Bill Text: IA SF2164 | 2013-2014 | 85th General Assembly | Introduced
Bill Title: A bill for an act relating to the individual income tax by modifying the income tax brackets and tax rates, increasing the net income amounts for purposes of the alternate tax and minimum filing thresholds, eliminating the deduction for federal income taxes paid, increasing the personal exemption credit for dependents, and creating an exemption for certain married wage earners, and including effective date and retroactive applicability provisions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-18 - Subcommittee, Bolkcom, Feenstra, and Quirmbach. S.J. 285. [SF2164 Detail]
Download: Iowa-2013-SF2164-Introduced.html
Senate
File
2164
-
Introduced
SENATE
FILE
2164
BY
HATCH
A
BILL
FOR
An
Act
relating
to
the
individual
income
tax
by
modifying
the
1
income
tax
brackets
and
tax
rates,
increasing
the
net
income
2
amounts
for
purposes
of
the
alternate
tax
and
minimum
filing
3
thresholds,
eliminating
the
deduction
for
federal
income
4
taxes
paid,
increasing
the
personal
exemption
credit
for
5
dependents,
and
creating
an
exemption
for
certain
married
6
wage
earners,
and
including
effective
date
and
retroactive
7
applicability
provisions.
8
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
9
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Section
1.
Section
422.4,
subsection
1,
paragraphs
b
and
c,
1
Code
2014,
are
amended
to
read
as
follows:
2
b.
“Cumulative
inflation
factor”
means
the
product
of
the
3
annual
inflation
factor
for
the
1988
2014
calendar
year
and
4
all
annual
inflation
factors
for
subsequent
calendar
years
5
as
determined
pursuant
to
this
subsection
.
The
cumulative
6
inflation
factor
applies
to
all
tax
years
beginning
on
or
after
7
January
1
of
the
calendar
year
for
which
the
latest
annual
8
inflation
factor
has
been
determined.
9
c.
The
annual
inflation
factor
for
the
1988
2014
calendar
10
year
is
one
hundred
percent.
11
Sec.
2.
Section
422.4,
subsection
16,
Code
2014,
is
amended
12
to
read
as
follows:
13
16.
The
words
“taxable
income”
mean
the
net
income
as
14
defined
in
section
422.7
minus
the
deductions
allowed
by
15
section
422.9
,
in
the
case
of
individuals;
in
the
case
of
16
estates
or
trusts,
the
words
“taxable
income”
mean
the
taxable
17
income
(without
a
deduction
for
personal
exemption)
as
computed
18
for
federal
income
tax
purposes
under
the
Internal
Revenue
19
Code,
but
with
the
adjustments
specified
in
section
422.7
plus
20
the
Iowa
income
tax
deducted
in
computing
the
federal
taxable
21
income
and
minus
federal
income
taxes
as
provided
in
section
22
422.9
,
if
available
.
23
Sec.
3.
Section
422.5,
subsection
1,
paragraphs
a,
b,
c,
24
d,
e,
f,
g,
h,
and
i,
Code
2014,
are
amended
by
striking
the
25
paragraphs
and
inserting
in
lieu
thereof
the
following:
26
a.
On
all
taxable
income
from
zero
through
eleven
thousand
27
seven
hundred
thirty
dollars,
three
percent.
28
b.
On
all
taxable
income
exceeding
eleven
thousand
seven
29
hundred
thirty
dollars
but
not
exceeding
forty-three
thousand
30
ninety
dollars,
four
percent.
31
c.
On
all
taxable
income
exceeding
forty-three
thousand
32
ninety
dollars
but
not
exceeding
eighty-eight
thousand
eight
33
hundred
twenty-one
dollars,
six
and
two-tenths
percent.
34
d.
On
all
taxable
income
exceeding
eighty-eight
thousand
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eight
hundred
twenty-one
dollars,
eight
and
eight-tenths
1
percent.
2
Sec.
4.
Section
422.5,
subsection
1,
paragraph
j,
3
subparagraph
(1),
Code
2014,
is
amended
to
read
as
follows:
4
(1)
The
tax
imposed
upon
the
taxable
income
of
a
nonresident
5
shall
be
computed
by
reducing
the
amount
determined
pursuant
to
6
paragraphs
“a”
through
“i”
“d”
by
the
amounts
of
nonrefundable
7
credits
under
this
division
and
by
multiplying
this
resulting
8
amount
by
a
fraction
of
which
the
nonresident’s
net
income
9
allocated
to
Iowa,
as
determined
in
section
422.8,
subsection
10
2
,
paragraph
“a”
,
is
the
numerator
and
the
nonresident’s
total
11
net
income
computed
under
section
422.7
is
the
denominator.
12
This
provision
also
applies
to
individuals
who
are
residents
of
13
Iowa
for
less
than
the
entire
tax
year.
14
Sec.
5.
Section
422.5,
subsection
1,
paragraph
j,
15
subparagraph
(2),
subparagraph
division
(a),
Code
2014,
is
16
amended
to
read
as
follows:
17
(a)
The
tax
imposed
upon
the
taxable
income
of
a
resident
18
shareholder
in
an
S
corporation
or
of
an
estate
or
trust
with
19
a
situs
in
Iowa
that
is
a
shareholder
in
an
S
corporation,
20
which
S
corporation
has
in
effect
for
the
tax
year
an
election
21
under
subchapter
S
of
the
Internal
Revenue
Code
and
carries
22
on
business
within
and
without
the
state,
may
be
computed
by
23
reducing
the
amount
determined
pursuant
to
paragraphs
“a”
24
through
“i”
“d”
by
the
amounts
of
nonrefundable
credits
under
25
this
division
and
by
multiplying
this
resulting
amount
by
a
26
fraction
of
which
the
resident’s
or
estate’s
or
trust’s
net
27
income
allocated
to
Iowa,
as
determined
in
section
422.8,
28
subsection
2
,
paragraph
“b”
,
is
the
numerator
and
the
resident’s
29
or
estate’s
or
trust’s
total
net
income
computed
under
section
30
422.7
is
the
denominator.
If
a
resident
shareholder,
or
an
31
estate
or
trust
with
a
situs
in
Iowa
that
is
a
shareholder,
32
has
elected
to
take
advantage
of
this
subparagraph
(2),
and
33
for
the
next
tax
year
elects
not
to
take
advantage
of
this
34
subparagraph,
the
resident
or
estate
or
trust
shareholder
shall
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not
reelect
to
take
advantage
of
this
subparagraph
for
the
1
three
tax
years
immediately
following
the
first
tax
year
for
2
which
the
shareholder
elected
not
to
take
advantage
of
this
3
subparagraph,
unless
the
director
consents
to
the
reelection.
4
This
subparagraph
also
applies
to
individuals
who
are
residents
5
of
Iowa
for
less
than
the
entire
tax
year.
6
Sec.
6.
Section
422.5,
subsection
2,
paragraph
a,
Code
2014,
7
is
amended
to
read
as
follows:
8
a.
There
is
imposed
upon
every
resident
and
nonresident
of
9
this
state,
including
estates
and
trusts,
the
greater
of
the
10
tax
determined
in
subsection
1
,
paragraphs
“a”
through
“d”
and
11
“j”
,
or
the
state
alternative
minimum
tax
equal
to
seventy-five
12
percent
of
the
maximum
state
individual
income
tax
rate
for
the
13
tax
year,
rounded
to
the
nearest
one-tenth
of
one
percent,
of
14
the
state
alternative
minimum
taxable
income
of
the
taxpayer
as
15
computed
under
this
subsection
.
16
Sec.
7.
Section
422.5,
subsection
3,
Code
2014,
is
amended
17
to
read
as
follows:
18
3.
a.
The
tax
shall
not
be
imposed
on
a
resident
or
19
nonresident
whose
net
income,
as
defined
in
section
422.7
,
is
20
thirteen
twenty-four
thousand
five
hundred
dollars
or
less
in
21
the
case
of
married
persons
filing
jointly
or
filing
separately
22
on
a
combined
return,
heads
of
household,
and
surviving
spouses
23
or
nine
twenty
thousand
dollars
or
less
in
the
case
of
all
24
other
persons;
but
in
the
event
that
the
payment
of
tax
under
25
this
division
would
reduce
the
net
income
to
less
than
thirteen
26
twenty-four
thousand
five
hundred
dollars
or
nine
twenty
27
thousand
dollars
,
as
applicable,
then
the
tax
shall
be
reduced
28
to
that
amount
which
would
result
in
allowing
the
taxpayer
29
to
retain
a
net
income
of
thirteen
twenty-four
thousand
five
30
hundred
dollars
or
nine
twenty
thousand
dollars
,
as
applicable.
31
The
preceding
sentence
does
not
apply
to
estates
or
trusts.
32
For
the
purpose
of
this
subsection
,
the
entire
net
income,
33
including
any
part
of
the
net
income
not
allocated
to
Iowa,
34
shall
be
taken
into
account.
For
purposes
of
this
subsection
,
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net
income
includes
all
amounts
of
pensions
or
other
retirement
1
income
received
from
any
source
which
is
not
taxable
under
2
this
division
as
a
result
of
the
government
pension
exclusions
3
in
section
422.7
,
or
any
other
state
law.
If
the
combined
4
net
income
of
a
husband
and
wife
exceeds
thirteen
twenty-four
5
thousand
five
hundred
dollars,
neither
of
them
shall
receive
6
the
benefit
of
this
subsection
,
and
it
is
immaterial
whether
7
they
file
a
joint
return
or
separate
returns.
However,
if
a
8
husband
and
wife
file
separate
returns
and
have
a
combined
net
9
income
of
thirteen
twenty-four
thousand
five
hundred
dollars
10
or
less,
neither
spouse
shall
receive
the
benefit
of
this
11
paragraph,
if
one
spouse
has
a
net
operating
loss
and
elects
12
to
carry
back
or
carry
forward
the
loss
as
provided
in
section
13
422.9,
subsection
3
.
A
person
who
is
claimed
as
a
dependent
14
by
another
person
as
defined
in
section
422.12
shall
not
15
receive
the
benefit
of
this
subsection
if
the
person
claiming
16
the
dependent
has
net
income
exceeding
thirteen
twenty-four
17
thousand
five
hundred
dollars
or
nine
twenty
thousand
dollars
,
18
as
applicable
,
or
the
person
claiming
the
dependent
and
the
19
person’s
spouse
have
combined
net
income
exceeding
thirteen
20
twenty-four
thousand
five
hundred
dollars
or
nine
twenty
21
thousand
dollars
,
as
applicable.
22
b.
In
lieu
of
the
computation
in
subsection
1
or
2,
or
in
23
paragraph
“a”
of
this
subsection
,
if
the
married
persons’,
24
filing
jointly
or
filing
separately
on
a
combined
return,
25
head
of
household’s,
or
surviving
spouse’s
net
income
exceeds
26
thirteen
twenty-four
thousand
five
hundred
dollars,
the
regular
27
tax
imposed
under
this
division
shall
be
the
lesser
of
the
28
maximum
state
individual
income
tax
rate
times
the
portion
29
of
the
net
income
in
excess
of
thirteen
twenty-four
thousand
30
five
hundred
dollars
or
the
regular
tax
liability
computed
31
without
regard
to
this
sentence.
Taxpayers
electing
to
file
32
separately
shall
compute
the
alternate
tax
described
in
this
33
paragraph
using
the
total
net
income
of
the
husband
and
wife.
34
The
alternate
tax
described
in
this
paragraph
does
not
apply
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if
one
spouse
elects
to
carry
back
or
carry
forward
the
loss
as
1
provided
in
section
422.9,
subsection
3
.
2
Sec.
8.
Section
422.5,
subsection
6,
Code
2014,
is
amended
3
to
read
as
follows:
4
6.
Upon
determination
of
the
latest
cumulative
inflation
5
factor,
the
director
shall
multiply
each
dollar
amount
set
6
forth
in
subsection
1
,
paragraphs
“a”
through
“i”
“d”
by
this
7
cumulative
inflation
factor,
shall
round
off
the
resulting
8
product
to
the
nearest
one
dollar,
and
shall
incorporate
the
9
result
into
the
income
tax
forms
and
instructions
for
each
tax
10
year.
11
Sec.
9.
Section
422.7,
Code
2014,
is
amended
by
adding
the
12
following
new
subsection:
13
NEW
SUBSECTION
.
48.
a.
Subtract,
to
the
extent
not
14
otherwise
excluded,
the
total
amount
of
wages
received
by
a
15
secondary
wage
earner,
up
to
a
maximum
of
one
thousand
dollars.
16
b.
Subtract,
to
the
extent
not
otherwise
excluded,
the
total
17
amount
of
wages
received
by
an
identical
wage
earner,
up
to
a
18
maximum
of
five
hundred
dollars
per
identical
wage
earner.
19
c.
For
purposes
of
this
subsection:
20
(1)
“Identical
wage
earner”
means
a
married
person
who,
with
21
respect
to
a
tax
year,
received
the
same
amount
of
wages
as
the
22
spouse
of
the
married
person.
23
(2)
“Secondary
wage
earner”
means
a
married
person
who,
with
24
respect
to
a
tax
year,
received
a
lower
amount
of
wages
than
25
the
spouse
of
the
married
person.
26
Sec.
10.
Section
422.9,
subsection
1,
Code
2014,
is
amended
27
to
read
as
follows:
28
1.
An
optional
standard
deduction,
after
deduction
29
of
federal
income
tax
if
available
,
equal
to
one
thousand
30
two
hundred
thirty
dollars
for
a
married
person
who
files
31
separately
or
a
single
person
or
equal
to
three
thousand
32
thirty
dollars
for
a
husband
and
wife
who
file
a
joint
return,
33
a
surviving
spouse,
or
a
head
of
household.
The
optional
34
standard
deduction
shall
not
exceed
the
amount
remaining
after
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deduction
of
the
federal
income
tax
,
if
available
.
The
amount
1
of
federal
income
tax
deducted
shall
be
computed
as
provided
2
in
subsection
2
,
paragraph
“b”
.
3
Sec.
11.
Section
422.9,
subsection
2,
paragraph
b,
Code
4
2014,
is
amended
to
read
as
follows:
5
b.
Add
the
amount
of
federal
income
taxes
paid
or
accrued,
6
as
the
case
may
be,
during
the
tax
year
beginning
on
or
after
7
January
1,
2014,
but
before
January
1,
2015,
to
the
extent
8
payment
is
for
a
tax
year
beginning
prior
to
January
1,
2014,
9
and
subtract
any
federal
income
tax
refunds
received
during
10
the
tax
year
beginning
on
or
after
January
1,
2014,
but
before
11
January
1,
2015,
to
the
extent
the
federal
income
tax
was
12
deducted
for
a
tax
year
beginning
prior
to
January
1,
2014
.
13
Where
married
persons,
who
have
filed
a
joint
federal
income
14
tax
return,
file
separately,
such
total
shall
be
divided
15
between
them
according
to
the
portion
of
the
total
paid
or
16
accrued,
as
the
case
may
be,
by
each.
Federal
income
taxes
17
paid
for
a
tax
year
in
which
an
Iowa
return
was
not
required
18
to
be
filed
shall
not
be
added
and
federal
income
tax
refunds
19
received
from
a
tax
year
in
which
an
Iowa
return
was
not
20
required
to
be
filed
shall
not
be
subtracted.
21
Sec.
12.
Section
422.11B,
subsection
1,
paragraph
a,
Code
22
2014,
is
amended
to
read
as
follows:
23
a.
There
is
allowed
as
a
credit
against
the
tax
determined
24
in
section
422.5,
subsection
1
,
paragraphs
“a”
through
“d”
and
25
“j”
for
a
tax
year
an
amount
equal
to
the
minimum
tax
credit
for
26
that
tax
year.
27
Sec.
13.
Section
422.11B,
subsection
2,
Code
2014,
is
28
amended
to
read
as
follows:
29
2.
a.
The
allowable
credit
under
subsection
1
for
a
tax
30
year
shall
not
exceed
the
excess,
if
any,
of
the
tax
determined
31
in
section
422.5,
subsection
1
,
paragraphs
“a”
through
“d”
and
32
“j”
over
the
state
alternative
minimum
tax
as
determined
in
33
section
422.5,
subsection
2
.
34
b.
The
net
minimum
tax
for
a
tax
year
is
the
excess,
if
any,
35
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of
the
tax
determined
in
section
422.5,
subsection
2
,
for
the
1
tax
year
over
the
tax
determined
in
section
422.5,
subsection
2
1
,
paragraphs
“a”
through
“d”
and
“j”
for
the
tax
year.
3
Sec.
14.
Section
422.12,
subsection
2,
paragraph
a,
4
subparagraph
(3),
Code
2014,
is
amended
to
read
as
follows:
5
(3)
For
each
dependent,
an
additional
forty
five
hundred
6
dollars.
7
Sec.
15.
Section
422.13,
subsection
1,
paragraph
a,
Code
8
2014,
is
amended
to
read
as
follows:
9
a.
The
individual
has
net
income
of
more
than
nine
twenty
10
thousand
dollars
for
the
tax
year
from
sources
taxable
under
11
this
division
.
12
Sec.
16.
EFFECTIVE
UPON
ENACTMENT.
This
Act,
being
deemed
13
of
immediate
importance,
takes
effect
upon
enactment.
14
Sec.
17.
RETROACTIVE
APPLICABILITY.
This
Act
applies
15
retroactively
to
January
1,
2014,
for
tax
years
beginning
on
16
or
after
that
date.
17
EXPLANATION
18
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
19
the
explanation’s
substance
by
the
members
of
the
general
assembly.
20
This
bill
makes
several
changes
to
the
individual
income
21
tax.
22
The
bill
eliminates
the
nine
existing
tax
brackets
and
tax
23
rates
and
replaces
them
with
four
tax
brackets
and
tax
rates
24
on
taxable
income
as
follows:
25
1.
From
$0
to
$11,730,
3
percent;
26
2.
From
$11,731
to
$43,090,
4
percent;
27
3.
From
$43,091
to
$88,821,
6.20
percent;
28
4.
From
$88,822
and
over,
8.80
percent.
29
The
income
amounts
in
each
bracket
will
be
adjusted
for
30
inflation
beginning
with
the
2015
tax
year.
31
The
bill
increases
the
net
income
amounts
at
which
the
income
32
tax
will
not
be
imposed
on
a
taxpayer
who
is
under
65
years
of
33
age
to
$24,500
from
$13,500
for
married
taxpayers,
heads
of
34
household,
or
surviving
spouses,
and
to
$20,000
from
$9,000
35
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for
a
single
taxpayer.
The
bill
also
amends
the
alternate
1
tax
calculation
for
a
married
person,
head
of
household,
or
2
surviving
spouse
under
the
age
of
65
so
that
it
is
calculated
3
using
the
amount
of
net
income
in
excess
of
$24,500
instead
4
of
the
amount
of
income
in
excess
of
$13,500.
By
operation
5
of
law
and
under
the
bill,
a
single
taxpayer
under
65
years
6
of
age
will
not
be
required
to
make
and
file
a
tax
return
if
7
the
taxpayer’s
net
income
is
$20,000
or
less,
and
a
married
8
taxpayer,
head
of
household,
or
surviving
spouse
will
not
be
9
required
to
make
and
file
a
tax
return
if
the
taxpayer’s
net
10
income
is
$24,500
or
less.
11
The
bill
eliminates
the
deduction
for
federal
income
taxes
12
paid
and
the
inclusion
of
federal
income
tax
refunds
received
13
except
for
a
one-year
phase-out
in
2014,
for
taxes
paid
or
14
refunds
received
in
that
year
that
relate
to
a
prior
tax
year.
15
The
bill
increases
the
personal
exemption
credit
for
a
16
dependent
to
$500
from
$40.
17
Finally,
the
bill
provides
an
individual
income
tax
18
exemption
from
the
computation
of
net
income
for
the
first
19
$1,000
of
wages
received
by
a
“secondary
wage
earner”,
which
is
20
defined
in
the
bill
to
be
a
married
person
who,
with
respect
to
21
a
tax
year,
received
a
lower
amount
of
wages
than
the
person’s
22
spouse.
In
the
event
each
spouse
received
the
same
amount
of
23
wages
during
the
tax
year,
both
spouses
will
be
considered
an
24
“identical
wage
earner”
and
each
will
be
eligible
to
exempt
the
25
first
$500
of
wages
received.
26
The
bill
takes
effect
upon
enactment
and
applies
27
retroactively
to
January
1,
2014,
for
tax
years
beginning
on
28
or
after
that
date.
29
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