ARRC Issues ABI-Backed Session Delay on Consumable Foods Rule

On Monday, the full membership of the Legislature’s Administrative Rules Review Committee (ARRC) voted to delay the implementation of ARC5906C. This is a rule developed by the Iowa Department of Revenue (IDR) related to a sales tax exemption provided to manufacturers of consumable foods for human consumption. ABI staff has testified before the IDR twice and also testified before the ARRC three times objecting to the rule. The exemption for food producers was first added to the Iowa Code in 1985 and since that time, rules interpreting the law had not been filed. As a result, an understanding of the law developed over time through a series of tax filings, audits, appeals and settlements.  IDR, motivated by a desire to reduce this administrative burden, issued rules this past Spring that the department believes brings clarity to the tax exemption. Taxpayers saw it differently, holding that the rules would expose them to greater tax liability. Meetings through the ensuing months between affected taxpayers, ABI, the Iowa Taxpayers Association and the IDR have developed proposed legislation to be introduced and passed by the Iowa Legislature during the 2022 session that reflects the taxpayer’s perspective. ABI’s food processing members provided issue-area expertise on this matter. Without an objection from the IDR, the ARRC delayed the rule implementation until after the Legislature was given an opportunity to pass the consensus legislation. Look for further updates on this issue as the 2022 legislative session begins in January.