Bill Text: IA SF437 | 2021-2022 | 89th General Assembly | Introduced


Bill Title: A bill for an act relating to the child and dependent care credit and the early childhood development credit available against the individual income tax, and including retroactive applicability provisions.

Spectrum: Partisan Bill (Democrat 18-0)

Status: (Introduced) 2021-02-25 - Subcommittee: Dawson, Goodwin, and Jochum. S.J. 469. [SF437 Detail]

Download: Iowa-2021-SF437-Introduced.html
Senate File 437 - Introduced SENATE FILE 437 BY WAHLS , RAGAN , LYKAM , QUIRMBACH , J. SMITH , MATHIS , CELSI , TRONE GARRIOTT , GIDDENS , KINNEY , T. TAYLOR , JOCHUM , BISIGNANO , BOLKCOM , BOULTON , DOTZLER , HOGG , and PETERSEN A BILL FOR An Act relating to the child and dependent care credit and 1 the early childhood development credit available against 2 the individual income tax, and including retroactive 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2300XS (4) 89 jm/jh
S.F. 437 Section 1. Section 422.12C, subsection 1, Code 2021, is 1 amended to read as follows: 2 1. The taxes imposed under this subchapter , less the amounts 3 of nonrefundable credits allowed under this subchapter , shall 4 be reduced by a child and dependent care credit equal to the 5 following percentages of the federal child and dependent care 6 credit provided in section 21 of the Internal Revenue Code, 7 without regard to whether or not the federal credit was limited 8 by the taxpayer’s federal tax liability: 9 a. For a taxpayer with net income of less than ten 10 twenty-five thousand dollars, seventy-five percent. 11 b. For a taxpayer with net income of ten twenty-five 12 thousand dollars or more but less than twenty thirty-five 13 thousand dollars, sixty-five percent. 14 c. For a taxpayer with net income of twenty thirty-five 15 thousand dollars or more but less than twenty-five forty 16 thousand dollars, fifty-five percent. 17 d. For a taxpayer with net income of twenty-five forty 18 thousand dollars or more but less than thirty-five fifty 19 thousand dollars, fifty percent. 20 e. For a taxpayer with net income of thirty-five fifty 21 thousand dollars or more but less than forty sixty thousand 22 dollars, forty percent. 23 f. For a taxpayer with net income of forty sixty thousand 24 dollars or more but less than forty-five sixty-five thousand 25 dollars, thirty percent. 26 g. For a taxpayer with net income of forty-five sixty-five 27 thousand dollars or more, zero percent. 28 Sec. 2. Section 422.12C, subsection 2, paragraph a, Code 29 2021, is amended to read as follows: 30 a. The taxes imposed under this subchapter , less the amounts 31 of nonrefundable credits allowed under this subchapter , may 32 be reduced by an early childhood development tax credit equal 33 to twenty-five percent of the first one thousand dollars 34 which the taxpayer has paid to others for each dependent, as 35 -1- LSB 2300XS (4) 89 jm/jh 1/ 4
S.F. 437 defined in the Internal Revenue Code, ages three through five 1 for early childhood development expenses. In determining the 2 amount of early childhood development expenses for the tax year 3 beginning in the 2006 calendar year only, such expenses paid 4 during November and December of the previous tax year shall 5 be considered paid in the tax year for which the tax credit 6 is claimed. This credit is available to a taxpayer whose net 7 income is less than forty-five sixty-five thousand dollars. If 8 the early childhood development tax credit is claimed for a tax 9 year, the taxpayer and the taxpayer’s spouse shall not claim 10 the child and dependent care credit under subsection 1 . 11 Sec. 3. Section 422.12C, Code 2021, is amended by adding the 12 following new subsection: 13 NEW SUBSECTION . 5. a. Upon determination of the latest 14 cumulative inflation factor, the director shall multiply 15 each net income level set forth in subsection 1 or 2 by this 16 cumulative inflation factor, shall round off the resulting 17 product to the nearest one dollar, and shall incorporate the 18 result into the net income levels in subsection 1 or 2 for each 19 tax year beginning on or after January 1, 2021. 20 b. For purposes of this subsection, “cumulative inflation 21 factor” means the product of the annual inflation factor for 22 the 2021 calendar year and all annual inflation factors for 23 subsequent calendar years as determined by section 422.4, 24 subsection 1, paragraph “a” . The cumulative inflation factor 25 applies to all tax years beginning on or after January 1 of 26 the calendar year for which the latest annual inflation factor 27 has been determined. Notwithstanding any other provision, 28 the annual inflation factor for the 2021 calendar year is one 29 hundred percent. 30 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 31 retroactively to tax years beginning on or after January 1, 32 2021. 33 EXPLANATION 34 The inclusion of this explanation does not constitute agreement with 35 -2- LSB 2300XS (4) 89 jm/jh 2/ 4
S.F. 437 the explanation’s substance by the members of the general assembly. 1 This bill increases the Iowa net income threshold levels 2 for purposes of calculating the Iowa child and dependent 3 child care tax credit and the early childhood development tax 4 credit available against the individual income tax. The Iowa 5 child and dependent care tax credit is a refundable credit 6 calculated as a percentage of the nonrefundable federal child 7 and dependent care tax credit, depending on the Iowa net income 8 of the taxpayer. The early childhood development tax credit 9 is a refundable credit equaling 25 percent of the first $1,000 10 which the taxpayer has paid to others for each dependent ages 11 three through five for early childhood development expenses. 12 IOWA CHILD AND DEPENDENT CHILD CARE TAX CREDIT. Currently, 13 there are seven graduated Iowa net income thresholds used to 14 calculate the credit. The bill increases these graduated 15 thresholds, but does not change the percentage of the 16 nonrefundable federal child and dependent care tax credit 17 used to calculate the Iowa child and dependent child care tax 18 credit. 19 Currently, the credit percentages in these seven Iowa 20 net income thresholds range from a high of 75 percent of 21 the federal credit for taxpayers with net income of less 22 than $10,000, to a low of 30 percent of the federal credit 23 for taxpayers with net income of $40,000 or more but less 24 than $45,000. Under the bill, the credit percentages in the 25 thresholds range from a high of 75 percent of the federal 26 credit for taxpayers with a net income of less than $25,000, 27 to a low of 30 percent of the federal credit for taxpayers with 28 net income of $60,000 or more but less than $65,000. 29 The bill also adjusts the future amount of each of the Iowa 30 net income amounts in the seven graduated Iowa net income 31 thresholds by indexing the thresholds to inflation. 32 EARLY CHILDHOOD DEVELOPMENT TAX CREDIT. The bill increases 33 the income threshold determining the eligibility of a taxpayer 34 for the early childhood development tax credit. The bill 35 -3- LSB 2300XS (4) 89 jm/jh 3/ 4
S.F. 437 increases the eligibility threshold from a taxpayer earning 1 $45,000 per year to $65,000 per year. By increasing the 2 eligibility threshold, taxpayers earning less than $65,000 are 3 now eligible to take the early childhood development tax credit 4 equaling 25 percent of the first $1,000 which the taxpayer has 5 paid to others for early childhood development expenses for 6 each dependent ages three through five. The bill also adjusts 7 the future amount of the net income threshold by indexing the 8 threshold to inflation. 9 APPLICABILITY. The bill applies retroactively to tax years 10 beginning on or after January 1, 2021. 11 -4- LSB 2300XS (4) 89 jm/jh 4/ 4
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