Bill Text: IA SF2208 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act relating to state financing involving the state general fund expenditure limitation by revising calculation requirements for the limitation, increasing reserve fund balances, creating a safety net fund, creating an Iowa personal income tax rate reduction fund, making transfers, and providing for related state personal income tax rate reductions, and including effective and applicability dates.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2016-02-17 - Subcommittee, Quirmbach, Anderson, and Bolkcom. S.J. 257. [SF2208 Detail]
Download: Iowa-2015-SF2208-Introduced.html
Senate File 2208 - Introduced SENATE FILE BY CHAPMAN and ANDERSON A BILL FOR 1 An Act relating to state financing involving the state 2 general fund expenditure limitation by revising calculation 3 requirements for the limitation, increasing reserve fund 4 balances, creating a safety net fund, creating an Iowa 5 personal income tax rate reduction fund, making transfers, 6 and providing for related state personal income tax rate 7 reductions, and including effective and applicability dates. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5367XS (5) 86 tm/rj PAG LIN 1 1 Section 1. Section 8.54, subsection 1, Code 2016, is amended 1 2 by adding the following new paragraphs: 1 3 NEW PARAGRAPH. 0b. "Iowa wage and salary component" means 1 4 the wage and salary component of the quarterly state personal 1 5 income table for Iowa issued by the bureau of economic analysis 1 6 of the United States department of commerce. For the purposes 1 7 of this paragraph and paragraph "c", "quarter" means the 1 8 calendar year quarter identified in the table issued by the 1 9 bureau. 1 10 NEW PARAGRAPH. c. "Wage and salary growth factor" means 1 11 one=half of the percentage increase, if any, in the average 1 12 of the second quarter Iowa wage and salary component issued 1 13 immediately prior to the meeting of the revenue estimating 1 14 conference held by December 15 in accordance with section 1 15 8.22A, subsection 3, and the Iowa wage and salary components 1 16 for the three quarters immediately preceding such second 1 17 quarter component, as compared to the average of the four 1 18 quarters of the Iowa wage and salary component immediately 1 19 preceding the oldest quarter used to calculate the first 1 20 average. 1 21 Sec. 2. Section 8.54, subsection 2, Code 2016, is amended 1 22 to read as follows: 1 23 2. a. There is created a state general fund expenditure 1 24 limitation for each fiscal year calculated as provided in 1 25 this section. An expenditure limitation shall be used for 1 26 the portion of the budget process commencing on the date the 1 27 revenue estimating conference agrees to a revenue estimate for 1 28 the following fiscal year in accordance with section 8.22A, 1 29 subsection 3, and ending with the governor's final approval 1 30 or disapproval of the appropriations bills applicable to that 1 31 fiscal year that were passed prior to July 1 of that fiscal 1 32 year in a regular or extraordinary legislative session. 1 33 b. A wage and salary growth factor for the following 1 34 fiscal year shall be calculated jointly by the department of 1 35 management and the legislative services agency for use in the 2 1 budget process for the following fiscal year in accordance with 2 2 this section. The wage and salary growth factor calculation 2 3 for the following fiscal year shall be issued concurrently 2 4 with the meeting of the revenue estimating conference held by 2 5 December 15 in which the estimates used to develop the adjusted 2 6 revenue estimate for the following fiscal year are agreed to 2 7 by the conference. 2 8 Sec. 3. Section 8.54, subsection 3, Code 2016, is amended 2 9 to read as follows: 2 10 3. Except as otherwise provided in this section, the state 2 11 general fund expenditure limitation for a fiscal year shall be 2 12 the lesser of the following amounts: 2 13 a.ninety=nineNinety=nine percent of the adjusted revenue 2 14 estimate for the fiscal year. 2 15 b. The percentage derived from adding to one hundred percent 2 16 the wage and salary growth factor calculated for the fiscal 2 17 year times the final state general fund expenditure limitation 2 18 for the prior fiscal year. 2 19 Sec. 4. Section 8.54, subsection 5, Code 2016, is amended by 2 20 striking the subsection. 2 21 Sec. 5. Section 8.55, subsection 2, Code 2016, is amended 2 22 to read as follows: 2 23 2. The maximum balance of the fund is the amount equal to 2 24 two and one=half percent of the adjusted revenue estimate for 2 25 the fiscal year. If the amount of moneys in the Iowa economic 2 26 emergency fund is equal to the maximum balance, moneys in 2 27 excess of this amount shall be distributedas followsin the 2 28 following order: 2 29 a. The initial excess, not to exceed the amount necessary 2 30 for the safety net fund to reach its maximum balance of two 2 31 percent of the adjusted revenue estimate for the fiscal year, 2 32 shall be transferred to the safety net fund. 2 33a.b. The remainder of the excess, not to exceed the first 2 34 sixty million dollars of the difference between the actual net 2 35 revenue for the general fund of the state for the fiscal year 3 1 and the adjusted revenue estimate for the fiscal year, shall be 3 2 transferred to the taxpayers trust fund. 3 3b.c. The remainder of the excess, if any, shall be 3 4 transferred to thegeneral fund of the stateIowa personal 3 5 income tax rate reduction fund created in section 8.57G. 3 6 Sec. 6. NEW SECTION. 8.57G Iowa personal income tax rate 3 7 reduction fund. 3 8 1. An Iowa personal income tax rate reduction fund is 3 9 created. The fund shall be separate from the general fund of 3 10 the state and the balance in the fund shall not be considered 3 11 part of the balance of the general fund of the state. The 3 12 moneys credited to the fund are not subject to section 8.33 and 3 13 shall not be transferred, used, obligated, appropriated, or 3 14 otherwise encumbered except as provided in this section. 3 15 2. a. Moneys in the Iowa personal income tax rate reduction 3 16 fund shall only be used pursuant to appropriations or transfers 3 17 made by the general assembly for tax relief. 3 18 b. No later than June 30 in each fiscal year the entire 3 19 balance of the Iowa personal income tax rate reduction fund, if 3 20 any, is transferred to the general fund of the state. 3 21 c. The moneys transferred to the general fund of the state 3 22 in accordance with paragraph "b" shall not be considered new 3 23 revenue for purposes of the state general fund expenditure 3 24 limitation under section 8.54 but instead shall be considered 3 25 as replacing a like amount included in the expenditure 3 26 limitation for the fiscal year in which the transfer is made. 3 27 3. a. Moneys in the Iowa personal income tax rate reduction 3 28 fund may be used for cash flow purposes during a fiscal year 3 29 provided that any moneys so allocated are returned to the fund 3 30 by the end of that fiscal year. 3 31 b. Except as provided in section 8.58, the Iowa personal 3 32 income tax rate reduction fund shall be considered a special 3 33 account for the purposes of section 8.53 in determining the 3 34 cash position of the general fund of the state for the payment 3 35 of state obligations. 4 1 4. Notwithstanding section 12C.7, subsection 2, interest or 4 2 earnings on moneys deposited in the Iowa personal income tax 4 3 rate reduction fund shall be credited to the fund. 4 4 Sec. 7. NEW SECTION. 8.57H Safety net fund. 4 5 1. A safety net fund is created. The fund shall be separate 4 6 from the general fund of the state and the balance in the fund 4 7 shall not be considered part of the balance of the general fund 4 8 of the state. The moneys credited to the fund are not subject 4 9 to section 8.33 and shall not be transferred, used, obligated, 4 10 appropriated, or otherwise encumbered except as provided in 4 11 this section. 4 12 2. Moneys in the safety net fund shall only be used pursuant 4 13 to appropriations or transfers made by the general assembly 4 14 to augment appropriations made for important education, 4 15 employment, health, human services, and other programs to aid 4 16 individuals and families with low income. 4 17 3. a. Moneys in the safety net fund may be used for cash 4 18 flow purposes during a fiscal year provided that any moneys so 4 19 allocated are returned to the fund by the end of that fiscal 4 20 year. 4 21 b. Except as provided in section 8.58, the safety net fund 4 22 shall be considered a special account for the purposes of 4 23 section 8.53 in determining the cash position of the general 4 24 fund of the state for the payment of state obligations. 4 25 4. Notwithstanding section 12C.7, subsection 2, interest 4 26 or earnings on moneys deposited in the safety net fund shall 4 27 be credited to the fund. 4 28 Sec. 8. Section 8.58, Code 2016, is amended to read as 4 29 follows: 4 30 8.58 Exemption from automatic application. 4 31 1.To the extent that moneys appropriated under section 4 32 8.57 do not result in moneys being credited to the general fund 4 33 under section 8.55, subsection 2, moneysMoneys appropriated 4 34 under section 8.57 and moneys contained in the cash reserve 4 35 fund, rebuild Iowa infrastructure fund, environment first 5 1 fund, Iowa economic emergency fund, taxpayers trust fund, 5 2andstate bond repayment fund, Iowa personal income tax rate 5 3 reduction fund, and safety net fund shall not be considered 5 4 in the application of any formula, index, or other statutory 5 5 triggering mechanism which would affect appropriations, 5 6 payments, or taxation rates, contrary provisions of the Code 5 7 notwithstanding. To the extent that moneys projected to be 5 8 transferred from the Iowa personal income tax rate reduction 5 9 fund to the general fund of the state pursuant to section 8.57G 5 10 replace revenues reduced pursuant to section 422.5, subsection 5 11 1, paragraph "k", such moneys reduction shall not be considered 5 12 by such arbitrator or in such negotiations in the application 5 13 of such mechanisms that affect appropriations, payments, or 5 14 taxation rates. 5 15 2.To the extent that moneys appropriated under section 5 16 8.57 do not result in moneys being credited to the general fund 5 17 under section 8.55, subsection 2, moneysMoneys appropriated 5 18 under section 8.57 and moneys contained in the cash reserve 5 19 fund, rebuild Iowa infrastructure fund, environment first 5 20 fund, Iowa economic emergency fund, taxpayers trust fund, 5 21andstate bond repayment fund, Iowa personal income tax rate 5 22 reduction fund, and safety net fund shall not be considered 5 23 by an arbitrator or in negotiations under chapter 20. To the 5 24 extent that moneys projected to be transferred from the Iowa 5 25 personal income tax rate reduction fund to the general fund of 5 26 the state pursuant to section 8.57G replace revenues reduced 5 27 pursuant to section 422.5, subsection 1, paragraph "k", such 5 28 moneys reduction shall not be considered by such arbitrator or 5 29 in such negotiations in the application of such mechanisms that 5 30 affect appropriations, payments, or taxation rates. 5 31 Sec. 9. Section 422.5, subsection 1, Code 2014, is amended 5 32 by adding the following new paragraph: 5 33 NEW PARAGRAPH. k. For the tax year beginning January 1 5 34 immediately preceding July 1 of any fiscal year in which a 5 35 transfer is made to the Iowa personal income tax rate reduction 6 1 fund pursuant to section 8.57G, subsection 2, paragraph "b", 6 2 each rate in paragraphs "a" through "i" shall be reduced, and 6 3 rounded to the nearest one=hundredth of one percent, by the 6 4 percentage that the amount transferred during the fiscal year 6 5 to the Iowa personal income tax rate reduction fund bears 6 6 to the actual net revenue for the general fund of the state 6 7 for the fiscal year immediately preceding the fiscal year in 6 8 which such transfer was made to the Iowa personal income tax 6 9 rate reduction fund. A tax rate reduction provided in this 6 10 paragraph only applies to the tax year which is the subject 6 11 of the rate reduction and shall not effect tax rates in any 6 12 successive tax year. The department shall draft the income tax 6 13 form for any tax year in which rates are reduced under this 6 14 paragraph to provide information to taxpayers necessary to 6 15 calculate the tax due. 6 16 Sec. 10. Section 422.5, subsection 2, paragraph a, Code 6 17 2016, is amended to read as follows: 6 18 a. There is imposed upon every resident and nonresident 6 19 of this state, including estates and trusts, the greater of 6 20 the tax determined in subsection 1, paragraphs "a" through"j" 6 21"k", or the state alternative minimum tax equal to seventy=five 6 22 percent of the maximum state individual income tax rate for the 6 23 tax year, rounded to the nearest one=tenth of one percent, of 6 24 the state alternative minimum taxable income of the taxpayer as 6 25 computed under this subsection. 6 26 Sec. 11. Section 422.11B, Code 2016, is amended to read as 6 27 follows: 6 28 422.11B Minimum tax credit. 6 29 1. a. There is allowed as a credit against the tax 6 30 determined in section 422.5, subsection 1, paragraphs "a" 6 31 through"j""k" for a tax year an amount equal to the minimum 6 32 tax credit for that tax year. 6 33 b. The minimum tax credit for a tax year is the excess, 6 34 if any, of the net minimum tax imposed for all prior tax 6 35 years beginning on or after January 1, 1987, over the amount 7 1 allowable as a credit under this section for those prior tax 7 2 years. 7 3 2. a. The allowable credit under subsection 1 for a tax 7 4 year shall not exceed the excess, if any, of the tax determined 7 5 in section 422.5, subsection 1, paragraphs "a" through"j""k" 7 6 over the state alternative minimum tax as determined in section 7 7 422.5, subsection 2. 7 8 b. The net minimum tax for a tax year is the excess, if any, 7 9 of the tax determined in section 422.5, subsection 2, for the 7 10 tax year over the tax determined in section 422.5, subsection 7 11 1, paragraphs "a" through"j""k" for the tax year. 7 12 Sec. 12. Section 422.16, subsection 1, paragraph a, Code 7 13 2016, is amended to read as follows: 7 14 a. Every withholding agent and every employer as defined 7 15 in this chapter and further defined in the Internal Revenue 7 16 Code, with respect to income tax collected at source, making 7 17 payment of wages to a nonresident employee working in Iowa, 7 18 or to a resident employee, shall deduct and withhold from the 7 19 wages an amount which will approximate the employee's annual 7 20 tax liability on a calendar year basis, calculated on the 7 21 basis of tables to be prepared by the department and schedules 7 22 or percentage rates, based on the wages, to be prescribed by 7 23 the department, and calculated without regard to the rate 7 24 reductions provided in section 422.5, subsection 1, paragraph 7 25 "k". Every employee or other person shall declare to the 7 26 employer or withholding agent the number of the employee's 7 27 or other person's personal allowances to be used in applying 7 28 the tables and schedules or percentage rates. However, no 7 29 greater number of allowances may be declared by the employee 7 30 or other person than the number to which the employee or other 7 31 person is entitled except as allowed under sections 3402(m)(1) 7 32 and 3402(m)(3) of the Internal Revenue Code and as allowed 7 33 for the child and dependent care credit provided in section 7 34 422.12C. The claiming of allowances in excess of entitlement is 7 35 a serious misdemeanor. 8 1 Sec. 13. EFFECTIVE DATE. This Act takes effect July 1, 8 2 2017. 8 3 Sec. 14. APPLICABILITY. The following provisions of this 8 4 Act are first applicable to calculate the state general fund 8 5 expenditure limitation for the fiscal year beginning July 1, 8 6 2017: 8 7 1. The sections amending section 8.54. 8 8 2. The sections amending section 8.55. 8 9 EXPLANATION 8 10 The inclusion of this explanation does not constitute agreement with 8 11 the explanation's substance by the members of the general assembly. 8 12 This bill relates to the state general fund expenditure 8 13 limitation by revising calculation requirements for the 8 14 limitation, creating a safety net fund, creating an Iowa 8 15 personal income tax rate reduction fund, making transfers, 8 16 and providing for related state personal income tax rate 8 17 reductions. 8 18 Code section 8.54, relating to the state general fund 8 19 expenditure limitation, is amended to provide an additional 8 20 method for calculating the limitation. Under current law, 8 21 the limitation is 99 percent of the adjusted revenue estimate 8 22 for the following fiscal year based on an estimate approved 8 23 by the revenue estimating conference in a meeting held by 8 24 December 15. The new calculation method in the bill is based 8 25 on the growth in the average wage and salary component of the 8 26 quarterly state personal income table for Iowa issued by the 8 27 bureau of economic analysis of the United States department of 8 28 commerce. Under the new method, the department of management 8 29 and the legislative services agency are directed to apply the 8 30 component issued for the quarters of a two=year period to 8 31 jointly calculate a wage and salary growth factor percentage. 8 32 One=half of this percentage amount, combined with 100 percent, 8 33 is applied to the amount of the state general fund expenditure 8 34 limitation for the prior fiscal year (fiscal year in progress). 8 35 The lesser amount identified by the two methods is required to 9 1 be used as the state general fund expenditure limitation in the 9 2 budget process for the following fiscal year. 9 3 Under current law, if a surplus is anticipated for the 9 4 general fund of the state at the close of a fiscal year, any 9 5 excess remaining, after the surplus is applied to bring state 9 6 reserve funds to their maximum balances, is transferred back 9 7 to the state general fund for the following fiscal year. The 9 8 original state general fund expenditure limitation for that 9 9 following fiscal year is required to be readjusted to reflect 9 10 the amount of excess anticipated to be transferred. The bill 9 11 repeals the current law requirements for the excess in Code 9 12 sections 8.54(5) and 8.55(2) and instead requires the excess 9 13 to be transferred in the following order: first to the safety 9 14 net fund created by the bill, up to the maximum balance for 9 15 the safety net fund which is established as 2 percent of the 9 16 adjusted revenue estimate for the fiscal year; next, to the 9 17 taxpayer trust fund, up to the maximum amount specified in 9 18 current law; and the entire remainder to the personal income 9 19 tax rate reduction fund created by the bill. 9 20 New Code section 8.57G creates an Iowa personal income tax 9 21 reduction fund separate from the general fund. Moneys in the 9 22 fund can only be used pursuant to appropriations or transfers 9 23 made by the general assembly for tax relief and for temporary 9 24 cash flow purposes. 9 25 New Code section 8.57H creates a safety net fund separate 9 26 from the general fund. Moneys in the fund can only be used 9 27 pursuant to appropriations or transfers made by the general 9 28 assembly to augment appropriations made for important 9 29 education, employment, health, human services, and other 9 30 programs to aid individuals and families with low income. 9 31 Moneys in the new funds are treated similarly to other 9 32 reserve funds under Code section 8.58 and exempted from 9 33 automatic application in triggering mechanisms which affect 9 34 appropriations, payments, or taxation rates and cannot be 9 35 considered by an arbitrator or in collective bargaining 10 1 negotiations under Code chapter 20. 10 2 Moneys transferred to the Iowa personal income tax rate 10 3 reduction fund are required to be transferred to the general 10 4 fund of the state by the end of the same fiscal year and treated 10 5 as a replacement of revenue resulting from the individual 10 6 income tax rate reduction provided for in the bill. 10 7 For tax years beginning January 1 immediately preceding July 10 8 1 of a fiscal year in which a transfer is made to the Iowa 10 9 personal income tax rate reduction fund, the rates for each of 10 10 the nine tax brackets of the individual income tax are required 10 11 to be reduced by the percentage that the amount transferred 10 12 to the fund bears to the state's actual net revenue for the 10 13 preceding fiscal year. Tax rate reductions only apply for one 10 14 tax year and do not affect tax rates in any successive tax 10 15 year. Withholding agents and employers are prohibited from 10 16 factoring in such an individual income tax rate reduction in 10 17 their calculation of appropriate employee withholding amounts 10 18 during a tax year. Under the bill, the tax year beginning 10 19 January 1, 2018, is the first tax year to which the individual 10 20 income tax rate reduction may apply. 10 21 The bill takes effect July 1, 2017. However, the provisions 10 22 affecting calculation of the state general fund expenditure 10 23 limitation are first applicable for the budget process for the 10 24 fiscal year beginning July 1, 2017 (FY 2017=2018). LSB 5367XS (5) 86 tm/rj
