Senate File 86 - Introduced SENATE FILE 86 BY BERTRAND , FEENSTRA , ANDERSON , ERNST , WHITVER , BOETTGER , GUTH , SMITH , JOHNSON , KAPUCIAN , ROZENBOOM , SEGEBART , HOUSER , BEHN , SINCLAIR , ZUMBACH , SCHNEIDER , BREITBACH , DIX , and SORENSON (COMPANION TO HF 1 BY SANDS) A BILL FOR An Act relating to the taxpayers trust fund by modifying the 1 transfer of moneys from the Iowa economic emergency fund 2 to the taxpayers trust fund, allowing transfers from the 3 taxpayers trust fund, creating an Iowa taxpayers trust fund 4 tax credit and fund and providing for the transfer of moneys 5 from the taxpayers trust fund for purposes of the credit, 6 and including effective date and retroactive applicability 7 provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 1420XS (4) 85 mm/sc

S.F. 86 DIVISION I 1 TAXPAYERS TRUST FUND 2 Section 1. Section 8.54, subsection 5, Code 2013, is amended 3 by striking the subsection. 4 Sec. 2. Section 8.55, subsection 2, Code 2013, is amended 5 to read as follows: 6 2. The maximum balance of the fund is the amount equal to 7 two and one-half percent of the adjusted revenue estimate for 8 the fiscal year. If the amount of moneys in the Iowa economic 9 emergency fund is equal to the maximum balance, moneys in 10 excess of this amount shall be distributed as follows: 11 a. The first sixty million dollars of the difference between 12 the actual net revenue for the general fund of the state for 13 the fiscal year and the adjusted revenue estimate for the 14 fiscal year shall be transferred to the taxpayers trust fund. 15 b. The remainder of the excess, if any, shall be transferred 16 to the general fund of the state. 17 Sec. 3. Section 8.57E, subsection 2, Code 2013, is amended 18 to read as follows: 19 2. Moneys in the taxpayers trust fund shall only be used 20 pursuant to appropriations or transfers made by the general 21 assembly for tax relief. 22 Sec. 4. Section 8.58, Code 2013, is amended to read as 23 follows: 24 8.58 Exemption from automatic application. 25 1. To the extent that moneys appropriated under section 26 8.57 do not result in moneys being credited to the general fund 27 under section 8.55, subsection 2 , moneys Moneys appropriated 28 under in section 8.57 and moneys contained in the cash reserve 29 fund, rebuild Iowa infrastructure fund, environment first 30 fund, Iowa economic emergency fund, and taxpayers trust fund 31 shall not be considered in the application of any formula, 32 index, or other statutory triggering mechanism which would 33 affect appropriations, payments, or taxation rates, contrary 34 provisions of the Code notwithstanding. 35 -1- LSB 1420XS (4) 85 mm/sc 1/ 8

S.F. 86 2. To the extent that moneys appropriated under section 1 8.57 do not result in moneys being credited to the general fund 2 under section 8.55, subsection 2 , moneys Moneys appropriated 3 under in section 8.57 and moneys contained in the cash reserve 4 fund, rebuild Iowa infrastructure fund, environment first fund, 5 Iowa economic emergency fund, and taxpayers trust fund shall 6 not be considered by an arbitrator or in negotiations under 7 chapter 20 . 8 Sec. 5. EFFECTIVE UPON ENACTMENT. This division of this 9 Act, being deemed of immediate importance, takes effect upon 10 enactment. 11 Sec. 6. RETROACTIVE APPLICABILITY. This division of this 12 Act applies retroactively to July 1, 2012, to moneys attributed 13 to fiscal years beginning on or after July 1, 2012. 14 DIVISION II 15 IOWA TAXPAYERS TRUST FUND TAX CREDIT 16 Sec. 7. TAXPAYERS TRUST FUND —— IOWA TAXPAYERS TRUST FUND 17 TAX CREDIT TRANSFER. During the fiscal year beginning July 18 1, 2013, there is transferred from the taxpayers trust fund 19 created in section 8.57E to the Iowa taxpayers trust fund tax 20 credit fund created in section 422.11E, an amount equal to the 21 balance of the taxpayers trust fund at the close of the fiscal 22 year beginning July 1, 2012, and ending June 30, 2013, to be 23 used for the Iowa taxpayers trust fund tax credit in accordance 24 with section 422.11E, subsection 5. 25 Sec. 8. Section 257.21, Code 2013, is amended to read as 26 follows: 27 257.21 Computation of instructional support amount. 28 1. The department of management shall establish the amount 29 of instructional support property tax to be levied and the 30 amount of instructional support income surtax to be imposed 31 by a district in accordance with the decision of the board 32 under section 257.19 for each school year for which the 33 instructional support program is authorized. The department 34 of management shall determine these amounts based upon the 35 -2- LSB 1420XS (4) 85 mm/sc 2/ 8

S.F. 86 most recent figures available for the district’s valuation of 1 taxable property, individual state income tax paid, and budget 2 enrollment in the district, and shall certify to the district’s 3 county auditor the amount of instructional support property 4 tax, and to the director of revenue the amount of instructional 5 support income surtax to be imposed if an instructional support 6 income surtax is to be imposed. 7 2. The instructional support income surtax shall be imposed 8 on the state individual income tax for the calendar year during 9 which the school’s budget year begins, or for a taxpayer’s 10 fiscal year ending during the second half of that calendar year 11 and after the date the board adopts a resolution to participate 12 in the program or the first half of the succeeding calendar 13 year, and shall be imposed on all individuals residing in the 14 school district on the last day of the applicable tax year. 15 As used in this section , “state individual income tax” means 16 the taxes computed under section 422.5 , less the amounts of 17 nonrefundable credits allowed under chapter 422, division II , 18 except for the Iowa taxpayers trust fund tax credit allowed 19 under section 422.11E . 20 Sec. 9. NEW SECTION . 422.11E Iowa taxpayers trust fund tax 21 credit. 22 1. For purposes of this section, “eligible individual” means, 23 with respect to a tax year, an individual who makes and files 24 an individual income tax return pursuant to section 422.13. 25 “Eligible individual” does not include an estate or trust, or 26 an individual for whom an individual income tax return was not 27 timely filed, including extensions. 28 2. The taxes imposed under this division, less the credits 29 allowed under this division except the credits for withheld 30 tax and estimated tax paid in section 422.16, shall be reduced 31 by an Iowa taxpayers trust fund tax credit to an eligible 32 individual for the tax year beginning January 1 immediately 33 preceding July 1 of any fiscal year during which a transfer, if 34 any, is made from the taxpayers trust fund in section 8.57E to 35 -3- LSB 1420XS (4) 85 mm/sc 3/ 8

S.F. 86 the Iowa taxpayers trust fund tax credit fund created in this 1 section. 2 3. The credit shall be equal to the quotient of the amount 3 transferred to the Iowa taxpayers trust fund tax credit fund in 4 the applicable fiscal year, divided by the number of eligible 5 individuals for the tax year immediately preceding the tax year 6 for which the credit in this section is allowed, as determined 7 by the director of revenue in accordance with this section, 8 rounded down to the nearest whole dollar. The department of 9 revenue shall draft the income tax form for any tax year in 10 which a credit will be allowed under this section to provide 11 the information and space necessary for eligible individuals to 12 claim the credit. 13 4. Any credit in excess of the taxpayer’s liability for the 14 tax year is not refundable and shall not be credited to the tax 15 liability for any following year or carried back to a tax year 16 prior to the tax year in which the taxpayer claims the credit. 17 5. a. There is established within the state treasury under 18 the control of the department an Iowa taxpayers trust fund tax 19 credit fund consisting of any moneys transferred by the general 20 assembly from the taxpayers trust fund created in section 8.57E 21 for purposes of the credit provided in this section. No later 22 than December 31 in the year following each tax year in which 23 a credit is allowed pursuant to this section, the department 24 shall transfer from the Iowa taxpayers trust fund tax credit 25 fund to the general fund of the state, the lesser of the 26 balance of the Iowa taxpayers trust fund tax credit fund or 27 an amount of money equal to the Iowa taxpayers trust fund tax 28 credits claimed under this section for the applicable tax year. 29 Any moneys remaining in the fund on December 31 after the 30 transfer provided in the previous sentence shall immediately 31 revert to the taxpayers trust fund created in section 8.57E. 32 b. The moneys transferred to the general fund of the state 33 in accordance with this subsection shall not be considered new 34 revenues for purposes of the state general fund expenditure 35 -4- LSB 1420XS (4) 85 mm/sc 4/ 8

S.F. 86 limitation under section 8.54 but instead as replacement of 1 a like amount included in the expenditure limitation for the 2 fiscal year in which the transfer is made. 3 Sec. 10. Section 422D.2, Code 2013, is amended to read as 4 follows: 5 422D.2 Local income surtax. 6 A county may impose by ordinance a local income surtax as 7 provided in section 422D.1 at the rate set by the board of 8 supervisors, of up to one percent, on the state individual 9 income tax of each individual residing in the county at the 10 end of the individual’s applicable tax year. However, the 11 cumulative total of the percents of income surtax imposed on 12 any taxpayer in the county shall not exceed twenty percent. 13 The reason for imposing the surtax and the amount needed 14 shall be set out in the ordinance. The surtax rate shall be 15 set to raise only the amount needed. For purposes of this 16 section , “state individual income tax” means the tax computed 17 under section 422.5 , less the amounts of nonrefundable credits 18 allowed under chapter 422, division II , except for the Iowa 19 taxpayers trust fund tax credit allowed under section 422.11E . 20 Sec. 11. EFFECTIVE UPON ENACTMENT. This division of this 21 Act, being deemed of immediate importance, takes effect upon 22 enactment. 23 Sec. 12. RETROACTIVE APPLICABILITY. This division of this 24 Act applies retroactively to January 1, 2013, for tax years 25 beginning on or after that date. 26 EXPLANATION 27 This bill relates to the taxpayers trust fund by modifying 28 the transfer of moneys from the Iowa economic emergency fund to 29 the taxpayers trust fund, allowing transfers from the taxpayers 30 trust fund, creating an Iowa taxpayers trust fund tax credit 31 and fund, and providing for the transfer of moneys from the 32 taxpayers trust fund for purposes of the credit. 33 Division I of the bill relates to the transfer of moneys from 34 the Iowa economic emergency fund to the taxpayers trust fund. 35 -5- LSB 1420XS (4) 85 mm/sc 5/ 8

S.F. 86 Under current law in Code section 8.55, when the balance of 1 the Iowa economic emergency fund is equal to the fund’s maximum 2 balance, the excess is first distributed to the taxpayers trust 3 fund up to a formula amount and the remainder is transferred to 4 the general fund of the state. The division provides that the 5 entire excess is transferred to the taxpayers trust fund and 6 moneys would no longer be transferred to the general fund of 7 the state. 8 Code section 8.54, relating to the state general fund 9 expenditure limitation, is amended to delete a subsection that 10 provides for readjustment of the expenditure limitation to 11 reflect moneys anticipated to be transferred to the general 12 fund of the state from the Iowa economic emergency fund. 13 Code section 8.58, providing an exemption from statutory 14 triggering mechanisms and consideration by an arbitrator or in 15 a collective bargaining negotiation under Code chapter 20 for 16 moneys in various funds, is amended to eliminate a reference 17 to the transfer from the Iowa economic emergency fund to the 18 general fund of the state. 19 The division amends Code section 8.57E to allow transfers 20 by the general assembly from the taxpayers trust fund for tax 21 relief in addition to appropriations which are already allowed 22 under Iowa law. 23 The division takes effect upon enactment and applies 24 retroactively to July 1, 2012, to moneys attributed to fiscal 25 years beginning on or after July 1, 2012. 26 Division II of the bill creates an Iowa taxpayers trust fund 27 tax credit and provides for a transfer from the taxpayers trust 28 fund for purposes of the credit. 29 The division provides for an Iowa taxpayers trust fund 30 tax credit for eligible individuals. “Eligible individual” 31 is defined, with respect to a tax year, as an individual who 32 timely files an Iowa individual income tax return. An eligible 33 individual does not include an estate or trust. The credit 34 is allowed to eligible individuals for the tax year beginning 35 -6- LSB 1420XS (4) 85 mm/sc 6/ 8

S.F. 86 January 1 immediately preceding July 1 of any fiscal year in 1 which a transfer is made from the taxpayers trust fund to 2 the Iowa taxpayers trust fund tax credit fund created in the 3 division. When such a transfer is made, a credit will be 4 allowed in an amount equal to the amount transferred divided by 5 the number of eligible individuals for the tax year immediately 6 preceding the tax year for which the credit is allowed, rounded 7 down to the nearest whole dollar. 8 The credit may be claimed against any individual income 9 tax liability remaining after subtracting all refundable and 10 nonrefundable credits except the credits for withheld tax and 11 estimated tax paid in Code section 422.16. The credit is 12 nonrefundable and shall not be credited to the tax liability 13 for any following year or carried back to a tax year prior to 14 the tax year in which the taxpayer claims the credit. 15 The division creates an Iowa taxpayers trust fund tax 16 credit fund within the state treasury under the control of the 17 department of revenue. The division requires that whenever 18 a transfer is made into the fund, the Iowa taxpayers trust 19 fund tax credit is allowed and the department of revenue shall 20 reimburse the general fund of the state an amount equal to the 21 lesser of the balance of the fund or an amount of money equal 22 to the Iowa taxpayers trust fund tax credits claimed for the 23 applicable tax year. The transfer from the Iowa taxpayers 24 trust fund tax credit fund to the general fund of the state 25 is required to be made no later than December 31 in the year 26 following the tax year in which an Iowa taxpayers trust fund 27 tax credit is allowed. Any moneys remaining in the fund after 28 the transfer will immediately revert back to the taxpayers 29 trust fund. 30 The division provides for a transfer from the taxpayers 31 trust fund to the Iowa taxpayers trust fund tax credit fund 32 during the fiscal year beginning July 1, 2013. The amount 33 transferred shall be the ending balance of the taxpayers trust 34 fund at the close of the fiscal year beginning July 1, 2012, 35 -7- LSB 1420XS (4) 85 mm/sc 7/ 8

S.F. 86 and ending June 30, 2013. The division provides that this 1 transfer will result in a taxpayers trust fund tax credit being 2 allowed to eligible individuals for the 2013 tax year. 3 Finally, the division excludes the Iowa taxpayers trust fund 4 tax credit from the definition of “state individual income 5 tax” for purposes of computing the emergency medical services 6 income surtax in Code chapter 422D, the instructional support 7 income surtax in Code section 257.21, and, by reference, the 8 educational improvement income surtax in Code section 257.29 9 and the physical plant and equipment income surtax in Code 10 section 298.2. 11 The division takes effect upon enactment and applies 12 retroactively to January 1, 2013, for tax years beginning on 13 or after that date. 14 -8- LSB 1420XS (4) 85 mm/sc 8/ 8