HOUSE REPUBLICAN STAFF ANALYSIS Bill: House File 2435 Committee: Ways and Means Floor Manager: Rep. Landon Date: March 10, 2014 Staff: Kristi L. Kielhorn (2-5290)
House Committee: House Floor: Senate Floor: Governor:
PASSED on March 3 (25-0)
Bill Subject House File 2435 incorporates all federal income tax changes enacted by Congress in 2013 into Iowa income tax law.
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Section by Section Analysis Division I – Internal Revenue Code References Sections 1 through 7 – Updating Year These sections update the year to 2014 and make other conforming code reference changes. Specifically, they update the provisions in the Iowa Code for the Iowa Research Activities Credit to include revisions in the federal research credit (the basis for the Iowa credit). These sections also update to conform to the 2013 federal changes affecting the computation of Iowa net income for individuals, corporations, and financial institutions. There was no significant federal tax legislation enacted in 2013. All changes in these sections are effective upon enactment, and are retroactive to January 1, 2013 for tax years beginning on or after that date. Division II – Repeal of Generation Skipping Transfer Tax and Iowa Estate Tax Sections 8 through 24 – Conforming Changes These sections make coordinating amendments regarding the repeal of the generation skipping transfer tax and the Iowa estate tax. In 2001, Congress enacted the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) which reduced the federal estate tax rates and increased the exemption level for estates. EGTRRA also phased out the tax credits for state inheritance and estate taxes in 25 percent increments between 2002 and 2005. Iowa has not collected any estate tax or generation skipping transfer tax for estates of decedents dying or generation skipping transfers occurring after December 31, 2004. Until 2008, Iowa had an estate tax with a base amount calculated from the federal tax credits phased out in EGTRRA. This type of tax was referred to as a “pick-up tax.” In 2008, Iowa’s estate tax was eliminated. In 2010, the Iowa estate tax was reenacted, but it was not going to be implemented unless the federal tax credits were reenacted as well. In 2013, Congress enacted the American Taxpayer Relief Act which permanently eliminated the federal tax credits. That resulted in no Iowa estate tax or Iowa generation skipping transfer tax. Section 25 – Repeal This section repeals the generation skipping transfer tax and the Iowa estate tax. 1
