Iowa General Assembly Daily Bills, Amendments & Study Bills March 17, 2009



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116 13 402(e) of the Internal Revenue Code to be separately taxed for

116 14 federal income tax purposes for the tax year. The rate of tax

116 15 is equal to twenty=five percent of the separate federal tax

116 16 imposed on the amount of the lump sum distribution. A

116 17 nonresident is liable for this tax only on that portion of the

116 18 lump sum distribution allocable to Iowa. The total amount of

116 19 the lump sum distribution subject to separate federal tax

116 20 shall be included in net income for purposes of determining

116 21 eligibility under subsections 2 3 and 2A or 2B 3B, as

116 22 applicable.

116 23 8. 9. In the case of income derived from the sale or

116 24 exchange of livestock which qualifies under section 451(e) of

116 25 the Internal Revenue Code because of drought, the taxpayer may

116 26 elect to include the income in the taxpayer's net income in

116 27 the tax year following the year of the sale or exchange in

116 28 accordance with rules prescribed by the director.

116 29 9. 10. If an individual's federal income tax was forgiven

116 30 for a tax year under section 692 of the Internal Revenue Code,

116 31 because the individual was killed while serving in an area

116 32 designated by the president of the United States or the United

116 33 States Congress as a combat zone, the individual was missing

116 34 in action and presumed dead, or the individual was killed

116 35 outside the United States in a terroristic or military action
Senate File 449 - Introduced continued
117 1 while the individual was a military or civilian employee of

117 2 the United States, the individual's Iowa income tax is also

117 3 forgiven for the same tax year.

117 4 10. 11. If a taxpayer repays in the current tax year

117 5 certain amounts of income that were subject to tax under this

117 6 division in a prior year and a tax benefit would be allowed

117 7 under similar circumstances under section 1341 of the Internal

117 8 Revenue Code, a tax benefit shall be allowed on the Iowa

117 9 return. The tax benefit shall be the reduced tax for the

117 10 current tax year due to the deduction for the repaid income or

117 11 the reduction in tax for the prior year or years due to

117 12 exclusion of the repaid income. The reduction in tax shall

117 13 qualify as a refundable tax credit on the return for the

117 14 current year pursuant to rules prescribed by the director.

117 15 Sec. 136. Section 422.7, subsection 12, Code 2009, is

117 16 amended to read as follows:

117 17 12. a. If the adjusted gross income includes income or

117 18 loss from a small business operated by the taxpayer, an

117 19 additional deduction shall be allowed in computing the income

117 20 or loss from the small business if the small business hired

117 21 for employment in the state during its annual accounting

117 22 period ending with or during the taxpayer's tax year any of

117 23 the following:

117 24 a. (1) An individual with a disability domiciled in this

117 25 state at the time of the hiring who meets any of the following

117 26 conditions:

117 27 (1) (a) Has a physical or mental impairment which

117 28 substantially limits one or more major life activities.

117 29 (2) (b) Has a record of that impairment.

117 30 (3) (c) Is regarded as having that impairment.

117 31 b. (2) An individual domiciled in this state at the time

117 32 of the hiring who meets any of the following conditions:

117 33 (1) (a) Has been convicted of a felony in this or any

117 34 other state or the District of Columbia.

117 35 (2) (b) Is on parole pursuant to chapter 906.

Senate File 449 - Introduced continued
118 1 (3) (c) Is on probation pursuant to chapter 907, for an

118 2 offense other than a simple misdemeanor.

118 3 (4) (d) Is in a work release program pursuant to chapter

118 4 904, division IX.

118 5 c. (3) An individual, whether or not domiciled in this

118 6 state at the time of the hiring, who is on parole or probation

118 7 and to whom the interstate probation and parole compact under

118 8 section 907A.1, Code 2001, applies, or to whom the interstate

118 9 compact for adult offender supervision under chapter 907B

118 10 applies.

118 11 b. (1) The amount of the additional deduction is equal to

118 12 sixty=five percent of the wages paid to individuals, but shall

118 13 not exceed twenty thousand dollars per individual, named in

118 14 paragraphs paragraph "a", "b", and "c" subparagraphs (1), (2),


118 15 and (3) who were hired for the first time by that business

118 16 during the annual accounting period for work done in the

118 17 state. This additional deduction is allowed for the wages

118 18 paid to those individuals successfully completing a

118 19 probationary period during the twelve months following the

118 20 date of first employment by the business and shall be deducted

118 21 at the close of the annual accounting period.

118 22 (2) The additional deduction shall not be allowed for

118 23 wages paid to an individual who was hired to replace an

118 24 individual whose employment was terminated within the

118 25 twelve=month period preceding the date of first employment.

118 26 However, if the individual being replaced left employment

118 27 voluntarily without good cause attributable to the employer or

118 28 if the individual was discharged for misconduct in connection

118 29 with the individual's employment as determined by the

118 30 department of workforce development, the additional deduction

118 31 shall be allowed.

118 32 (3) A taxpayer who is a partner of a partnership or a

118 33 shareholder of a subchapter S corporation, may deduct that

118 34 portion of wages qualified under this subsection paid by the

118 35 partnership or subchapter S corporation based on the
Senate File 449 - Introduced continued
119 1 taxpayer's pro rata share of the profits or losses from the

119 2 partnership or subchapter S corporation.

119 3 c. For purposes of this subsection, "physical:

119 4 (1) "Physical or mental impairment" means any

119 5 physiological disorder or condition, cosmetic disfigurement,

119 6 or anatomical loss affecting one or more of the body systems

119 7 or any mental or psychological disorder, including mental

119 8 retardation, organic brain syndrome, emotional or mental

119 9 illness and specific learning disabilities.

119 10 (2) (a) For purposes of this subsection, "small "Small

119 11 business" means a profit or nonprofit business, including but

119 12 not limited to an individual, partnership, corporation, joint

119 13 venture, association, or cooperative, to which the following

119 14 apply:

119 15 (1) (i) It is not an affiliate or subsidiary of a

119 16 business dominant in its field of operation.

119 17 (2) (ii) It has twenty or fewer full=time equivalent

119 18 positions and not more than the equivalent of three million

119 19 dollars in annual gross revenues as computed for the preceding

119 20 fiscal year or as the average of the three preceding fiscal

119 21 years.

119 22 (3) (iii) It does not include the practice of a

119 23 profession.

119 24 (b) "Small business" includes an employee=owned business

119 25 which has been an employee=owned business for less than three

119 26 years or which meets the conditions of subparagraphs (1)

119 27 subparagraph division (a), subparagraph subdivisions (i)

119 28 through (3) (iii).

119 29 (c) For purposes of this definition, "dominant in its

119 30 field of operation" means having more than twenty full=time

119 31 equivalent positions and more than three million dollars in

119 32 annual gross revenues, and "affiliate or subsidiary of a

119 33 business dominant in its field of operation" means a business

119 34 which is at least twenty percent owned by a business dominant

119 35 in its field of operation, or by partners, officers,

Senate File 449 - Introduced continued
120 1 directors, majority stockholders, or their equivalents, of a

120 2 business dominant in that field of operation.

120 3 The department may, by resolution, waive any or all of the

120 4 requirements of paragraph "b" in connection with a loan to a

120 5 small business, as defined under applicable federal law and

120 6 regulations that have been enacted or adopted by April 1,

120 7 1983, in which federal assistance, insurance, or guaranties

120 8 are sought.

120 9 Sec. 137. Section 422.7, subsection 28, paragraph b, Code

120 10 2009, is amended to read as follows:

120 11 b. The amount of any savings refund or state match

120 12 payments authorized under section 541A.3, subsection 1.

120 13 Sec. 138. Section 422.7, subsection 43, unnumbered

120 14 paragraph 1, Code 2009, is amended to read as follows:

120 15 A taxpayer may elect not to take the increased expensing

120 16 allowance under section 179 of the Internal Revenue Code, as

120 17 amended by Pub. L. No. 108=27, section 202, in computing

120 18 adjusted gross income for state tax purposes. If the taxpayer

120 19 does not take the increased expensing allowance under section

120 20 179 of the Internal Revenue Code for state tax purposes, the

120 21 following adjustments shall be made:

120 22 Sec. 139. Section 422.7, subsection 53, Code 2009, is

120 23 amended to read as follows:

120 24 53. A taxpayer is allowed to take the increased expensing

120 25 allowance under section 179 of the Internal Revenue Code, as

120 26 amended by Pub. L. No. 110=185, in computing adjusted gross


120 27 income for state tax purposes.

120 28 Sec. 140. Section 422.12, Code 2009, is amended to read as

120 29 follows:

120 30 422.12 DEDUCTIONS FROM COMPUTED TAX.

120 31 1. As used in this section:

120 32 a. "Dependent" has the same meaning as provided by the



120 33 Internal Revenue Code.

120 34 b. "Textbooks" means books and other instructional



120 35 materials and equipment used in elementary and secondary
Senate File 449 - Introduced continued
121 1 schools in teaching only those subjects legally and commonly

121 2 taught in public elementary and secondary schools in this

121 3 state and does not include instructional books and materials

121 4 used in the teaching of religious tenets, doctrines, or

121 5 worship, the purpose of which is to inculcate those tenets,

121 6 doctrines, or worship. "Textbooks" includes books or

121 7 materials used for extracurricular activities including

121 8 sporting events, musical or dramatic events, speech

121 9 activities, driver's education, or programs of a similar


121 10 nature.

121 11 c. "Tuition" means any charges for the expenses of



121 12 personnel, buildings, equipment, and materials other than

121 13 textbooks, and other expenses of elementary or secondary

121 14 schools which relate to the teaching only of those subjects

121 15 legally and commonly taught in public elementary and secondary

121 16 schools in this state and which do not relate to the teaching

121 17 of religious tenets, doctrines, or worship, the purpose of

121 18 which is to inculcate those tenets, doctrines, or worship.

121 19 "Tuition" includes those expenses which relate to

121 20 extracurricular activities including sporting events, musical

121 21 or dramatic events, speech activities, driver's education, or

121 22 programs of a similar nature.

121 23 2. There shall be deducted from but not to exceed the tax,

121 24 after the same shall have been computed as provided in this

121 25 division, the following:

121 26 1. a. A personal exemption credit in the following

121 27 amounts:

121 28 a. (1) For an estate or trust, a single individual, or a

121 29 married person filing a separate return, forty dollars.

121 30 b. (2) For a head of household, or a husband and wife

121 31 filing a joint return, eighty dollars.

121 32 c. (3) For each dependent, an additional forty dollars.

121 33 As used in this section, the term "dependent" has the same



121 34 meaning as provided by the Internal Revenue Code.

121 35 d. (4) For a single individual, husband, wife, or head of


Senate File 449 - Introduced continued
122 1 household, an additional exemption of twenty dollars for each

122 2 of said individuals who has attained the age of sixty=five

122 3 years before the close of the tax year or on the first day

122 4 following the end of the tax year.

122 5 e. (5) For a single individual, husband, wife, or head of

122 6 household, an additional exemption of twenty dollars for each

122 7 of said individuals who is blind at the close of the tax year.

122 8 For the purposes of this paragraph subparagraph, an individual

122 9 is blind only if the individual's central visual acuity does

122 10 not exceed twenty=two hundredths in the better eye with

122 11 correcting lenses, or if the individual's visual acuity is

122 12 greater than twenty=two hundredths but is accompanied by a

122 13 limitation in the fields of vision such that the widest

122 14 diameter of the visual field subtends an angle no greater than

122 15 twenty degrees.

122 16 2. b. A tuition credit equal to twenty=five percent of

122 17 the first one thousand dollars which the taxpayer has paid to

122 18 others for each dependent in grades kindergarten through

122 19 twelve, for tuition and textbooks of each dependent in

122 20 attending an elementary or secondary school situated in Iowa,

122 21 which school is accredited or approved under section 256.11,

122 22 which is not operated for profit, and which adheres to the

122 23 provisions of the federal Civil Rights Act of 1964 and chapter

122 24 216. As used in this subsection, "textbooks" means books and


122 25 other instructional materials and equipment used in elementary

122 26 and secondary schools in teaching only those subjects legally

122 27 and commonly taught in public elementary and secondary schools

122 28 in this state and does not include instructional books and

122 29 materials used in the teaching of religious tenets, doctrines,

122 30 or worship, the purpose of which is to inculcate those tenets,

122 31 doctrines, or worship. "Textbooks" includes books or

122 32 materials used for extracurricular activities including

122 33 sporting events, musical or dramatic events, speech

122 34 activities, driver's education, or programs of a similar

122 35 nature. Notwithstanding any other provision, all other
Senate File 449 - Introduced continued

123 1 credits allowed under this section subsection shall be

123 2 deducted before the tuition credit under this subsection

123 3 paragraph. The department, when conducting an audit of a

123 4 taxpayer's return, shall also audit the tuition tax credit

123 5 portion of the tax return.

123 6 As used in this subsection, "tuition" means any charges for


123 7 the expenses of personnel, buildings, equipment and materials

123 8 other than textbooks, and other expenses of elementary or

123 9 secondary schools which relate to the teaching only of those

123 10 subjects legally and commonly taught in public elementary and

123 11 secondary schools in this state and which do not relate to the

123 12 teaching of religious tenets, doctrines, or worship, the

123 13 purpose of which is to inculcate those tenets, doctrines, or

123 14 worship. "Tuition" includes those expenses which relate to

123 15 extracurricular activities including sporting events, musical

123 16 or dramatic events, speech activities, driver's education, or

123 17 programs of a similar nature.

123 18 3. For the purpose of this section, the determination of

123 19 whether an individual is married shall be made in accordance

123 20 with section 7703 of the Internal Revenue Code.

123 21 Sec. 141. Section 422.35, subsections 6 and 6A, Code 2009,

123 22 are amended to read as follows:

123 23 6. a. If the taxpayer is a small business corporation,

123 24 subtract an amount equal to sixty=five percent of the wages

123 25 paid to individuals, but not to exceed twenty thousand dollars

123 26 per individual, named in paragraphs "a", "b", and "c"

123 27 subparagraphs (1), (2), and (3) who were hired for the first

123 28 time by the taxpayer during the tax year for work done in this

123 29 state:

123 30 a. (1) An individual with a disability domiciled in this

123 31 state at the time of the hiring who meets any of the following

123 32 conditions:

123 33 (1) (a) Has a physical or mental impairment which

123 34 substantially limits one or more major life activities.

123 35 (2) (b) Has a record of that impairment.
Senate File 449 - Introduced continued
124 1 (3) (c) Is regarded as having that impairment.

124 2 b. (2) An individual domiciled in this state at the time

124 3 of the hiring who meets any of the following conditions:

124 4 (1) (a) Has been convicted of a felony in this or any

124 5 other state or the District of Columbia.

124 6 (2) (b) Is on parole pursuant to chapter 906.

124 7 (3) (c) Is on probation pursuant to chapter 907, for an

124 8 offense other than a simple misdemeanor.

124 9 (4) (d) Is in a work release program pursuant to chapter

124 10 904, division IX.

124 11 c. (3) An individual, whether or not domiciled in this

124 12 state at the time of the hiring, who is on parole or probation

124 13 and to whom the interstate probation and parole compact under

124 14 section 907A.1, Code 2001, applies, or to whom the interstate

124 15 compact for adult offender supervision under chapter 907B

124 16 applies.

124 17 b. This deduction is allowed for the wages paid to the

124 18 individuals successfully completing a probationary period

124 19 named in paragraphs paragraph "a", "b", and "c" subparagraphs


124 20 (1), (2), and (3) during the twelve months following the date

124 21 of first employment by the taxpayer and shall be deducted in

124 22 the tax years when paid.

124 23 c. For purposes of this subsection, "physical:

124 24 (1) "Physical or mental impairment" means any

124 25 physiological disorder or condition, cosmetic disfigurement,

124 26 or anatomical loss affecting one or more of the body systems

124 27 or any mental or psychological disorder, including mental

124 28 retardation, organic brain syndrome, emotional or mental

124 29 illness, and specific learning disabilities.

124 30 (2) (a) For purposes of this subsection, "small "Small

124 31 business" means a profit or nonprofit business, including but

124 32 not limited to an individual, partnership, corporation, joint

124 33 venture, association, or cooperative, to which the following

124 34 apply:

124 35 (1) (i) It is not an affiliate or subsidiary of a


Senate File 449 - Introduced continued

125 1 business dominant in its field of operation.

125 2 (2) (ii) It has either twenty or fewer full=time

125 3 equivalent positions or not more than the equivalent of three

125 4 million dollars in annual gross revenues as computed for the

125 5 preceding fiscal year or as the average of the three preceding

125 6 fiscal years.

125 7 (3) (iii) It does not include the practice of a

125 8 profession.

125 9 (b) "Small business" includes an employee=owned business

125 10 which has been an employee=owned business for less than three

125 11 years or which meets the conditions of subparagraphs (1)

125 12 through (3) subparagraph division (a), subparagraph

125 13 subdivisions (i) through (iii).

125 14 (c) For purposes of this definition, "dominant in its

125 15 field of operation" means having more than twenty full=time

125 16 equivalent positions and more than three million dollars in

125 17 annual gross revenues, and "affiliate or subsidiary of a

125 18 business dominant in its field of operation" means a business

125 19 which is at least twenty percent owned by a business dominant




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