
federal tax benefits, the program must be established to
allow contributions for the purposes of funding certain
qualifying expenses of attendance at institutions of higher
education. Accordingly, the Iowa 529 plan allows participants
to contribute and withdraw funds to and from the Iowa 529 plan
for the payment of higher education costs related to attendance
at institutions of higher education.
The federal Tax Cuts and Jobs Act of 2017 amended IRC
§529 to provide that during each tax year, up to $10,000 of
cash distributions from all qualified tuition programs for a
beneficiary for tuition expenses in connection with enrollment
or attendance at an elementary or secondary public, private,
or religious school, may be considered a distribution for
qualified higher education expenses and thus excludable from
income for federal income tax purposes. The federal Tax
Cuts and Jobs Act of 2017 also provided that under certain
conditions, amounts in qualified tuition programs may be
transferred to a qualified ABLE account without incurring
federal income tax consequences.
This bill amends the Iowa 529 plan to provide for qualified
withdrawals from the plan for elementary or secondary school
tuition as is now allowed under federal law pursuant to the
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federal Tax Cuts and Jobs Act of 2017. The bill modifies the
findings and purpose provision of the Iowa 529 plan in Code
section 12D.1(1) by striking or amending specific references
to higher education and institutions of higher education so
that such provisions more generally reference education and
educational institutions, and by providing that the Iowa 529
plan’s purpose is to make available an opportunity to invest in
a public trust to fund future formal education needs.
The bill strikes the definition of “higher education costs”,
as well as numerous references to that term throughout the Iowa
529 plan, and replaces them with the term “qualified education
expenses”, which is defined in the bill to mean the same as
qualified higher education expenses as defined in IRC §529,
including elementary and secondary school tuition to the extent
such tuition amounts are described and allowed under IRC §529.
The bill also replaces numerous references to “institution
of higher education” throughout the Iowa 529 plan with
references to a “qualified educational institution”, which
is defined in the bill to include an institution of higher
education and any elementary or secondary, public, private, or
religious school described in IRC §529.
The federal Tax Cuts and Jobs Act of 2017 also amended
IRC §529 to allow certain transfers from a qualified tuition
program to an ABLE account without incurring federal income tax
consequences. The bill amends the Iowa 529 plan to provide
that a participant may transfer amounts in an Iowa 529 plan to
an ABLE account, including the Iowa ABLE plan, if the transfer
is permitted under IRC §529. The Iowa 529 plan is further
amended to allow the transfer of funds to another account in
the Iowa 529 plan, if the transfer is permitted under IRC §529.
Several other modifications are made to the Iowa 529 plan
to remove references to the imposition of penalties for
cancellation and late payments under the trust, to remove
certain references to the ability to amend participation
agreements, to describe rules and procedures for determining
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account successors in the case of death of a participant, and
to modify the permissible investment direction that may be
provided by participants and beneficiaries under the trust.
Finally, the bill adds Iowa 529 plan accounts to the list of
exemptions from execution under Code section 627.6.
Under current law in Code section 422.7(32)(c), previously
tax-deducted contributions to an Iowa 529 plan that are
withdrawn for purposes other than the payment of qualified
education expenses are required to be added back to income
in computing Iowa individual income tax. The bill amends
this provision to provide that Iowa 529 plan withdrawals of
previously tax-deducted contributions must be added back to
Iowa income unless the amount is a withdrawal or transfer
for one of three eligible purposes. First, for the payment
of qualified higher education expenses. Second, for the
payment of tuition to an elementary or secondary school if the
tuition amounts are qualified education expenses. Third, for a
change in beneficiaries under, or transfer to another account
within, the Iowa 529 plan, or a transfer to the Iowa ABLE plan,
provided such beneficiary change or transfer is permitted under
the Iowa 529 plan. The bill defines “institution of higher
education” and “tuition” to mean the same as defined under
the Iowa 529 plan. The bill defines “elementary or secondary
school” to mean an elementary or secondary school in this state
which is accredited under Code section 256.11 (educational
standards), and adheres to the provisions of the federal
Civil Rights Act of 1964 and Code chapter 216 (civil rights
commission). The bill defines “qualified higher education
expenses” to mean the same as defined under IRC §529.
The bill amends the income tax treatment of contributions
to and withdrawals from the Iowa ABLE plan to provide that a
contribution shall not be deducted from Iowa income tax to the
extent it represents a transfer from the Iowa 529 plan that was
previously deducted as a contribution to the Iowa 529 plan,
and that amounts resulting from a cancellation or withdrawal
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from the Iowa ABLE plan for purposes other than the payment of
qualified disability expenses shall be added back to income in
computing Iowa individual income tax to the extent the amount
was previously transferred from the Iowa 529 plan and deducted
as a contribution to the Iowa 529 plan.
The division takes effect upon enactment and applies
retroactively to January 1, 2018, for withdrawals and transfers
from the Iowa educational savings plan trust made on or after
that date, and for tax years beginning on or after that date.
DIVISION IV —— SALES AND USE TAXES. Division IV makes
numerous changes to the sales and use taxes, including the
local option sales tax.
SPECIFIED DIGITAL PRODUCTS. The bill imposes the sales and
use tax at a rate of six percent on the sale or use of specified
digital products in Iowa. The bill defines “specified digital
products” as electronically transferred digital audio-visual
works, digital audio works, digital books, or other digital
products. These and other related terms are defined in
the bill in new Code section 423.1(55A). The sales or use
tax applies whether the purchaser obtains permanent use or
less than permanent use of the specified digital product,
whether the sale or use is conditioned or not conditioned upon
continued payment from the purchaser, and whether the sale or
use is on a subscription basis or is not on a subscription
basis. The bill also provides that the sale or use of digital
code that may be used to obtain or access a specified digital
product at a later date is taxed in the same manner as a
specified digital product.
The bill creates an exemption for the sale or use of
specified digital products to a non-end user, as defined in the
bill.
The bill amends numerous existing sales and use tax
exemptions to include specified digital products, including
the following: sales the state is prohibited from taxing
under the United States Constitution or the Iowa Constitution;
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sales to certain nonprofit corporations, organizations,
educational institutions, legal aid organizations, museums,
art centers, organ procurement organizations, hospitals, or
hospice facilities; sales by a state fair; sales to political
subdivisions; sales by counties or cities; casual sales; sales
of property which will be distributed as prizes to players
of certain amusement games; sales to recognized community
action agencies; uses of property for which the sales tax has
already been paid; sales in the regular course of business;
and property brought into Iowa by a nonresident and used here
temporarily. The bill amends a sales tax refund provision
relating to relief agencies that purchase property for free
distribution to the poor to include purchases of specified
digital products.
The bill makes certain other conforming amendments related
to the treatment of specified digital products for purposes
of the administration of the sales and use taxes. The bill
provides that the imposition of tax on the sale or use of
specified digital products shall not be construed as affecting
the taxability or nontaxability under other provisions of
existing law of sales or uses occurring prior to the enactment
of this division of this Act of products meeting the definition
of “specified digital products”.
SUBSCRIPTIONS AND PAY TELEVISION SERVICE. The bill amends
the definition of “sale” in Code section 423.1(50) for purposes
of the sales tax to provide that a sale includes but is not
limited to any transfer, exchange, or barter on a subscription
basis. The bill defines “subscription” in new Code section
423.1(57A).
The bill amends the taxable service of pay television to
provide that pay television includes but is not limited to
streaming video, video on-demand, and pay-per-view.
The bill provides that it is the intent of the general
assembly that these changes to the definition of “sale” and
“subscription”, and changes to the service of pay television,
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are conforming amendments consistent with current state law,
and that the amendments do not change the application of
current law but instead reflect current law both before and
after the enactment of these changes.
These changes take effect July 1, 2018.
OTHER CHANGES TO TAXABLE SERVICES. Under current law, the
services of photography and retouching are subject to the
sales and use tax, but such services are taxed as if they were
sales of tangible personal property. The bill strikes these
provisions treating photography and retouching as tangible
personal property, and adds photography and retouching to the
list of enumerated services subject to the sales and use tax.
These changes to photography and retouching take effect July
1, 2018.
Current law provides that a limousine service is subject
to the sales and use tax. The bill modifies this service to
provide that a personal transportation service shall be subject
to the sales and use tax, and includes taxis, driver services,
ride sharing services, rides for hire, and limousine services
as examples of the types of services which qualify as a taxable
personal transportation service.
Under current law, the furnishing of information services,
as defined in Code section 423.3(66), is exempt from the
sales and use tax. The bill strikes this exemption and makes
information services a taxable service for purposes of the
sales and use tax. The bill defines “information services”.
The bill additionally adds the following services to the
list of enumerated services subject to the sales and use
tax: storage of tangible or electronic files, documents, or
other records; services arising from or related to installing,
maintaining, servicing, repairing, operating, upgrading, or
enhancing specified digital products; video game services and
tournaments; and software as a service.
OTHER SALES AND USE TAX EXEMPTIONS. Current law provides
a sales and use tax exemption for access charges related to
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online computer services in Code section 423.3(65), and for any
retail sale delivered electronically in Code section 423.3(67).
The bill strikes both of these exemptions.
The bill creates a sales and use tax exemption in new
Code section 423.3(103) for certain sales to a commercial
enterprise for use exclusively by the commercial enterprise.
The exemption specifies that such a use fails to qualify as
a use exclusively by the commercial enterprise if its use
for noncommercial purposes is more than de minimis. The
bill provides that the terms “de minimis” and “noncommercial
purposes” shall be defined by the director of revenue by
rule. The bill defines “commercial enterprise” to mean the
same as defined under the machinery and equipment sales and
use tax exemption in Code section 423.3(47), which includes
businesses and manufacturers conducted for profit and centers
for data processing services to insurance companies, financial
institutions, businesses, and manufacturers, but excludes
professions and occupations and nonprofit organizations.
The exemption applies to sales of specified digital
products, and to the furnishing of the following enumerated
taxable services: storage of tangible or electronic files,
documents, or other records; information services; services
arising from or related to installing, maintaining, servicing,
repairing, operating, upgrading, or enhancing specified digital
products; and software as a service.
The bill adds the sale of services to the items that may
qualify for the sales and use tax exemption in Code section
423.3(63) relating to items purchased for the purposes of
providing them as prizes to players of certain amusement games.
SALES AND USE TAX NEXUS AND COLLECTION REQUIREMENTS. The
bill modifies the requirement of persons to collect and remit
the state sales and use taxes and the local option sales tax.
Current law requires retailers to collect sales tax for taxable
items sold at retail in the state. The bill defines “sold
at retail in the state” and other similar terms to include
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but not be limited to sales sourced to this state under Code
chapter 423 (sales and use tax), and provides that it is
the intent of the general assembly that the definition is a
conforming amendment consistent with current state law, and
that the amendment does not change the application of current
law but instead reflects current law both before and after the
enactment of the definition. The enactment of the definition
of “sold at retail in the state” takes effect July 1, 2018.
Under current law, Code section 423.15 provides general
rules for the sourcing of sales to Iowa. The bill amends a
provision in this Code section relating to when sales tax
applies to a sale sourced to Iowa, to provide that Iowa sales
tax applies to a sale sourced to Iowa made by a seller who is a
retailer maintaining a place of business in this state, or who
is subject to the new Code section 423.14A (described below).
The bill also amends provisions relating to the requirement
of retailers maintaining a place of business in this state to
collect use tax in Code sections 423.14 and 423.29, to provide
that use tax shall be collected by retailers not otherwise
required to collect sales tax under Code chapter 423 (sales and
use tax).
Under current law in Code section 423B.5, the local sales and
services tax is applicable to transactions within the areas of
the county imposing the tax. The bill amends this provision
to provide that a transaction occurring within the taxing area
includes a sale sourced to a location in that area pursuant
to the sourcing rules governing the sales and use tax (Code
sections 423.15 through 423.20).
The bill creates new Code section 423.14A that deems certain
persons, or agents of those persons, to be a retailer and
a retailer maintaining a place of business in this state
on or after January 1, 2019, and subjects those persons to
all requirements of Code chapter 423 (sales and use taxes),
including but not limited to the requirement to collect and
remit Iowa sales and use tax, and the requirement to collect
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and remit the local option sales tax. The bill provides that
the requirements in Code section 423.14A are in addition to,
and not in lieu of, any other application of Code chapter 423
to a retailer or a retailer maintaining a place of business in
this state. Qualifying persons required to collect and remit
Iowa sales and use tax include any person described below. For
purposes of any threshold requirement described below that
involves the sales of taxable items, the bill defines “Iowa
sales” to include any sale sourced to this state under Code
chapter 423, or otherwise sold in this state or for delivery
into this state, of tangible personal property, specified
digital products, or services.
A qualifying person includes any retailer that has gross
revenue from Iowa sales equal to or exceeding $100,000 for the
current or previous calendar year.
A qualifying person includes any retailer that makes Iowa
sales in 200 or more separate transactions for the current or
previous calendar year.
A qualifying person includes any retailer that owns,
licenses, or uses software or data files (as defined in the
bill) that are installed or stored on property used in this
state.
A qualifying person includes any retailer that uses in-state
software (as defined in the bill) to make Iowa sales.
A qualifying person includes any retailer that provides, or
enters into an agreement to provide, a content distribution
network (as defined in the bill) in this state to facilitate,
accelerate, or enhance the delivery of the retailer’s internet
site to purchasers. However, this provision does not apply to
any retailer that has gross revenue from Iowa sales of less
than $100,000 for the current or previous calendar year.
A qualifying person includes any retailer that makes Iowa
sales through a marketplace provider (as defined in the bill).
However, this provision does not apply to any retailer that
has gross revenue from Iowa sales of less than $10,000 for the
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current or previous calendar year.
A qualifying person includes any marketplace provider that
makes or facilitates Iowa sales for a retailer equal to or
exceeding $100,000, or in 200 or more separate transactions for
the current or previous year. The bill requires marketplace
providers to collect Iowa sales and use tax on the entire
sales price or purchase price paid the purchaser, regardless
of the amount that will ultimately accrue to or benefit the
marketplace provider or any other person, includes other
provisions related to marketplace providers, and subjects
certain marketplace providers and retailers described in the
bill to joint and several liability for the collection and
payment of Iowa sales and use tax.
A qualifying person includes a retailer that makes Iowa
sales through the use of a solicitor (as defined in the bill).
The bill creates a presumption that a retailer has a solicitor
in this state under certain circumstances. This provision does
not apply to retailers that have gross revenue from Iowa sales
referred by solicitors of $10,000 or less for the current or
previous calendar year.
A qualifying person includes any person that owns, controls,
rents, licenses, makes available, or uses any tangible or
intangible property in this state or with a situs in this state
to make or facilitate a retail sale.
A qualifying person includes any person that enters into a
contract or agreement with a governmental entity, as defined in
the bill, including but not limited to contracts or agreements
for the provision of financial assistance or incentives such as
a tax credit, forgivable loan, grant, tax rebate, or any other
thing of value. This provision includes certain requirements
for contractors who submit bids and agreements to state
agencies similar to language in current Code section 423.2(10).
The bill strikes the similar language under existing law in
Code section 423.2(10).
A qualifying person includes any affiliate or any retailer
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that is required to collect Iowa sales and use tax, provided
the affiliate makes retail sales.
OTHER MISCELLANEOUS SALES AND USE TAX CHANGES. The bill
moves provisions relating to the deposit and transfer of sales
tax revenues in Code section 423.11 to a new Code section
423.2A, and makes corresponding changes to other provisions of
the Code that reference those deposit and transfer provisions.
The bill amends the definition of “lease or rental”, “use”,
“use tax”, and “user” in Code section 423.1. The bill also
amends the definition of “bundled transaction” in Code section
423.2(8) to incorporate certain language also included in
the definition of “bundled transaction” for purposes of the
streamlined sales tax agreement, of which Iowa is a member
state. The changes to the definition of bundled transaction
take effect July 1, 2018.
The bill defines “personal property” for purposes of the
sales and use tax to include but not be limited to tangible
personal property and specified digital products.
The bill amends the definition of “place of business” in
Code section 423.1 to include places where specified digital
products or services are offered for sale, and provides that
it is the intent of the general assembly that the change to
the definition is a conforming amendment consistent with
current state law, and that the amendment does not change the
application of current law but instead reflects current law
both before and after the enactment of the change. These
changes to the definition of “place of business” take effect
July 1, 2018.
The bill provides that when any retailer required under
Iowa law to collect and remit sales and use tax fails to do
so, the retailer and any affiliate that directly, indirectly,
or constructively controls the retailer shall be held jointly
and severally liable for the tax and any resulting penalty and
interest, regardless of whether the affiliate is a retailer.
The bill provides the department the authority to assess
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the full amount of any tax, penalty, or interest against
the retailer and these affiliates, and gives the department
discretion to disregard or look through any organizational
structure of an enterprise to assess tax, penalty, and interest
against an affiliate of a retailer. The term “affiliate” for
purposes of these provisions is defined under existing law in
Code section 423.1(2).
Finally, the bill adds several Code sections relating to
the requirement to collect sales and use tax to the provisions
for which failure to comply may subject a retailer to personal
liability under Code section 421.26.
EFFECTIVE DATE PROVISIONS. Except as otherwise provided
above, the division takes effect January 1, 2019.
DIVISION V —— HOTEL AND MOTEL EXCISE TAX AND AUTOMOBILE
RENTAL EXCISE TAX. The bill amends the hotel and motel excise
tax in Code chapter 423A and the automobile rental excise tax
in Code chapter 423C to expand the types of persons who must
collect and remit the excise taxes, and to make other changes
to the administration of the taxes.
Current law requires lessors, as defined with respect to
each excise tax, to collect the excise tax. The bill amends
the definition of “lessor” under each tax to more broadly
include any person who acquires a right or interest in lodging
or an automobile, any person who actually or constructively
rents lodging or an automobile, lodging facilitators and rental
facilitators, and retailers who would be required to collect
the excise taxes if the excise taxes were a sales and use tax
under Code chapter 423. The bill defines a lodging facilitator
with respect to the hotel and motel excise tax, and defines a
rental facilitator with respect to the automobile rental excise
tax, to include certain persons who facilitate the renting of
the taxable items by directly or indirectly performing certain
acts with regard to the rental transaction. The bill modifies
the definition of “sales price” for purposes of the hotel
and motel excise tax and “rental price” with respect to the
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automobile rental excise tax.
The bill repeals an exemption from the hotel and motel excise
tax provided for the renting of rooms in a memorial union of an
Iowa college or university, and expands an exemption for the
renting of rooms in certain religious institutions so that it
also applies to the state and local hotel and motel excise tax.
Under current law, that exemption only applies to the local
hotel and motel excise tax.
The bill modifies the definition of “lodging” for purposes
of the hotel and motel excise tax to include a cabin,
apartment, or residential property. The bill provides that it
is the intent of the general assembly that the change to the
definition of “lodging” is a conforming amendment consistent
with current state law, and that the amendments do not change
the application of current law but instead reflect current law
both before and after the enactment of these changes. The
changes to the definition of “lodging” take effect July 1,
2018.
Finally, the bill provides that if a transaction under
either excise tax involves both a lessor and a lodging
facilitator or rental facilitator, as applicable, then both
parties will be jointly and severally liable for the applicable
tax, and further provides that the lodging facilitator or
rental facilitator shall collect the entire amount of tax
due on the transaction, regardless of the amount that will
ultimately accrue to the benefit of the lodging facilitator or
rental facilitator, or any other person.
EFFECTIVE DATE PROVISIONS. Except as otherwise provided
above, the division takes effect January 1, 2019.
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