Bill Text: IA HF352 | 2023-2024 | 90th General Assembly | Enrolled
Bill Title: A bill for an act relating to an entity-level taxation election for pass-through entities and allowing a partner or shareholder to claim a credit against the individual and corporate income taxes and the franchise tax, and including effective date and retroactive applicability provisions. (Formerly HSB 69.) Effective date: 05/11/2023. Applicability date: 01/01/2022.
Spectrum: Committee Bill
Status: (Passed) 2023-05-16 - Fiscal note. [HF352 Detail]
Download: Iowa-2023-HF352-Enrolled.html
House
File
352
-
Enrolled
House
File
352
AN
ACT
RELATING
TO
AN
ENTITY-LEVEL
TAXATION
ELECTION
FOR
PASS-THROUGH
ENTITIES
AND
ALLOWING
A
PARTNER
OR
SHAREHOLDER
TO
CLAIM
A
CREDIT
AGAINST
THE
INDIVIDUAL
AND
CORPORATE
INCOME
TAXES
AND
THE
FRANCHISE
TAX,
AND
INCLUDING
EFFECTIVE
DATE
AND
RETROACTIVE
APPLICABILITY
PROVISIONS.
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
Section
1.
Section
422.11,
Code
2023,
is
amended
to
read
as
follows:
422.11
Franchise
tax
credit.
1.
The
taxes
imposed
under
this
subchapter
,
less
the
credits
allowed
under
section
422.12
,
shall
be
reduced
by
a
franchise
tax
credit.
A
taxpayer
who
is
a
shareholder
in
a
financial
institution,
as
defined
in
section
581
of
the
Internal
Revenue
Code,
which
has
in
effect
for
the
tax
year
an
election
under
subchapter
S
of
the
Internal
Revenue
Code,
or
is
a
member
of
a
financial
institution
organized
as
a
limited
liability
company
under
chapter
524
that
is
taxed
as
a
partnership
for
federal
income
tax
purposes,
shall
compute
the
amount
of
the
tax
credit
by
recomputing
the
amount
of
tax
under
this
subchapter
by
House
File
352,
p.
2
reducing
the
taxable
income
of
the
taxpayer
by
the
taxpayer’s
pro
rata
share
of
the
items
of
income
and
expense
of
the
financial
institution
and
subtracting
the
credits
allowed
under
section
422.12
.
This
recomputed
tax
shall
be
subtracted
from
the
amount
of
tax
computed
under
this
subchapter
after
the
deduction
for
credits
allowed
under
section
422.12
.
The
resulting
amount,
which
shall
not
exceed
the
taxpayer’s
pro
rata
share
of
the
franchise
tax
paid
by
the
financial
institution,
is
the
amount
of
the
franchise
tax
credit
allowed.
2.
For
a
taxpayer
making
an
election
under
section
422.16C
that
is
also
a
financial
institution
subject
to
the
franchise
tax
under
subchapter
V,
the
tax
imposed
under
section
422.16C
shall
be
reduced
by
a
franchise
tax
credit
equal
to
the
amount
of
franchise
tax
paid
by
the
taxpayer
for
the
same
year.
Sec.
2.
NEW
SECTION
.
422.16C
Pass-through
entity
——
election
——
entity-level
tax
——
credit.
1.
As
used
in
this
section,
unless
the
context
otherwise
requires:
a.
“Partnership”
means
the
same
as
defined
in
section
422.25A,
except
a
“partnership”
does
not
include
a
pass-through
entity
that
is
a
publicly
traded
partnership
as
defined
in
section
7704
of
the
Internal
Revenue
Code.
b.
“Taxpayer”
means
a
partnership
or
an
S
corporation.
2.
For
tax
years
beginning
on
or
after
January
1,
2022,
notwithstanding
any
other
provision
of
law
to
the
contrary,
a
taxpayer
may
elect
to
be
subject
to
the
provisions
of
this
section.
This
section
only
applies
to
tax
years
for
which
the
limitation
on
individual
deductions
applies
under
section
164(b)(6)
of
the
Internal
Revenue
Code.
3.
a.
A
separate
election
shall
be
made
for
each
tax
year
on
a
form
and
at
a
time
prescribed
by
the
department.
An
election
shall
be
irrevocable
once
made
and
shall
be
binding
on
the
taxpayer
and
all
partners
or
shareholders
of
the
taxpayer.
b.
If
an
election
is
made
under
this
section,
a
taxpayer
shall
not
be
required
to
file
a
composite
return
for
the
same
tax
year
pursuant
to
section
422.16B.
4.
a.
A
taxpayer
making
an
election
under
this
section
shall
be
subject
to
tax
in
an
amount
equal
to
the
maximum
rate
House
File
352,
p.
3
under
section
422.5A,
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.
b.
The
tax
under
this
section
shall
be
reduced
by
the
credit
provided
in
subsection
5,
paragraph
“b”
,
and
the
franchise
tax
credit
in
section
422.11,
subsection
2,
and
the
composite
credit
in
section
422.16B,
subsection
4.
Any
other
tax
credits
shall
not
be
claimed
by
the
taxpayer
against
the
tax
imposed
under
this
section.
A
net
operating
loss
or
other
loss
carryback
or
carryforward
shall
not
be
claimed
by
the
taxpayer.
5.
a.
For
a
taxable
year
in
which
a
taxpayer
made
an
election
under
this
section,
for
the
partners
or
shareholders
of
the
taxpayer,
the
taxes
imposed
under
this
subchapter,
less
the
credits
allowed
under
section
422.12,
or
the
taxes
imposed
under
subchapter
III
or
V,
as
applicable,
shall
be
reduced
by
a
credit
equal
to
the
product
of
the
following
amounts:
(1)
The
ratio
of
the
partner’s
or
shareholder’s
share
of
the
taxpayer’s
taxable
income
over
the
taxpayer’s
total
taxable
income
multiplied
by
the
state
tax
liability
actually
paid
by
the
taxpayer.
(2)
The
difference
between
one
hundred
percent
and
the
highest
individual
income
tax
rate
in
effect
for
the
tax
year.
b.
If
the
taxpayer
is
itself
a
partner
or
shareholder
of
another
taxpayer
making
an
election
under
this
section,
the
credit
under
this
subsection
shall
be
allowed.
c.
Any
credit
in
excess
of
the
tax
liability
is
refundable.
In
lieu
of
claiming
a
refund,
the
partner
or
shareholder
may
elect
to
have
the
overpayment
shown
on
the
partner’s
or
shareholder’s
final,
completed
return
credited
to
the
tax
liability
for
the
following
tax
year.
6.
A
nonresident
individual
who
is
a
partner
or
shareholder
of
a
taxpayer
for
a
tax
year
in
which
an
election
is
made
under
this
section
shall
not
be
required
to
file
an
individual
income
tax
return
under
section
422.13
for
such
tax
year
if
the
only
Iowa
source
income
of
the
individual
is
from
a
taxpayer
making
the
election
under
this
section,
the
credit
allowed
to
the
partner
or
shareholder
equals
or
exceeds
the
tax
liability
of
House
File
352,
p.
4
the
partner
or
shareholder
for
the
tax
imposed
in
the
tax
year
the
election
is
made,
and
if
the
taxpayer
files
and
pays
the
tax
due
under
this
section.
7.
A
taxpayer
making
an
election
under
this
section
is
liable
for
the
entity-level
tax
imposed
pursuant
to
this
section,
including
applicable
penalties
and
interest.
This
section
shall
not
prohibit
the
department
from
assessing
direct
or
indirect
partners
and
shareholders
for
taxes
owed
in
the
event
that
the
taxpayer
fails
to
timely
make
any
payment
required
by
this
section
for
any
reason.
8.
In
addition
to
and
not
in
lieu
of
any
period
of
limitation
provided
in
section
422.25,
if
a
taxpayer
files
an
amended
return
that
requests
a
refund
of
tax
previously
paid
within
one
year
prior
to
the
expiration
of
the
department’s
applicable
period
of
limitations
in
section
422.25,
the
department
has
one
year
from
the
date
of
receipt
of
the
amended
return
to
assess
any
direct
or
indirect
partners
and
shareholders
related
to
the
reduction
of
any
tax
credit
provided
under
subsection
5.
9.
The
department
shall
adopt
rules
pursuant
to
chapter
17A
to
administer
this
section.
Sec.
3.
Section
422.85,
Code
2023,
is
amended
to
read
as
follows:
422.85
Imposition
of
estimated
tax.
A
taxpayer
subject
to
the
tax
imposed
by
sections
422.16C,
422.33
,
and
422.60
shall
make
payments
of
estimated
tax
for
the
taxable
year
if
the
amount
of
tax
payable,
less
credits,
can
reasonably
be
expected
to
be
more
than
one
thousand
dollars
for
the
taxable
year.
For
purposes
of
this
subchapter
,
“estimated
tax”
means
the
amount
which
the
taxpayer
estimates
to
be
the
tax
due
and
payable
under
subchapter
II,
III
,
or
V
of
this
chapter
for
the
taxable
year.
Sec.
4.
ESTIMATED
TAX
PAYMENTS
FOR
TAX
YEARS
BEGINNING
PRIOR
TO
EFFECTIVE
DATE
OF
ACT.
Notwithstanding
sections
422.16
and
422.85,
a
taxpayer
electing
to
apply
the
provisions
of
section
422.16C
shall
not
be
required
to
make
estimated
tax
payments
for
a
tax
year
beginning
prior
to
the
effective
date
of
this
Act.
Sec.
5.
PENALTY
AND
INTEREST
WAIVER
RELATED
TO
TAX
YEARS
House
File
352,
p.
5
ENDING
PRIOR
TO
EFFECTIVE
DATE
OF
ACT.
Notwithstanding
any
provision
of
law
to
the
contrary,
the
department
may
waive
penalty
and
interest
for
a
return
filing
or
tax
payment
related
to
an
election
to
be
subject
to
the
provisions
of
section
422.16C
for
a
tax
year
ending
prior
to
the
effective
date
of
this
Act.
Sec.
6.
EFFECTIVE
DATE.
This
Act,
being
deemed
of
immediate
importance,
takes
effect
upon
enactment.
Sec.
7.
RETROACTIVE
APPLICABILITY.
This
Act
applies
retroactively
to
January
1,
2022,
for
tax
years
beginning
on
or
after
that
date.
______________________________
PAT
GRASSLEY
Speaker
of
the
House
______________________________
AMY
SINCLAIR
President
of
the
Senate
I
hereby
certify
that
this
bill
originated
in
the
House
and
is
known
as
House
File
352,
Ninetieth
General
Assembly.
______________________________
MEGHAN
NELSON
Chief
Clerk
of
the
House
Approved
_______________,
2023
______________________________
KIM
REYNOLDS
Governor