Tax Cleanup Legislation Unveiled

March 28, 2019

Legislation to address changes made in the comprehensive tax reform bill of 2018 was introduced Tuesday. SSB 1249 has 20 divisions and encompasses issues from research activities credit and changes to marketplace facilitators to changes in the definition of manufacturer and GILTI. ABI is still reviewing the legislation, but a few components that ABI members will be interested in are:

  • Division I: Expands like-kind changes of personal property to corporate income and franchise taxpayers. Retroactive to tax year 2019.
  • Division II: States who and how the department of revenue can release state tax information to.
  • Division III: Sales and use tax section includes several items of interest to Iowa businesses.
    • Exemption of sales tax for purchase price and material and replacement parts of grain bin.
    • Changes to exemption of sales tax on the sales of option service or warranty contracts for computer software furnished to a commercial enterprise, as defined in code.
    • The threshold for marketplace facilitators changes. Also, there is no longer an option of 200 separate transactions or $100,000; it is simply Iowa sales equal to or exceeding $100,000.
    • Establishes a task force to look at the definition of computer in Iowa code and the exemption for computers.
  • Division IV and V makes changes to the automobile rental excise tax and makes changes to the classification of a long distance telephone company by the Iowa Utilities Board if certain criteria are met.
  • Division X makes changes to the targeted jobs withholding credit. It was scheduled to expire this year. However, it has been extended to 2023 but can now only be used for “created job” not “retained job” as the code previously allowed.
  • Division XIII repeals AMT on franchise tax.
  • Division XIV addresses issues with GILTI that were not clear under Iowa law after the federal government passed tax reform in 2018.
  • Division XVI expands the research activities credit to allow the credit to be taken against the individual and corporate income tax if an individual is engaged in agriscience or animal production and is retroactive to January 1, 2017.
  • Division XVIII extends the utility replacement task force for another 10 years until 2029.
  • Division XX clarifies the definition of manufacturer that was changed in the 2018 tax reform bill. There is concern that last year’s law would inadvertently exclude companies that otherwise fit the definition of the manufacturer based on the construction of the code language. The inclusion of the word primarily will allow manufacturers who may also repair tangible personal property to claim the exemption.

Although the legislation is considered a clean-up bill, there are provisions in the bill that will be contentious. It is expected this bill will have a fiscal impact. For more information about the legislation, please contact Nicole Crain.