Bill Text: IA SSB3038 | 2023-2024 | 90th General Assembly | Introduced

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Bill Title: A bill for an act relating to state taxation and appropriations by combining special purpose funds, modifying individual income tax rates, placing assessment limitations for property tax purposes on commercial child care facilities, and modifying unemployment benefits, and including effective date and retroactive applicability provisions.(See SF 2398.)

Spectrum: Committee Bill

Status: (Introduced) 2024-02-22 - Committee report approving bill, renumbered as SF 2398. [SSB3038 Detail]

Download: Iowa-2023-SSB3038-Introduced.html

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Senate Study Bill 3038 - Introduced
SENATE/HOUSE FILE _____
BY (PROPOSED GOVERNOR BILL)
A BILL FOR
An Act relating to state taxation and appropriations by
combining special purpose funds, modifying individual income
tax rates, placing assessment limitations for property tax
purposes on commercial child care facilities, and modifying
unemployment benefits, and including effective date and
retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
SPECIAL PURPOSE FUNDS
Section 1. Section 7D.29, subsection 1, paragraphs a and b,
Code 2024, are amended to read as follows:
a. From the appropriation made from the Iowa economic
emergency cash reserve fund in section 8.55 8.56 for purposes
of paying such expenses.
b. To the extent the appropriation from the Iowa economic
emergency cash reserve fund described in paragraph “a” is
insufficient to pay such expenses, there is appropriated
from moneys in the general fund of the state not otherwise
appropriated the amount necessary to fund that deficiency.
Sec. 2. Section 8.22A, subsection 2, Code 2024, is amended
to read as follows:
2. The conference shall meet as often as deemed necessary,
but shall meet at least three times per year with at least
one meeting taking place each year in March. The conference
may use sources of information deemed appropriate. At each
meeting, the conference shall agree to estimates for the
current fiscal year and the following fiscal year for the
general fund of the state, lottery revenues to be available
for disbursement, and from gambling revenues and from interest
earned on the cash reserve fund and the economic emergency
fund to be deposited in the rebuild Iowa infrastructure fund.
At the meeting taking place each year in March, in addition
to agreeing to estimates for the current fiscal year and the
following fiscal year, the conference shall agree to estimates
for the fiscal year beginning July 1 of the following calendar
year. Only an estimate for the following fiscal year agreed
to by the conference pursuant to subsection 3, 4, or 5 , shall
be used for purposes of calculating the state general fund
expenditure limitation under section 8.54 , and any other
estimate agreed to shall be considered a preliminary estimate
that shall not be used for purposes of calculating the state
general fund expenditure limitation.
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Sec. 3. Section 8.22A, subsection 5, paragraph b, Code 2024,
is amended to read as follows:
b. The amount of revenue for the following fiscal year from
gambling revenues and from interest earned on the cash reserve
fund and the economic emergency fund to be deposited in the
rebuild Iowa infrastructure fund under section 8.56 and section
8.57, subsection 5 , paragraph “e” “f” .
Sec. 4. Section 8.54, subsection 1, unnumbered paragraph 1,
Code 2024, is amended to read as follows:
For the purposes of section 8.22A , this section , and
sections 8.55 through 8.56 and 8.57 :
Sec. 5. Section 8.54, subsection 5, paragraph a, Code 2024,
is amended to read as follows:
a. For fiscal years in which it is anticipated that the
distribution of moneys from the Iowa economic emergency fund
in accordance with section 8.55 8.57 , subsection 2 , paragraph
“c” , will result in moneys being transferred to the general
fund of the state, the original state general fund expenditure
limitation amount provided for in subsection 3 shall be
readjusted to include the amount of moneys anticipated to be
so transferred.
Sec. 6. Section 8.56, subsections 1 and 3, Code 2024, are
amended to read as follows:
1. A cash reserve fund is created in the state treasury.
The cash reserve fund shall be separate from the general fund
of the state and shall not be considered part of the general
fund of the state except in determining the cash position of
the state as provided in subsection 3 . The moneys in the cash
reserve fund are not subject to section 8.33 and shall not
be transferred, used, obligated, appropriated, or otherwise
encumbered except as provided in this section . Notwithstanding
section 12C.7, subsection 2 , interest or earnings on moneys
deposited in the cash reserve fund shall be credited to the
rebuild Iowa infrastructure fund created in section 8.57 .
Moneys in the cash reserve fund may be used for cash flow
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purposes during a fiscal year provided that any moneys so
allocated are returned to the cash reserve fund by the end of
that fiscal year.
3. a. The moneys in the cash reserve fund shall only be
used pursuant to an appropriation made by the general assembly
or as provided in this section . An appropriation shall be
made in accordance with subsection 4 only for the fiscal year
in which the appropriation is made. The moneys shall only be
appropriated by the general assembly for nonrecurring emergency
expenditures and shall not be appropriated for payment of
any collective bargaining agreement or arbitrator’s decision
negotiated or awarded under chapter 20 . Except as provided
in section 8.58 , the cash reserve fund shall be considered a
special account for the purposes of section 8.53 in determining
the cash position of the general fund of the state for the
payment of state obligations.
b. Moneys in the cash reserve fund may be used for cash
flow purposes during a fiscal year provided that any moneys so
allocated are returned to the cash reserve fund by the end of
that fiscal year.
c. There is appropriated from the cash reserve fund to the
executive council an amount sufficient to pay the expenses
authorized by the executive council, as specified in section
7D.29.
d. There is appropriated from the cash reserve fund to the
general fund of the state for the fiscal year in which moneys
in the fund were used for cash flow purposes, for the purposes
of reducing or preventing any overdraft on or deficit in the
general fund of the state, the amount from the cash reserve
fund that was used for cash flow purposes pursuant to paragraph
“b” and that was not returned to the cash reserve fund by June
30 of the fiscal year. The appropriation in this paragraph
shall not exceed one percent of the adjusted revenue estimate
for the fiscal year for which the appropriation is made and is
contingent upon all of the following having occurred:
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(1) Prior to an appropriation being made pursuant to this
paragraph, the balance of the general fund of the state at the
end of the fiscal year for which the appropriation is made is
negative.
(2) The governor issues an official proclamation and
notifies the legislative fiscal committee and the legislative
services agency that the balance of the general fund is
negative and that an appropriation made pursuant to this
paragraph brings the general fund of the state into balance.
e. If an appropriation is made pursuant to paragraph “d”
for a fiscal year, there is appropriated from the general fund
of the state to the cash reserve fund for the following fiscal
year the amount of the appropriation made pursuant to paragraph
“d” .
Sec. 7. Section 8.56, subsection 4, paragraph a, unnumbered
paragraph 1, Code 2024, is amended to read as follows:
Except as provided in subsection 1 3 , an appropriation shall
not be made from the cash reserve fund unless the appropriation
is in accordance with all of the following:
Sec. 8. Section 8.57, subsection 1, paragraph a, Code 2024,
is amended to read as follows:
a. The “cash reserve goal percentage” for fiscal years
beginning on or after July 1, 2004 2024 , is seven twelve and
one-half percent of the adjusted revenue estimate. For each
fiscal year in which the appropriation of the surplus existing
in the general fund of the state at the conclusion of the prior
fiscal year pursuant to paragraph “b” was not sufficient for the
cash reserve fund to reach the cash reserve goal percentage for
the current fiscal year, there is appropriated from the general
fund of the state an amount to be determined as follows:
(1) If the balance of the cash reserve fund in the current
fiscal year is not more than six eleven and one-half percent of
the adjusted revenue estimate for the current fiscal year, the
amount of the appropriation under this lettered paragraph is
one percent of the adjusted revenue estimate for the current
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fiscal year.
(2) If the balance of the cash reserve fund in the current
fiscal year is more than six eleven and one-half percent but
less than seven twelve and one-half percent of the adjusted
revenue estimate for that fiscal year, the amount of the
appropriation under this lettered paragraph is the amount
necessary for the cash reserve fund to reach seven twelve and
one-half percent of the adjusted revenue estimate for the
current fiscal year.
(3) The moneys appropriated under this lettered paragraph
shall be credited in equal and proportionate amounts in each
quarter of the current fiscal year.
Sec. 9. Section 8.57, subsections 2 and 3, Code 2024, are
amended to read as follows:
2. a. Moneys appropriated under subsection 1 shall be first
credited to the cash reserve fund. To the extent that moneys
appropriated under subsection 1 would make the moneys in the
cash reserve fund exceed the cash reserve goal percentage of
the adjusted revenue estimate for the fiscal year, the moneys
are appropriated to the department of management to be spent
for the purpose of eliminating Iowa’s GAAP deficit, including
the payment of items budgeted in a subsequent fiscal year
which under generally accepted accounting principles should be
budgeted in the current fiscal year. These moneys shall be
deposited into a GAAP deficit reduction account established
within the department of management.
b. The department of management shall annually file
with both houses of the general assembly at the time of the
submission of the governor’s budget, a schedule of the items
for which moneys appropriated under this subsection for the
purpose of eliminating Iowa’s GAAP deficit, including the
payment of items budgeted in a subsequent fiscal year which
under generally accepted accounting principles should be
budgeted in the current fiscal year, shall be spent. The
schedule shall indicate the fiscal year in which the spending
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for an item is to take place and shall incorporate the items
detailed in 1994 Iowa Acts, ch. 1181, §17 . The schedule
shall list each item of expenditure and the estimated dollar
amount of moneys to be spent on that item for the fiscal
year. The department of management may submit during a
regular legislative session an amended schedule for legislative
consideration. If moneys appropriated under this subsection
are not enough to pay for all listed expenditures, the
department of management shall distribute the payments among
the listed expenditure items. Moneys appropriated to the
department of management under this subsection shall not be
spent on items other than those included in the filed schedule.
c. On September 1 following the close of a fiscal year,
moneys in the GAAP deficit reduction account which remain
unexpended for items on the filed schedule for the previous
fiscal year shall be credited to the Iowa economic emergency
fund as follows:
(1) The difference between the actual net revenue for the
general fund of the state for the fiscal year and the adjusted
revenue estimate for the fiscal year shall be transferred to
the taxpayer relief fund created in section 8.57E .
(2) The remainder of the excess, if any, shall be
transferred to the general fund of the state.
3. To the extent that moneys appropriated under subsection
subsections 1 and 2 exceed the amounts necessary for the
cash reserve fund to reach its maximum balance and the
amounts necessary to eliminate Iowa’s GAAP deficit, including
elimination of the making of any appropriation in an incorrect
fiscal year, the moneys shall be appropriated to the Iowa
economic emergency fund transferred pursuant to subsection 2,
paragraph “c” .
Sec. 10. Section 8.57, subsection 5, paragraph d, Code 2024,
is amended to read as follows:
d. The general assembly may provide that all or part of the
moneys deposited in the GAAP deficit reduction account created
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in this section shall be transferred to the rebuild Iowa
infrastructure fund in lieu of appropriation of the moneys to
the Iowa economic emergency fund under subsection 2, paragraph
“c” .
Sec. 11. Section 8.57E, subsection 2, paragraph b,
subparagraph (1), Code 2024, is amended to read as follows:
(1) For the fiscal year beginning July 1, 2023, and for
each fiscal year thereafter, if the actual net revenue for the
general fund of the state for the fiscal year plus the amount
transferred to the general fund of the state under section 8.55
8.57 , subsection 2 , paragraph “b” “c” , for the fiscal year, if
any, is less than one hundred three and one-half percent of
the actual net revenue for the general fund of the state for
the prior fiscal year, there is transferred from the taxpayer
relief fund to the general fund of the state an amount equal to
the difference or the remaining balance of the taxpayer relief
fund, whichever is lower, subject to subparagraph (2).
Sec. 12. Section 8.58, Code 2024, is amended to read as
follows:
8.58 Exemption from automatic application.
1. To the extent that moneys appropriated under section 8.57
do not result in moneys being credited to the general fund of
the state under section 8.55 8.57 , subsection 2 , paragraph “c” ,
moneys appropriated under section 8.57 and moneys contained
in the cash reserve fund, rebuild Iowa infrastructure fund,
environment first fund, Iowa economic emergency fund, taxpayer
relief fund, state bond repayment fund, Iowa coronavirus fiscal
recovery fund, and Iowa coronavirus capital projects fund
shall not be considered in the application of any formula,
index, or other statutory triggering mechanism which would
affect appropriations, payments, or taxation rates, contrary
provisions of the Code notwithstanding.
2. To the extent that moneys appropriated under section 8.57
do not result in moneys being credited to the general fund of
the state under section 8.55 8.57 , subsection 2 , paragraph “c” ,
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moneys appropriated under section 8.57 and moneys contained
in the cash reserve fund, rebuild Iowa infrastructure fund,
environment first fund, Iowa economic emergency fund, taxpayer
relief fund, state bond repayment fund, Iowa coronavirus fiscal
recovery fund, and Iowa coronavirus capital projects fund shall
not be considered by an arbitrator or in negotiations under
chapter 20 .
Sec. 13. REPEAL. Section 8.55, Code 2024, is repealed.
Sec. 14. TRANSFER OF MONEYS. On the effective date of this
division of this Act, moneys remaining in the Iowa economic
emergency fund created in section 8.55, Code 2024, shall be
transferred as follows:
1. To the cash reserve fund created in section 8.56 up to
the maximum balance of the cash reserve fund as described in
sections 8.56 and 8.57, as amended by this division of this
Act.
2. If moneys remain after the transfer under subsection 1,
to the general fund of the state.
DIVISION II
INDIVIDUAL INCOME TAXES —— FUTURE INCOME TAX RATES —— ALTERNATE
TAX RATES —— WITHHOLDING
Sec. 15. Section 421.27, subsection 9, paragraph a,
subparagraph (3), Code 2024, is amended to read as follows:
(3) In the case of all other entities, including
corporations described in section 422.36, subsection 5 , and all
other entities required to file an information return under
section 422.15, subsection 2 , the entity’s Iowa net income
after the application of the Iowa business activity ratio,
if applicable, multiplied by the top income tax rate imposed
under section 422.5A 422.5 for the tax year, less any Iowa tax
credits available to the entity.
Sec. 16. Section 422.5, subsection 1, paragraph a, Code
2024, is amended to read as follows:
a. A tax is imposed upon every resident and nonresident
of the state which tax shall be levied, collected, and paid
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annually upon and with respect to the entire taxable income
as defined in this subchapter at rates as provided in section
422.5A. the following rates:
(1) For the tax year beginning on or after January 1, 2024,
but before January 1, 2025, a rate of 3.65 percent.
(2) For the tax years beginning on or after January 1, 2025,
a rate of 3.50 percent.
Sec. 17. Section 422.5, subsection 2, paragraph b, Code
2024, is amended by striking the paragraph.
Sec. 18. Section 422.5, subsection 3, paragraph b, Code
2024, is amended by striking the paragraph.
Sec. 19. Section 422.5, subsection 6, Code 2024, is amended
by striking the subsection.
Sec. 20. Section 422.16, subsection 2, paragraph e, Code
2024, is amended to read as follows:
e. For the purposes of this subsection , state income tax
shall be withheld at the highest rate for the applicable tax
year described in section 422.5A 422.5 from supplemental wages
of an employee in those circumstances in which the employer
treats the supplemental wages as wholly separate from regular
wages for purposes of withholding and federal income tax is
withheld from the supplemental wages under section 3402(g) of
the Internal Revenue Code.
Sec. 21. Section 422.16B, subsection 2, paragraph a, Code
2024, is amended to read as follows:
a. (1) A pass-through entity shall file a composite return
on behalf of all nonresident members and shall report and pay
the income or franchise tax imposed under this chapter at the
maximum state income or franchise tax rate applicable to the
member under section 422.5A 422.5 , 422.33 , or 422.63 on the
nonresident members’ distributive shares of the income from the
pass-through entity.
(2) The tax rate applicable to a tiered pass-through entity
shall be the maximum state income tax rate under section 422.5A
422.5 .
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Sec. 22. Section 422.16C, subsection 4, paragraph a, Code
2024, is amended to read as follows:
a. A taxpayer making an election under this section shall
be subject to tax in an amount equal to the maximum rate for
the applicable tax year under section 422.5A 422.5 , imposed
against the taxable income of the taxpayer for the taxable
year properly determined under this chapter and allocated
and apportioned to the state under the rules adopted by the
department. The tax shall be due with the taxpayer’s return
required under this chapter .
Sec. 23. Section 422.16C, subsection 5, paragraph a,
subparagraph (2), Code 2024, is amended to read as follows:
(2) The difference between one hundred percent and the
highest individual income tax rate in effect for the tax year.
Sec. 24. Section 422.21, subsection 5, Code 2024, is amended
to read as follows:
5. The director shall determine for the 2023 calendar year
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 .
Sec. 25. Section 422.25A, subsection 5, paragraph c,
subparagraphs (3), (4), and (5), Code 2024, are amended to read
as follows:
(3) Determine the total distributive share of all final
federal partnership adjustments and positive reallocation
adjustments as modified by this title that are reported to
nonresident individual partners and nonresident fiduciary
partners and allocate and apportion such adjustments as
provided in section 422.33 at the partnership or tiered partner
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level, and multiply the resulting amount by the maximum highest
individual income tax rate pursuant to section 422.5A for the
reviewed year.
(4) For the total distributive share of all final federal
partnership adjustments and positive reallocation adjustments
as modified by this title that are reported to tiered partners:
(a) Determine the amount of such adjustments which are of a
type that would be subject to sourcing to Iowa under section
422.8, subsection 2 , paragraph “a” , as a nonresident, and then
determine the portion of this amount that would be sourced to
Iowa under those provisions as if the tiered partner were a
nonresident.
(b) Determine the amount of such adjustments which are of
a type that would not be subject to sourcing to Iowa under
section 422.8, subsection 2 , paragraph “a” , as a nonresident.
(c) Determine the portion of the amount in subparagraph
division (b) that can be established, as prescribed by the
department by rule, to be properly allocable to indirect
partners that are nonresident partners or other partners not
subject to tax on the adjustments.
(d) Multiply the total of the amounts determined in
subparagraph divisions (a) and (b), reduced by any amount
determined in subparagraph division (c), by the highest
individual income tax rate pursuant to section 422.5A for the
reviewed year.
(5) For the total distributive share of all final federal
partnership adjustments and positive reallocation adjustments
as modified by this title that are reported to resident
individual partners and resident fiduciary partners, multiply
that amount by the highest individual income tax rate pursuant
to section 422.5A for the reviewed year.
Sec. 26. REPEAL. 2022 Iowa Acts, chapter 1002, sections 19,
20, 21, 22, 23, and 24, are repealed.
Sec. 27. REPEAL. 2023 Iowa Acts, chapter 115, sections 20
and 21, are repealed.
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Sec. 28. REPEAL. Section 422.5A, Code 2024, is repealed.
Sec. 29. RATE OF WITHHOLDING. Notwithstanding any other
provision of law to the contrary, for tax years beginning on
or after January 1, 2024, any required rate of withholding
shall not be higher than the rate for the applicable tax year
pursuant to section 422.5 as amended by this division of this
Act.
Sec. 30. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 31. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2024, for tax years
beginning on or after that date.
DIVISION III
PENALTY FOR OVERWITHHOLDING
Sec. 32. Section 422.16, Code 2024, is amended by adding the
following new subsection:
NEW SUBSECTION . 16. a. A withholding agent required to
deduct and withhold individual income tax under this section
shall adjust the rate of withholding for each payee to the
individual income tax rate applicable to the payee within sixty
days of a change to the individual income tax rate in section
422.5.
b. Any withholding agent that is in violation of paragraph
“a” shall pay a penalty of one hundred dollars for each payee’s
withholding that is not adjusted per payroll period.
c. The penalty shall not apply if the overwithholding
resulted from one or more of the following circumstances:
(1) A payee has requested additional withholding above the
individual income tax rate pursuant to section 422.5.
(2) A withholding agent is overwithholding to correct
erroneous underwithholding within the same calendar year.
(3) A withholding agent makes a clerical or mathematical
error that results in the amount of withholding for a payee
being within one percent or twenty dollars of the correct
amount of withholding, whichever is greater.
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d. Any penalty imposed under this subsection shall be in
addition to any other penalty provided by law.
e. Any penalty imposed pursuant to this subsection is not
subject to waiver.
Sec. 33. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
DIVISION IV
ESTIMATED TAX THRESHOLD
Sec. 34. Section 422.16, subsection 12, paragraph a,
subparagraph (1), Code 2024, is amended to read as follows:
(1) Taxpayers filing a return shall make estimated tax
payments if their Iowa income tax liability can reasonably be
expected to amount to two hundred one thousand dollars or more
for the year.
Sec. 35. EFFECTIVE DATE. This division of this Act takes
effect January 1, 2025.
Sec. 36. APPLICABILITY. This division of this Act applies
to tax years beginning on or after January 1, 2025.
DIVISION V
LUMP SUM DISTRIBUTION OF RETIREMENT INCOME
Sec. 37. Section 422.5, subsection 8, Code 2024, is amended
to read as follows:
8. a. In addition to the other taxes imposed by this
section , a tax is imposed , except under paragraph “b” , on the
amount of a lump sum distribution for which the taxpayer has
elected under section 402(e) of the Internal Revenue Code to
be separately taxed for federal income tax purposes for the
tax year. The rate of tax is equal to twenty-five percent of
the separate federal tax imposed on the amount of the lump
sum distribution. A nonresident is liable for this tax only
on that portion of the lump sum distribution allocable to
Iowa. The total amount of the lump sum distribution subject
to separate federal tax shall be included in net income for
purposes of determining eligibility under subsections 2 and 3 ,
as applicable , except the amount of the lump sum distribution
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exempt from state tax in paragraph “b” shall not be included .
b. The amount of a lump sum distribution that is received
from a governmental or other pension or retirement plan,
including defined benefit or defined contribution plans,
annuities, individual retirement accounts, plans maintained or
contributed to by an employer, or maintained or contributed
to by a self-employed person as an employer, and deferred
compensation plans or any earnings attributable to the deferred
compensation plans is exempt from state tax imposed under
paragraph “a” if received by a person who is disabled, or is
fifty-five years of age or older, or is the surviving spouse of
an individual or is a survivor having an insurable interest in
an individual who would have qualified for the exemption under
this subsection for the tax year.
Sec. 38. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
Sec. 39. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2024, for tax years
beginning on or after that date.
DIVISION VI
CHILD CARE FACILITY PROPERTY TAX ASSESSMENT LIMITATION
Sec. 40. Section 441.21, subsection 5, paragraph b,
subparagraph (2), unnumbered paragraph 1, Code 2024, is amended
to read as follows:
For Except as prescribed for property subject to
subparagraph (3), for valuations established for the assessment
year beginning January 1, 2022, and each assessment year
thereafter, the portion of actual value at which each property
unit of commercial property shall be assessed shall be the sum
of the following:
Sec. 41. Section 441.21, subsection 5, paragraph b, Code
2024, is amended by adding the following new subparagraph:
NEW SUBPARAGRAPH . (3) (a) For valuations established
for the assessment year beginning January 1, 2024, and each
assessment year thereafter, the portion of actual value at
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which each portion of a property unit of commercial property
that is primarily used as a child care facility as defined
in section 237A.1, and for which an application has been
allowed under this subparagraph, shall be assessed at an amount
equal to the product of the assessment limitation percentage
applicable to residential property under subsection 4 for that
assessment year multiplied by the actual value of the property.
(b) Applications to qualify a child care facility for the
assessment limitation allowed under this subparagraph shall be
filed with the assessor not later than July 1 of the assessment
year for which the person is requesting the assessment
limitation. The application shall be on forms prescribed by
the department of revenue and must include all of the following
information:
(i) A description of the property, including the property’s
location.
(ii) A copy of the license to operate as a child care
facility issued by the department of health and human services,
or other proof of eligibility as set forth by the department
of revenue by rule.
(iii) Any other information as required by the department
of revenue.
(c) Upon allowance of the application, the assessment
limitation shall be applied on the portion of the property
unit of commercial property that is primarily used as a child
care facility for successive years without further filing as
long as the property continues to be classified as commercial
property and is used for the purposes specified in the original
application for assessment limitation.
(d) No later than July 6 of each year, the assessor shall
remit the applications for assessment limitation to the county
auditor with the assessor’s recommendation for allowance or
disallowance of the assessment limitation. If the assessor
recommends disallowance, the assessor shall submit the reasons
for the recommendation in writing to the county auditor.
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(e) No later than July 15 of each year, the county auditor
shall forward the applications for assessment limitation to
the board of supervisors. The board shall determine the
eligibility for each application on or before September 1 of
each year.
(i) If the board disallows a claim, the board shall send
written notice by mail to the applicant at the applicant’s
last-known address. The notice shall state the reasons for
disallowing the application and shall state the applicant’s
right to appeal the board’s action to the district court. An
applicant may appeal the board’s decision to the district court
of the county in which the property is located within thirty
days of the date of the notice of disallowance.
(ii) No later than October 1 of each year, the board of
supervisors shall certify all allowed assessment limitations
received for that year with the county auditor.
(f) If a property that has been granted an assessment
limitation ceases to be used as a child care facility, the
owner of the child care facility shall give written notice to
the assessor by the July 1 following the date the property
ceased to be used as a child care facility.
(g) (i) If the board determines at any time within
thirty-six months of allowing an assessment limitation that the
assessment limitation was allowed in error, the board shall
notify the property owner by mail and conduct a hearing on the
matter.
(ii) If, after a hearing required by subparagraph
subdivision (i), the board determines the assessment limitation
was allowed in error and the assessment limitation should be
disallowed, the treasurer shall collect from the property owner
the amount of tax that would have been assessed on the property
if there had been no allowance of the assessment limitation
under this subparagraph (3). The amount due shall become a
lien on the property that received the assessment limitation
and shall be collected by the county treasurer in the same
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manner as other taxes.
(h) The assessor shall retain a permanent file of properties
that have approved assessment limitations pursuant to this
subparagraph. If the assessor receives notice of a title
transfer pursuant to subparagraph division (i), then the
assessor shall file a notice of transfer of property.
(i) The county recorder shall give notice to the assessor
of each transfer of title filed in the recorder’s office for a
property which has an allowed assessment limitation pursuant to
this subparagraph. The notice from the county recorder shall
describe the property transferred, the name of the person who
transferred title, and the name of the person to whom title is
transferred.
(j) The department of revenue shall adopt rules to implement
and administer this subparagraph.
Sec. 42. Section 441.21, subsection 5, paragraph e,
subparagraphs (1) and (3), Code 2024, are amended to read as
follows:
(1) For the fiscal year beginning July 1, 2023, there
is appropriated from the general fund of the state to the
department of revenue the sum of one hundred twenty-two million
three hundred fifty thousand dollars to be used for payments
under this paragraph calculated as a result of the assessment
limitations imposed under paragraph “b” , subparagraph (2),
subparagraph division (a), and paragraph “c” , subparagraph (2),
subparagraph division (a). For each fiscal year beginning on
or after July 1, 2024, there is appropriated from the general
fund of the state to the department of revenue the sum of one
hundred twenty-five million dollars to be used for payments
under this paragraph calculated as a result of the assessment
limitations imposed under paragraph “b” , subparagraph (2),
subparagraph division (a), and paragraph “c” , subparagraph (2),
subparagraph division (a) , and paragraph “b” , subparagraph (3),
for the portion of the actual value of the property unit equal
to or less than one hundred fifty thousand dollars .
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(3) On or before July 1 of each fiscal year, the assessor
shall report to the county auditor that portion of the total
actual value of all commercial property and industrial property
in the county that is subject to the assessment limitations
imposed under paragraph “b” , subparagraph (2), subparagraph
division (a), and paragraph “c” , subparagraph (2), subparagraph
division (a), and paragraph “b” , subparagraph (3), for the
portion of the actual value of the property unit equal to
or less than one hundred fifty thousand dollars, for the
assessment year used to calculate the taxes due and payable in
that fiscal year.
Sec. 43. Section 441.21, subsection 5, paragraph e,
subparagraph (4), subparagraph division (a), Code 2024, is
amended to read as follows:
(a) The product of the portion of the total actual value
of all commercial property, industrial property, and property
valued by the department under chapter 434 in the county
that is subject to the assessment limitations imposed under
paragraph “b” , subparagraph (2), subparagraph division (a) ; ,
and paragraph “c” , subparagraph (2), subparagraph division
(a) , ; and paragraph “b” , subparagraph (3), for the portion of
the actual value of the property unit equal to or less than one
hundred fifty thousand dollars, for the applicable assessment
year used to calculate taxes which are due and payable in the
applicable fiscal year multiplied by the difference, stated
as a percentage, between ninety percent and the assessment
limitation percentage applicable to residential property under
subsection 4 for the applicable assessment year.
Sec. 44. RETROACTIVE APPLICABILITY. The following apply
retroactively to assessment years beginning on or after January
1, 2024:
1. The section of this division of this Act amending
section 441.21, subsection 5, paragraph “b”, subparagraph (2),
unnumbered paragraph 1.
2. The section of this division of this Act enacting section
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441.21, subsection 5, paragraph “b”, subparagraph (3).
Sec. 45. APPLICABILITY. The following apply to fiscal years
beginning on or after July 1, 2025, for payments pursuant to
section 441.21, subsection 5, paragraph “e”:
1. The section of this division of this Act amending section
441.21, subsection 5, paragraph “e”, subparagraphs (1) and (3).
2. The section of this division of this Act amending
section 441.21, subsection 5, paragraph “e”, subparagraph (4),
subparagraph division (a).
Sec. 46. EFFECTIVE DATE. This division of this Act, being
deemed of immediate importance, takes effect upon enactment.
DIVISION VII
UNEMPLOYMENT BENEFITS
Sec. 47. Section 96.1A, subsection 36, Code 2024, is amended
to read as follows:
36. “Taxable wages” means an amount of wages upon which an
employer is required to contribute based upon wages which have
been paid in this state during a calendar year to an individual
by an employer or the employer’s predecessor , in this state or
another state which extends a like comity to this state, with
respect to employment , upon which the employer is required to
contribute, which equals the greater of the following:
a. Sixty-six and two-thirds Thirty-three and one-third
percent of the statewide average weekly wage which was used
during the previous calendar year to determine maximum weekly
benefit amounts, multiplied by fifty-two and rounded to the
next highest multiple of one hundred dollars.
b. That portion of wages subject to a tax under a federal
law imposing a tax against which credit may be taken for
contributions required to be paid into a state unemployment
compensation fund.
Sec. 48. Section 96.7, subsection 2, paragraph c,
subparagraphs (1) and (2), Code 2024, are amended to read as
follows:
(1) A nonconstruction contributory employer newly subject
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to this chapter shall pay contributions at the rate specified
in the twelfth fourth benefit ratio rank but not less than
one percent until the end of the calendar year in which the
employer’s account has been chargeable with benefits for
twelve consecutive calendar quarters immediately preceding the
computation date.
(2) A construction or landscaping contributory employer,
as defined under rules adopted by the department pursuant to
chapter 17A , which is newly subject to this chapter shall pay
contributions at the rate specified in the twenty-first ninth
benefit ratio rank until the end of the calendar year in which
the employer’s account has been chargeable with benefits for
twelve consecutive calendar quarters.
Sec. 49. Section 96.7, subsection 2, paragraph d,
subparagraph (1), Code 2024, is amended to read as follows:
(1) The current reserve fund ratio is computed by dividing
the total funds available for payment of benefits, on the
computation date or on August 15 following the computation
date if the total funds available for payment of benefits is a
higher amount on August 15, by the total wages paid in covered
employment excluding reimbursable employment wages during the
first four calendar quarters of the five calendar quarters
year immediately preceding the computation date. However,
in computing the current reserve fund ratio, beginning July
1, 2007, one hundred fifty million dollars shall be added to
the total funds available for payment of benefits on each
computation date.
Sec. 50. Section 96.7, subsection 2, paragraph d,
subparagraph (2), subparagraph division (a), Code 2024, is
amended by striking the subparagraph division.
Sec. 51. Section 96.7, subsection 2, paragraph d,
subparagraph (2), subparagraph division (b), Code 2024, is
amended by striking the subparagraph division and inserting in
lieu thereof the following:
(b) If the current reserve fund ratio:
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Equals or But is The contribution rate
exceeds less than table in effect shall be
_______________________________________________________________
—— 0.50 A
0.50 0.90 B
0.90 1.30 C
1.30 —— D
Sec. 52. Section 96.7, subsection 2, paragraph d,
subparagraph (2), subparagraph division (d), Code 2024, is
amended by striking the subparagraph division and inserting in
lieu thereof the following:
(d) Each employer qualified for an experience rating
shall be assigned a contribution rate for each rate year
that corresponds to the employer’s benefit ratio rank in the
contribution rate table effective for the rate year from the
following contribution rate tables. Each employer’s benefit
ratio rank shall be computed by listing all the employers by
increasing benefit ratios, from the lowest benefit ratio to the
highest benefit ratio and grouping the employers so listed into
nine separate ranks containing as nearly as possible fourteen
and twenty-nine hundredths percent of the total taxable wages,
excluding reimbursable employment wages, in the first six
ranks, and four and seventy-six hundredths percent of the total
taxable wages, excluding reimbursable employment wages, in
ranks seven, eight, and nine, paid in covered employment during
the four completed calendar quarters immediately preceding the
computation date. If an employer’s taxable wages qualify the
employer for two separate benefit ratio ranks the employer
shall be afforded the benefit ratio rank assigned the lower
contribution rate. Employers with identical benefit ratios
shall be assigned to the same benefit ratio rank.
Approximate Contribution Rate Tables
Benefit Cumulative
Ratio Taxable
Rank Payroll Limit A B C D
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__________________________________________________________
1 14.29% 0.00 0.00 0.00 0.00
2 28.58% 0.40 0.30 0.10 0.10
3 42.87% 1.20 0.80 0.40 0.20
4 57.16% 2.10 1.40 0.60 0.30
5 71.45% 3.60 2.40 1.10 0.50
6 85.74% 5.40 4.10 1.90 0.90
7 90.50% 5.40 5.40 4.20 2.00
8 95.26% 5.40 5.40 5.40 2.80
9 100.00% 5.40 5.40 5.40 5.40
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill relates to state taxation and appropriations by
combining special purpose funds, modifying individual income
tax rates, placing assessment limitations for property taxation
purposes on commercial child care facilities, and modifying
unemployment benefits.
DIVISION I —— SPECIAL PURPOSE FUNDS. The bill combines
the Iowa economic emergency fund (EEF) and the cash reserve
fund (CRF) by (1) eliminating the EEF, (2) increasing the
maximum balance of the CRF from 7.5 percent of the adjusted
revenue estimate to 12.5 percent of the adjusted revenue
estimate, and (3) authorizing moneys in the CRF to be used for
purposes previously authorized for moneys in the EEF. These
authorizations include (1) support of the executive council,
(2) appropriations to the general fund of the state (GF) under
emergency circumstances when the balance of the GF is negative,
and (3) transfers of a budget surplus to the taxpayer relief
fund and to the GF, as applicable. Upon the elimination of
the EEF, remaining EEF moneys are transferred to the taxpayer
relief fund and then remainder of the excess, if any, to the
GF.
DIVISION II —— INDIVIDUAL INCOME TAXES —— FUTURE TAX RATES
—— ALTERNATE TAX RATES.
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FUTURE INDIVIDUAL INCOME TAX RATES. The bill strikes the
graduated individual income tax rates that go into effect in
tax years 2024 and 2025, and establishes new individual income
tax flat rates beginning in tax years on or after January 1,
2024.
The bill establishes the individual income tax flat rate for
the tax year beginning January 1, 2024, but before January 1,
2025, at 3.65 percent.
The bill establishes the individual income tax flat rate for
the tax years beginning on or after January 1, 2025, at 3.50
percent. Under current law, the individual income tax flat
rate of 3.90 percent goes into effect for tax years beginning
on or after January 1, 2026.
The bill strikes references to calculating the latest
cumulative inflation factor in Code section 422.5(6) and Code
section 422.21(5) due to removing income tax brackets and
establishing the individual income tax flat rate commencing
with tax years beginning on or after January 1, 2024.
ALTERNATE INDIVIDUAL INCOME TAX RATES. The bill repeals the
alternate individual income tax rates. The alternate income
tax rate is available for a taxpayer whose income marginally
exceeds the individual income tax filing thresholds in Code
sections 422.5(2) and (3), and is used to calculate income tax
owed.
EFFECTIVE DATE AND APPLICABILITY. The division takes effect
upon enactment and applies retroactively to tax years beginning
on or after January 1, 2024.
DIVISION III —— PENALTY FOR OVERWITHHOLDING. The bill
requires a withholding agent to adjust the rate of withholding
for each payee (taxpayer) to the individual income tax rate
applicable to the payee within 60 days of a change to the
individual income tax rate. The term “withholding agent” is
defined in Code section 422.16(1).
A withholding agent who knowingly does not adjust the rate
of withholding to the individual income tax rate applicable to
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the payee within 60 days of a change to the individual income
tax rate is required to pay a penalty of $100 for each payee’s
withholding that is not adjusted per payroll period.
The overwithholding penalty does not apply if the
overwithholding resulted because a payee has requested
additional withholding above the individual income tax rate;
the withholding agent is overwithholding to correct erroneous
underwithholding; or the withholding agent makes a clerical or
mathematical error in the amount of withholding that is within
1 percent or $20 of the correct amount, whichever is greater.
The overwithholding penalty imposed pursuant to the bill is
not subject to waiver.
The division takes effect upon enactment.
DIVISION IV —— ESTIMATED TAX THRESHOLD. Under the bill,
a taxpayer filing a return is required to make estimated
tax payments if Iowa income tax liability can reasonably be
expected to exceed $1,000 or more. Under current law, such
a taxpayer filing a return is required to make estimated
tax payments if Iowa income tax liability can reasonably be
expected to exceed $200 or more.
The division takes effect January 1, 2025, and applies to tax
years on or after that date.
DIVISION V —— LUMP SUM DISTRIBUTION OF RETIREMENT INCOME.
Under current law, commencing with tax years beginning on or
after January 1, 2023, retirement income is not subject to
Iowa individual income tax. However, under current law a lump
sum distribution from a retirement account is subject to Iowa
income tax under Code section 422.5(8) at a rate of 25 percent
of the federal tax rate imposed on the amount of the lump sum
distribution.
The bill provides that the taxation of a lump sum
distribution from a retirement account is also exempt from
state taxation by exempting the lump sum distribution for a
person who is disabled, or 55 years of age or older, or who is
the surviving spouse of an individual or is a survivor having
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an insurable interest in an individual who would have qualified
for the exemption for the tax year.
The bill excludes the lump sum distribution exempt from
state taxation from being included in calculating the
individual income tax filing thresholds in Code section
422.5(2) and (3).
The division takes effect upon enactment and applies
retroactively to tax years beginning on or after January 1,
2024.
DIVISION VI —— CHILD CARE FACILITY PROPERTY TAX ASSESSMENT
LIMITATION. This division of the bill relates to assessment
limitations for property taxation purposes for commercial child
care facilities, and includes applicability and effective date
provisions.
Code section 441.21(5) determines the amount of actual value
of commercial property that is subject to property tax. The
amount is the sum of the residential assessment limitation
to the portion of the property’s value that does not exceed
$150,000 plus 90 percent of the property’s value in excess of
$150,000.
The bill division excludes property that is primarily used
as a child care facility from the calculation of the actual
value of the property. The bill instead specifies that for
assessment years beginning on or after January 1, 2024, the
amount of actual value used as child care facilities that
is subject to tax is equal to the product of the assessment
limitation percentage applicable to residential property
multiplied by the actual value of the property provided that
the property owner has applied for the assessment limitation
and the county board of supervisors has allowed such an
assessment limitation.
The division establishes application procedures, approval
procedures, and recordkeeping procedures for the assessment
limitation.
The division makes conforming changes to reflect the child
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care facility assessment limitation.
The division applies retroactively to assessment years
beginning on or after January 1, 2024, and applies to payments
to local governments for fiscal years beginning on or after
July 1, 2025.
The division takes effect upon enactment.
DIVISION VII —— UNEMPLOYMENT BENEFITS. The bill modifies
the definition of “taxable wages” by eliminating the wages
paid to an employee from another state from the calculation
of wages upon which an employer is required to contribute to
the unemployment compensation fund (fund) when the other state
extends a like comity (reciprocity) to Iowa for employment
purposes.
Under current law, the calculation of taxable wages upon
which an employer is required to contribute to the fund is
the greater amount of the two amounts calculated pursuant to
paragraphs “a” and “b” under Code section 96.1A(36). The bill
changes the calculation of one these amounts under paragraph
“a” by reducing the percentage of statewide average weekly wage
used in the calculation from 66.66 percent to 33.33 percent
of the statewide average weekly wage used during the previous
calendar year which is then multiplied by 52 and rounded to the
nearest $100 to determine maximum weekly benefit amounts.
The amount in paragraph “a” as calculated under the bill
would be the amount used to calculate taxable wages upon which
an employer is required to contribute to the fund if that
amount exceeds the amount in paragraph “b” under Code section
96.1A(36).
The calculation of the unemployment contribution rate each
year is a dynamic calculation dependent upon the calculation
of the current reserve ratio, the benefit ratio rank, and
the contribution rate table in effect for the rate year.
The bill changes the current reserve ratio calculation, the
number of benefit ratio ranks, the contribution rates, and the
contribution rate table.
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The current reserve ratio (calculation of available benefit
amount in fund) determines the contribution rate table in
effect for the rate year following the computation date. The
bill changes the computation of the current reserve fund
ratio in Code section 96.7(2)(d)(1) by basing the calculation
of the ratio on the preceding year rather than the previous
five calendar quarters, and strikes the requirement that $150
million be added on the reserve ratio computation date to the
total funds available for benefits. The bill also strikes the
computation of the highest cost-benefit ratio and removes the
ratio from the computation of the current reserve ratio.
The bill modifies the contribution rate table by reducing
the number of possible rate tables that could be in effect
for the rate year from eight contribution rate tables to four
contribution rate tables. Under the bill and current law, only
one contribution rate table may be in effect per rate year. In
reducing the number of possible contribution rates tables from
eight to four, the bill also changes the numbered contribution
rate designations to lettered contribution rate designations.
Under current law, there are 21 benefit ratio ranks in the
contribution table. The benefit ratio is a calculation based
upon the average number of unemployment benefits charged to
an employer over previous calendar quarters. The higher the
benefits charged to an employer, the higher the benefit ratio
rank the employer receives. The bill reduces the number of
benefit ratio ranks from 21 to 9.
Under current law, each of the 21 benefit ratio rank
constitutes 4.76 percent of total taxable wages. The bill
groups the benefit ratio ranks differently by separating each
of the first six benefit ratio ranks by 14.29 percent of total
taxable wages, and separates the last three benefit ratio ranks
by 4.76 percent of total taxable wages.
Under current law, the highest contribution rate that
corresponds with the highest benefit ratio rank is 9.0 percent.
Under the bill, the highest contribution rate that corresponds
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with the highest benefit ratio rank is 5.40 percent.
As a result of the bill, each employer will be assigned one
of the nine new benefit ratio ranks that corresponds with one
of the four new lettered contribution rate designations in
effect for the rate year to determine the contribution rate for
the year.
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