Bill Text: IA HSB739 | 2023-2024 | 90th General Assembly | Introduced

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Bill Title: A bill for an act providing a credit refund for taxpayers who own or lease cow-calf operations that maintain a herd of qualified cattle, and providing an appropriation.(See HF 2676.)

Spectrum: Committee Bill

Status: (Introduced) 2024-03-27 - Committee report approving bill, renumbered as HF 2676. [HSB739 Detail]

Download: Iowa-2023-HSB739-Introduced.html

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House Study Bill 739 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON KAUFMANN)
A BILL FOR
An Act providing a credit refund for taxpayers who own or
lease cow-calf operations that maintain a herd of qualified
cattle, and providing an appropriation.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. NEW SECTION . 422.11N Cow-calf operations credit.
The taxes imposed under this subchapter, less the credits
allowed under section 422.12, shall be reduced by a cow-calf
operations credit allowed and a cow-calf operations credit
refund paid under subchapter X.
Sec. 2. Section 422.33, Code 2024, is amended by adding the
following new subsection:
NEW SUBSECTION . 11. The taxes imposed under this subchapter
shall be reduced by a cow-calf operations credit allowed and a
cow-calf operations credit refund paid under subchapter X.
Sec. 3. NEW SECTION . 422.120 Definitions.
As used in this subchapter, unless the context otherwise
requires:
1. “Appropriation amount” means the amount of the
appropriation for a fiscal year as provided in section 422.124
available to support a cow-calf operations credit refund paid
under section 422.126 plus any additional appropriation made
to the department for that same fiscal year and for that same
purpose.
2. “Cow-calf operation” or “operation” means land and
facilities located in this state where a cow-calf operation
herd is maintained.
3. “Cow-calf operation cattle” or “cattle” means any of the
following three types of cattle:
a. A mature beef cow bred or for breeding.
b. A bred yearling heifer.
c. A breeding bull.
4. “Cow-calf operation herd” or “herd” means at least one
head of each of the three types of cow-calf operation cattle
that are maintained together.
Sec. 4. NEW SECTION . 422.121 Administration.
1. The department shall adopt all rules pursuant to chapter
17A that it determines are necessary or desirable to administer
this subchapter.
2. The department shall publish all forms required for
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an eligible taxpayer to comply with this subchapter. The
department shall provide for procedures for the receipt,
filing, processing, and return of documents in an electronic
format, including but not limited to the transmission of
documents by the internet. The department shall provide for
authentication of the documents that may include electronic
signatures as provided in chapter 554D.
Sec. 5. NEW SECTION . 422.122 Allowance.
1. There is allowed a cow-calf operations credit that may be
claimed by eligible taxpayers for tax years beginning on and
after January 1, 2025.
2. Only qualifying cow-calf operation cattle are counted
in calculating an allowable credit. Cattle qualify, if on
December 31 of the taxpayer’s tax year and on the previous July
1, the cattle are part of a cow-calf operation herd maintained
at a cow-calf operation.
3. a. The amount of an allowable credit equals fifteen
dollars and fifty cents multiplied by the number of qualifying
cow-calf operation cattle counted by the eligible taxpayer as
provided in subsection 2 subject to allocation as provided in
section 422.127.
b. The maximum allowable credit amount that may be claimed
by an eligible taxpayer shall not exceed four thousand dollars.
Sec. 6. NEW SECTION . 422.123 Taxpayer eligibility.
A taxpayer is eligible to claim the allowable credit under
section 422.122, if all of the following apply:
1. The taxpayer is all of the following:
a. The owner of an interest in one or more qualifying
cow-calf operation cattle that are part of a cow-calf operation
herd as described in section 422.122.
b. The owner or lessee of an interest in the cow-calf
operation where the qualifying cow-calf operation cattle are
maintained.
c. Able to directly or indirectly acquire or otherwise
obtain, own, lease, or hold agricultural land for purposes of
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farming under chapter 9H, 9I, 10, or 501.
d. Not classified as a habitual violator for a violation of
state law involving an animal feeding operation as regulated by
the department of natural resources under chapter 459.
e. Subject to taxation under subchapter II or III.
2. The taxpayer’s income does exceed an adjustable income
limit. The taxpayer’s adjustable income limit equals the
taxpayer’s federal taxable income. In the case of married
taxpayers, their combined federal taxable income shall be used
to determine if they may claim the allowable credit. The
taxpayer’s adjustable income limit shall be calculated as
follows:
a. The base rate for the calendar year beginning January 1,
2024, shall equal one hundred ninety-one thousand dollars.
b. (1) For the tax year beginning January 1, 2025, and for
each subsequent tax year, the eligible taxpayer’s base rate as
specified in paragraph “a” is multiplied by the cumulative index
factor for that tax year.
(2) (a) “Cumulative index factor” means the product of the
annual index factor for the 2025 calendar year and all annual
index factors for subsequent calendar years.
(b) The annual index factor equals the annual inflation
factor for that calendar year as computed in section 422.4 for
purposes of the individual income tax.
Sec. 7. NEW SECTION . 422.124 Appropriation —— limitation.
For the fiscal year beginning July 1, 2025, and ending
June 30, 2026, and for each fiscal year thereafter, there
is appropriated from the general fund of the state to the
department three million dollars to pay cow-calf operations
credit refunds as provided in section 422.126.
Sec. 8. NEW SECTION . 422.125 Credit claim form —— filing
requirements.
1. An eligible taxpayer shall only claim a cow-calf
operations credit allowed under section 422.122 for the
taxpayer’s tax year by completing a cow-calf operations
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credit claim form including all information required by the
department. The claim form must include all of the following:
a. The count of the cow-calf operation cattle in which
the eligible taxpayer owns an interest as provided in section
422.122.
b. The eligible taxpayer’s ownership percentage interest in
the counted cow-calf operation cattle as provided in section
422.123.
c. A calculation of the cow-calf operations credit claimed
by the eligible taxpayer.
2. The eligible taxpayer must file the cow-calf operations
credit claim form with the department as required by the
department. The claim form shall be attached to the taxpayer’s
income tax return for the tax year in which the credit is
claimed. The claim form must be filed within ten months after
the last day of the tax year of the return. The department
shall not grant the taxpayer an extension for filing the claim
form. The taxpayer has the burden to maintain tax records that
support the claim form. Upon request by the department, a
taxpayer shall allow the department to examine the tax records
used to support the claim form.
3. The department shall review and approve or disapprove all
cow-calf operations credit claim forms, if properly submitted
to the department according to procedures established by the
department.
4. A taxpayer who files a fraudulent cow-calf operations
credit claim form shall forfeit any right or interest in a
cow-calf operations credit refund payment, as provided in
section 422.126, in subsequent tax years.
Sec. 9. NEW SECTION . 422.126 Credit refund computation and
payment.
1. On or before February 28, the department shall compute
all payable claimed cow-calf operations credits approved by the
department as provided in section 422.125, for a refund payment
for the eligible taxpayer’s prior tax year. If a credit cannot
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be computed by that date because a taxpayer is not a calendar
year filer, the taxpayer’s approved claim form shall be held
over for computation and payment of a credit for the taxpayer’s
following tax year.
2. The department shall pay each eligible taxpayer up to the
maximum allowable credit amount.
3. The department shall determine whether it will make full
credit refund payments or partial credit refund payments to
eligible taxpayers in a tax year by dividing the appropriation
amount by the total amount of all payable claimed credits
approved by the department.
a. If the appropriation amount is equal to or more than the
total amount of payable claimed credits, the department shall
make full credit refund payments to all eligible taxpayers.
b. If the appropriation amount is less than the total
amount of payable claimed credits, the department shall make
partial credit refund payments, in lieu of making full credit
refund payments, to all eligible taxpayers. In that case, the
department shall make to each eligible taxpayer submitting an
approved claim form the sum of the two partial credit refund
payments as follows:
(1) The first refund payment which shall be made to all such
eligible taxpayers not awarded a full credit refund payment,
by dividing the appropriation amount by the total number of
eligible taxpayers filing approved claim forms.
(2) The second refund payment which shall be made to
each such eligible taxpayer not awarded a full credit refund
payment. Each such taxpayer shall be assigned the same
percentage of the remaining appropriation amount as would have
been awarded to that taxpayer if full refund payments were
being made.
4. An eligible taxpayer who is awarded a partial credit
refund payment is not entitled to any remaining unpaid amount
of the partial credit refund. The taxpayer is not entitled to
carry forward or carry back to another tax year any remaining
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unpaid amount of the partial credit refund. The taxpayer
shall not use a credit refund as an estimated payment for a
succeeding tax year.
Sec. 10. NEW SECTION . 422.127 Allocations.
1. A percentage of a cow-calf operations credit refund
payment made in section 422.126 shall be awarded to one or
more eligible taxpayers, under circumstances identified by the
department, including any of the following:
a. If an eligible taxpayer owns or leases an interest in a
cow-calf operation that is partially located in and partially
located outside this state.
b. (1) Except for married taxpayers, if two or more
eligible taxpayers jointly own or lease an interest in the
same cow-calf operation and jointly own a percentage of all
qualified cow-calf operation cattle that are part of a cow-calf
operation herd maintained at the operation.
(2) For married taxpayers in which one or both spouses are
eligible taxpayers, any of the following:
(a) If only one spouse as an eligible taxpayer owns or
leases an interest in a cow-calf operation and independently
owns an interest in all qualified cattle that are part of a
cow-calf operation herd maintained at the operation.
(b) If both spouses as eligible taxpayers jointly own or
lease an interest in the same cow-calf operation and jointly
own all qualified cattle that are part of a cow-calf operation
herd maintained at the operation.
(3) If each spouse separately owns or leases an interest
in a separate cow-calf operation and independently owns an
interest in all qualified cattle that are part of a cow-calf
herd maintained at that operation. In that case, each spouse
as an eligible taxpayer may claim up to the maximum allowable
credit amount without allocation to the other spouse.
2. a. An individual may claim a cow-calf operations credit
refund allowed a partnership, limited liability company,
subchapter S corporation, or estate or trust electing to have
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the income taxed directly to the individual. The amount
claimed by the individual shall be based upon the pro rata
share of the individual’s earning of the partnership, limited
liability company, subchapter S corporation, or estate or
trust.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
BACKGROUND —— GENERAL. In 1996, the general assembly
established the livestock production tax credit refund (credit
refund) in Code sections 422.120 through 422.123 codified
as division X (now subchapter X) that authorized eligible
taxpayers to claim a refund tax credit (credit) in an amount
based on the cost of producing certain farm animals associated
with beef, dairy, pork, sheep, and poultry operations (1996
Iowa Acts, chapter 1197). The details of the credit were
further described in rules adopted by the department of revenue
and finance (today the department or revenue) under 701 IAC
43.8. In 1997 and 1999, the general assembly amended the
provisions in the division (1997 Iowa Acts, chapter 206, and
1999 Iowa Acts, chapter 151) and in 2009 the general assembly
eliminated the provisions entirely (2009 Iowa Acts, chapter
179).
BACKGROUND —— CALCULATION. The 1996 Iowa Act established
a formula to calculate the credit based on a flat rate of
10 cents multiplied by a corn equivalency factor assigned to
each species of listed farm animals maintained as part of a
herd or flock at a livestock production operation (operation).
The Act accounted for both mature and immature farm animals
(e.g., farrow to finish and farrow to feeder pig) and types of
operation (cow-calf, feedlot, and dairy). The corn equivalency
factor was based on the farm animal’s relevant consumption of
corn or a corn substitute having relative comparable value,
which presumably corresponded to the comparative weights of
the farm animals, ranging from a broiler assigned a 0.15 corn
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equivalency to a dairy cow assigned a 350 corn equivalency
(for a similar scale of corresponding animal weights see Code
section 459.102). For example, the credit for an operation
maintaining turkeys assigned a corn equivalency of 1.5 for
each bird would be calculated as $0.10 x 1.5 = $0.15). The
next step would be to multiply the product of the per turkey
credit refund by the total number of turkeys maintained at
the operation. If the operation contained 15,000 turkeys,
the total animal credit refund amount would be calculated
as $0.10 x 1.5 x 15,000 = $2,250. Alternatively, for a
cow-calf operation, the assigned corn equivalency for each
qualifying head of cattle that was part of a herd maintained
at an operation was 111.5 or $11.15 per head. If an operation
contained 280 qualifying cattle, the total credit refund amount
would be calculated as $0.10 x 111.5 x 280 = $3,122.
BACKGROUND —— PROCEDURES. The 1996 Iowa Act established
a number of procedures. The taxpayer was required to file
a claim for the refund within 10 months from the last day
of the taxpayer’s tax year (October 31 for a calendar year
filer). An extension by the taxpayer was not allowed. A
claim for a credit refund had to be made on forms published by
the department. The department was required to determine by
February 28 of each calendar year whether the total amount of
claims for refunds for the prior calendar year exceeded the
amount available to fully pay all claims.
BACKGROUND —— LIMITATIONS (RESTRICTED TO COW-CALF
OPERATIONS). The 1996 Iowa Act provided that for the tax
year beginning on and after January 1, 1996, the credit
refund applied only to cow-calf operations. The 1997 Iowa
Act extended that restriction to all future tax years, while
leaving the Code sections establishing the general credit
refund applying to all farm animals intact but unfunded. The
1997 Iowa Act specified that a cow-calf operation must include
a herd consisting of three types of qualifying cattle: mature
beef cows bred or for breeding, bred yearling heifers, and
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breeding bulls. The 1999 Iowa Act provided that the credit
refund was based on a head count of the cattle (inventory)
conducted on December 31 of the tax year and required that the
same cattle must have been included in the herd inventory on
the previous July 1.
BACKGROUND —— LIMITATIONS (FINANCIAL CAPS). A number of
financial limitations applied to the credit refund. The
first and second limitations were established in the 1996
Iowa Act. The first limitation set a maximum allowable
amount (maximum credit cap) of $3,000 that could be awarded
to any one taxpayer. Thus, a taxpayer who owned a cow-calf
operation could not count more than 269 cattle when claiming
a credit refund ($0.10 x 111.5 x 269 = $2,999.35). The second
limitation set a maximum annual standing limited appropriation
of $2 million dedicated to pay all claimed credit refunds
allowed by the department in that fiscal year. If on February
28 the appropriated amount was available to cover all approved
credit claims, each of the approved claims would be paid up to
the maximum allowable credit cap. Otherwise, the appropriated
amount would be paid on a percentage basis in two rounds of
distributions. During the first round, each taxpayer holding
a claim was paid an equal amount up to the claimed credit’s
maximum credit cap. During the second round, the remaining
appropriation amount was apportioned among all taxpayers
holding claims that were not fully paid. Each such taxpayer
was assigned the same percentage of the remaining appropriation
amount as would have been awarded to that taxpayer if full
refund payments were made to all such waiting taxpayers. The
third financial limitation set an eligibility requirement for
taxpayers. The 1997 Iowa Act replaced a taxpayer net worth cap
with a taxpayer annual income cap. The former Act required
a taxpayer to have had a net worth of less than $1 million.
The new requirement provided that the taxpayer’s income could
not exceed $99,600 for the 1997 tax year and increased that
cap each tax year based on an inflation formula referred to
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as a cumulative index factor which added together the rate of
inflation for each relevant year after the base year (see Code
section 422.4).
BACKGROUND —— ALLOCATIONS. Interest holders of certain
businesses, such as S corporations, were allowed to claim the
credit individually as a pass-through.
BILL’S PROVISIONS. This bill reestablishes the credit
refund based on the framework of the 1996 Iowa Act as amended,
but also makes certain changes. The former version of the
credit refund applied to livestock production operations but
in fact limited its application to only cow-calf operations.
The bill applies exclusively to cow-calf operations as defined
in the 1997 Iowa Act and eliminates language that refers to
those other types of operations. The bill assumes an inflation
rate of 92 percent (rounded) since the income cap for taxpayers
first applied to 1997 and later tax years and substitutes
$99,600 with $191,000 (rounded) as a base rate for the 2024
calendar year with subsequent increases calculated for tax
years beginning on and after January 1, 2025, using the same
inflation formula. The bill assumes an inflation rate of 43.75
percent (rounded) since the credit’s elimination in 2009. The
bill replaces the formula that had been used to calculate the
per head amount of the credit with a fixed amount of $15.50
assuming an inflation adjusted flat rate per head from $0.10 to
$0.14 calculated as $0.14 x 111.5 = $15.50 (rounded). It makes
two other inflation adjustments, including (1) the maximum
allowable credit amount by substituting $3,000 with $4,000
(rounded), and (2) the appropriation amount by substituting
$2 million with $3 million (rounded). It requires the filing
of documents with the department in an electronic format. It
provides that a taxpayer must be able to hold agricultural
land for farming under Iowa’s corporate and foreign farming
laws (see Code chapter 425A providing for the family farm
tax credit) and provides that a taxpayer operating an animal
feeding operation cannot be classified as a habitual violator
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of environmental regulations (see Code section 16.79 providing
eligibility criteria for the beginning farmer tax credit
program). Finally, it expressly allows the department to
calculate allocations of a credit when qualifying cow-calf
operation cattle are owned by more than one taxpayer, including
married taxpayers.
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