Bill Text: IA SF470 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act modifying the tax brackets and tax rates imposed under the individual income tax and corporate income tax and including retroactive applicability provisions.
Sponsorship: Partisan Bill (Republican 1)
Status: (Introduced - Dead) 2015-03-17 - Subcommittee, Quirmbach, Bolkcom, and Breitbach. S.J. 600. [SF470 Detail]
Download: Iowa-2015-SF470-Introduced.html
Senate File 470 - Introduced SENATE FILE BY CHELGREN A BILL FOR 1 An Act modifying the tax brackets and tax rates imposed under 2 the individual income tax and corporate income tax and 3 including retroactive applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 1983XS (2) 86 mm/sc PAG LIN 1 1 Section 1. Section 422.5, subsection 1, Code 2015, is 1 2 amended to read as follows: 1 3 1. A tax is imposed upon every resident and nonresident 1 4 of the state which tax shall be levied, collected, and paid 1 5 annually upon and with respect to the entire taxable income as 1 6 defined in this division at rates as follows: 1 7 a. On all taxable income from zero through one thousand 1 8 dollars, thirty=six hundredths of one percent. 1 9 b. On all taxable income exceeding one thousand dollars but 1 10 not exceeding two thousand dollars, seventy=two hundredths of 1 11 one percent. 1 12 c. On all taxable income exceeding two thousand dollars 1 13 but not exceeding four thousand dollars, two and forty=three 1 14 hundredths percent. 1 15 d. On all taxable income exceeding four thousand dollars but 1 16 not exceeding nine thousand dollars, four and one=half percent. 1 17 e. On all taxable income exceeding nine thousand dollars 1 18but not exceeding fifteen thousand dollars,six and twelve 1 19 hundredthsfive percent. 1 20f. On all taxable income exceeding fifteen thousand dollars 1 21 but not exceeding twenty thousand dollars, six and forty=eight 1 22 hundredths percent.1 23g. On all taxable income exceeding twenty thousand dollars 1 24 but not exceeding thirty thousand dollars, six and eight=tenths 1 25 percent.1 26h. On all taxable income exceeding thirty thousand dollars 1 27 but not exceeding forty=five thousand dollars, seven and 1 28 ninety=two hundredths percent.1 29i. On all taxable income exceeding forty=five thousand 1 30 dollars, eight and ninety=eight hundredths percent.1 31j.f. (1) The tax imposed upon the taxable income of a 1 32 nonresident shall be computed by reducing the amount determined 1 33 pursuant to paragraphs "a" through"i""e" by the amounts of 1 34 nonrefundable credits under this division and by multiplying 1 35 this resulting amount by a fraction of which the nonresident's 2 1 net income allocated to Iowa, as determined in section 2 2 422.8, subsection 2, paragraph "a", is the numerator and the 2 3 nonresident's total net income computed under section 422.7 is 2 4 the denominator. This provision also applies to individuals 2 5 who are residents of Iowa for less than the entire tax year. 2 6 (2) (a) The tax imposed upon the taxable income of a 2 7 resident shareholder in an S corporation or of an estate 2 8 or trust with a situs in Iowa that is a shareholder in an S 2 9 corporation, which S corporation has in effect for the tax 2 10 year an election under subchapter S of the Internal Revenue 2 11 Code and carries on business within and without the state, 2 12 may be computed by reducing the amount determined pursuant to 2 13 paragraphs "a" through"i""e" by the amounts of nonrefundable 2 14 credits under this division and by multiplying this resulting 2 15 amount by a fraction of which the resident's or estate's 2 16 or trust's net income allocated to Iowa, as determined in 2 17 section 422.8, subsection 2, paragraph "b", is the numerator 2 18 and the resident's or estate's or trust's total net income 2 19 computed under section 422.7 is the denominator. If a resident 2 20 shareholder, or an estate or trust with a situs in Iowa 2 21 that is a shareholder, has elected to take advantage of this 2 22 subparagraph (2), and for the next tax year elects not to take 2 23 advantage of this subparagraph, the resident or estate or 2 24 trust shareholder shall not reelect to take advantage of this 2 25 subparagraph for the three tax years immediately following the 2 26 first tax year for which the shareholder elected not to take 2 27 advantage of this subparagraph, unless the director consents to 2 28 the reelection. This subparagraph also applies to individuals 2 29 who are residents of Iowa for less than the entire tax year. 2 30 (b) This subparagraph (2) shall not affect the amount of 2 31 the taxpayer's checkoffs under this division, the credits from 2 32 tax provided under this division, and the allocation of these 2 33 credits between spouses if the taxpayers filed separate returns 2 34 or separately on combined returns. 2 35 Sec. 2. Section 422.5, subsection 2, paragraph a, Code 2015, 3 1 is amended to read as follows: 3 2 a. There is imposed upon every resident and nonresident 3 3 of this state, including estates and trusts, the greater of 3 4 the tax determined in subsection 1, paragraphs "a" through"j" 3 5"f", or the state alternative minimum tax equal to seventy=five 3 6 percent of the maximum state individual income tax rate for the 3 7 tax year, rounded to the nearest one=tenth of one percent, of 3 8 the state alternative minimum taxable income of the taxpayer as 3 9 computed under this subsection. 3 10 Sec. 3. Section 422.5, subsection 6, Code 2015, is amended 3 11 to read as follows: 3 12 6. Upon determination of the latest cumulative inflation 3 13 factor, the director shall multiply each dollar amount set 3 14 forth in subsection 1, paragraphs "a" through"i""e" by this 3 15 cumulative inflation factor, shall round off the resulting 3 16 product to the nearest one dollar, and shall incorporate the 3 17 result into the income tax forms and instructions for each tax 3 18 year. 3 19 Sec. 4. Section 422.8, subsection 2, paragraph a, Code 2015, 3 20 is amended to read as follows: 3 21 a. Nonresident's net income allocated to Iowa is the net 3 22 income, or portion of net income, which is derived from a 3 23 business, trade, profession, or occupation carried on within 3 24 this state or income from any property, trust, estate, or 3 25 other source within Iowa. However, income derived from a 3 26 business, trade, profession, or occupation carried on within 3 27 this state and income from any property, trust, estate, or 3 28 other source within Iowa shall not include distributions from 3 29 pensions, including defined benefit or defined contribution 3 30 plans, annuities, individual retirement accounts, and deferred 3 31 compensation plans or any earnings attributable thereto so long 3 32 as the distribution is directly related to an individual's 3 33 documented retirement and received while the individual is a 3 34 nonresident of this state. If a business, trade, profession, 3 35 or occupation is carried on partly within and partly without 4 1 the state, only the portion of the net income which is fairly 4 2 and equitably attributable to that part of the business, 4 3 trade, profession, or occupation carried on within the state 4 4 is allocated to Iowa for purposes of section 422.5, subsection 4 5 1, paragraph"j""f", and section 422.13 and income from any 4 6 property, trust, estate, or other source partly within and 4 7 partly without the state is allocated to Iowa in the same 4 8 manner, except that annuities, interest on bank deposits and 4 9 interest=bearing obligations, and dividends are allocated 4 10 to Iowa only to the extent to which they are derived from a 4 11 business, trade, profession, or occupation carried on within 4 12 the state. 4 13 Sec. 5. Section 422.11B, Code 2015, is amended to read as 4 14 follows: 4 15 422.11B Minimum tax credit. 4 16 1. a. There is allowed as a credit against the tax 4 17 determined in section 422.5, subsection 1, paragraphs "a" 4 18 through"j""f" for a tax year an amount equal to the minimum 4 19 tax credit for that tax year. 4 20 b. The minimum tax credit for a tax year is the excess, 4 21 if any, of the net minimum tax imposed for all prior tax 4 22 years beginning on or after January 1, 1987, over the amount 4 23 allowable as a credit under this section for those prior tax 4 24 years. 4 25 2. a. The allowable credit under subsection 1 for a tax 4 26 year shall not exceed the excess, if any, of the tax determined 4 27 in section 422.5, subsection 1, paragraphs "a" through"j""f" 4 28 over the state alternative minimum tax as determined in section 4 29 422.5, subsection 2. 4 30 b. The net minimum tax for a tax year is the excess, if any, 4 31 of the tax determined in section 422.5, subsection 2, for the 4 32 tax year over the tax determined in section 422.5, subsection 4 33 1, paragraphs "a" through"j""f" for the tax year. 4 34 Sec. 6. Section 422.33, subsection 1, Code 2015, is amended 4 35 by striking the subsection and inserting in lieu thereof the 5 1 following: 5 2 1. a. A tax is imposed annually upon each corporation doing 5 3 business in this state, or deriving income from sources within 5 4 this state, at the rate of five percent of the taxable income 5 5 received by the corporation during the income year. 5 6 b. For purposes of this section, "taxable income" means the 5 7 net income as calculated in section 422.35 and determined to 5 8 be reasonably attributable to Iowa pursuant to subsections 2 5 9 and 3. 5 10 Sec. 7. Section 422.33, subsection 1A, Code 2015, is amended 5 11 to read as follows: 5 12 1A. There is imposed upon each corporation exempt from 5 13 the general business tax on corporations by section 422.34, 5 14 subsection 2, a tax at theratesrate specified in subsection 1 5 15 upon the state's apportioned share computed in accordance with 5 16 subsections 2 and 3 of the unrelated business income computed 5 17 in accordance with the Internal Revenue Code and with the 5 18 adjustments set forth in section 422.35. 5 19 Sec. 8. Section 422.33, subsection 4, paragraph a, Code 5 20 2015, is amended to read as follows: 5 21 a. In addition to all taxes imposed under this division, 5 22 there is imposed upon each corporation doing business within 5 23 the state the greater of the tax determined in subsection 1, 5 24 paragraphs "a" through "d"or the state alternative minimum tax 5 25 equal to sixty percent of the maximum state corporate income 5 26 tax rate, rounded to the nearest one=tenth of one percent, of 5 27 the state alternative minimum taxable income of the taxpayer 5 28 computed under this subsection. 5 29 Sec. 9. RETROACTIVE APPLICABILITY. This Act applies 5 30 retroactively to January 1, 2015, for tax years beginning on 5 31 or after that date. 5 32 EXPLANATION 5 33 The inclusion of this explanation does not constitute agreement with 5 34 the explanation's substance by the members of the general assembly. 5 35 This bill relates to the tax brackets and tax rates imposed 6 1 on individuals and corporations under the individual and 6 2 corporate income taxes. 6 3 INDIVIDUAL INCOME TAX. Currently, the individual income tax 6 4 is imposed in a progressive manner using nine income brackets 6 5 with increasing rates ranging from a low of 0.36 percent on the 6 6 first $1,539 of taxable income to a high of 8.98 percent on 6 7 all taxable income in excess of $69,255. The taxable income 6 8 amounts in each bracket are indexed for inflation each year by 6 9 the department of revenue. The bill eliminates the top four 6 10 tax brackets and tax rates and lowers the rate in the fifth tax 6 11 bracket from 6.12 percent to 5 percent. As a result, the new 6 12 tax rates and tax brackets (2015 amounts) are as follows: 6 13 1. From $0 to $1,539, 0.36 percent. 6 14 2. From $1,540 to $3,078, 0.72 percent. 6 15 3. From $3,079 to $6,156, 2.43 percent. 6 16 4. From $6,157 to $13,851, 4.5 percent. 6 17 5. From $13,852 and over, 5 percent. 6 18 CORPORATE INCOME TAX. Currently, the corporate income tax 6 19 is imposed in a progressive manner using four income brackets 6 20 with increasing rates ranging from a low of 6 percent on the 6 21 first $25,000 of taxable income to a high of 12 percent on 6 22 taxable income of $250,000 or more. The bill eliminates this 6 23 tiered bracket and rate structure and imposes the tax at a rate 6 24 of 5 percent on the corporation's taxable income. 6 25 The bill applies retroactively to tax years beginning on or 6 26 after January 1, 2015. LSB 1983XS (2) 86 mm/sc
