Text: SF2407 Text: SF2409 Complete Bill History
Senate File 2408
PAG LIN 1 1 Section 1. Section 422.5, Code 2005, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 2A. However, the tax shall not be imposed 1 4 on a resident or nonresident who is at least sixty=five years 1 5 old on December 31 of the tax year and whose net income, as 1 6 defined in section 422.7, is twenty=four thousand dollars or 1 7 less in the case of married persons filing jointly or filing 1 8 separately on a combined return, unmarried heads of household, 1 9 and surviving spouses or eighteen thousand dollars or less in 1 10 the case of all other persons; but in the event that the 1 11 payment of tax under this division would reduce the net income 1 12 to less than twenty=four thousand dollars or eighteen thousand 1 13 dollars as applicable, then the tax shall be reduced to that 1 14 amount which would result in allowing the taxpayer to retain a 1 15 net income of twenty=four thousand dollars or eighteen 1 16 thousand dollars as applicable. The preceding sentence does 1 17 not apply to estates or trusts. For the purpose of this 1 18 subsection, the entire net income, including any part of the 1 19 net income not allocated to Iowa, shall be taken into account. 1 20 For purposes of this subsection, net income includes all 1 21 amounts of pensions or other retirement income received from 1 22 any source which is not taxable under this division as a 1 23 result of the government pension exclusions in section 422.7, 1 24 or any other state law. If the combined net income of a 1 25 husband and wife exceeds twenty=four thousand dollars, neither 1 26 of them shall receive the benefit of this subsection, and it 1 27 is immaterial whether they file a joint return or separate 1 28 returns. However, if a husband and wife file separate returns 1 29 and have a combined net income of twenty=four thousand dollars 1 30 or less, neither spouse shall receive the benefit of this 1 31 paragraph, if one spouse has a net operating loss and elects 1 32 to carry back or carry forward the loss as provided in section 1 33 422.9, subsection 3. A person who is claimed as a dependent 1 34 by another person as defined in section 422.12 shall not 1 35 receive the benefit of this subsection if the person claiming 2 1 the dependent has net income exceeding twenty=four thousand 2 2 dollars or eighteen thousand dollars as applicable or the 2 3 person claiming the dependent and the person's spouse have 2 4 combined net income exceeding twenty=four thousand dollars or 2 5 eighteen thousand dollars as applicable. 2 6 In addition, if the married persons', filing jointly or 2 7 filing separately on a combined return, unmarried head of 2 8 household's, or surviving spouse's net income exceeds 2 9 twenty=four thousand dollars, the regular tax imposed under 2 10 this division shall be the lesser of the maximum state 2 11 individual income tax rate times the portion of the net income 2 12 in excess of twenty=four thousand dollars or the regular tax 2 13 liability computed without regard to this sentence. Taxpayers 2 14 electing to file separately shall compute the alternate tax 2 15 described in this paragraph using the total net income of the 2 16 husband and wife. The alternate tax described in this 2 17 paragraph does not apply if one spouse elects to carry back or 2 18 carry forward the loss as provided in section 422.9, 2 19 subsection 3. 2 20 This subsection applies even though one spouse has not 2 21 attained the age of sixty=five, if the other spouse is at 2 22 least sixty=five at the end of the tax year. 2 23 This subsection is repealed January 1, 2009. 2 24 Sec. 2. Section 422.5, Code 2005, is amended by adding the 2 25 following new subsection: 2 26 NEW SUBSECTION. 2B. However, the tax shall not be imposed 2 27 on a resident or nonresident who is at least sixty=five years 2 28 old on December 31 of the tax year and whose net income, as 2 29 defined in section 422.7, is thirty=two thousand dollars or 2 30 less in the case of married persons filing jointly or filing 2 31 separately on a combined return, unmarried heads of household, 2 32 and surviving spouses or twenty=four thousand dollars or less 2 33 in the case of all other persons; but in the event that the 2 34 payment of tax under this division would reduce the net income 2 35 to less than thirty=two thousand dollars or twenty=four 3 1 thousand dollars as applicable, then the tax shall be reduced 3 2 to that amount which would result in allowing the taxpayer to 3 3 retain a net income of thirty=two thousand dollars or 3 4 twenty=four thousand dollars as applicable. The preceding 3 5 sentence does not apply to estates or trusts. For the purpose 3 6 of this subsection, the entire net income, including any part 3 7 of the net income not allocated to Iowa, shall be taken into 3 8 account. For purposes of this subsection, net income includes 3 9 all amounts of pensions or other retirement income received 3 10 from any source which is not taxable under this division as a 3 11 result of the government pension exclusions in section 422.7, 3 12 or any other state law. If the combined net income of a 3 13 husband and wife exceeds thirty=two thousand dollars, neither 3 14 of them shall receive the benefit of this subsection, and it 3 15 is immaterial whether they file a joint return or separate 3 16 returns. However, if a husband and wife file separate returns 3 17 and have a combined net income of thirty=two thousand dollars 3 18 or less, neither spouse shall receive the benefit of this 3 19 paragraph, if one spouse has a net operating loss and elects 3 20 to carry back or carry forward the loss as provided in section 3 21 422.9, subsection 3. A person who is claimed as a dependent 3 22 by another person as defined in section 422.12 shall not 3 23 receive the benefit of this subsection if the person claiming 3 24 the dependent has net income exceeding thirty=two thousand 3 25 dollars or twenty=four thousand dollars as applicable or the 3 26 person claiming the dependent and the person's spouse have 3 27 combined net income exceeding thirty=two thousand dollars or 3 28 twenty=four thousand dollars as applicable. 3 29 In addition, if the married persons', filing jointly or 3 30 filing separately on a combined return, unmarried head of 3 31 household's, or surviving spouse's net income exceeds 3 32 thirty=two thousand dollars, the regular tax imposed under 3 33 this division shall be the lesser of the maximum state 3 34 individual income tax rate times the portion of the net income 3 35 in excess of thirty=two thousand dollars or the regular tax 4 1 liability computed without regard to this sentence. Taxpayers 4 2 electing to file separately shall compute the alternate tax 4 3 described in this paragraph using the total net income of the 4 4 husband and wife. The alternate tax described in this 4 5 paragraph does not apply if one spouse elects to carry back or 4 6 carry forward the loss as provided in section 422.9, 4 7 subsection 3. 4 8 This subsection applies even though one spouse has not 4 9 attained the age of sixty=five, if the other spouse is at 4 10 least sixty=five at the end of the tax year. 4 11 Sec. 3. Section 422.5, subsection 7, Code 2005, is amended 4 12 to read as follows: 4 13 7. In addition to the other taxes imposed by this section, 4 14 a tax is imposed on the amount of a lump sum distribution for 4 15 which the taxpayer has elected under section 402(e) of the 4 16 Internal Revenue Code to be separately taxed for federal 4 17 income tax purposes for the tax year. The rate of tax is 4 18 equal to twenty=five percent of the separate federal tax 4 19 imposed on the amount of the lump sum distribution. A 4 20 nonresident is liable for this tax only on that portion of the 4 21 lump sum distribution allocable to Iowa. The total amount of 4 22 the lump sum distribution subject to separate federal tax 4 23 shall be included in net income for purposes of determining 4 24 eligibility underthe thirteen thousand five hundred dollar or 4 25 less or nine thousand dollar or less exclusion, as applicable4 26 subsections 2 and 2A or 2B, as applicable. 4 27 Sec. 4. Section 422.7, subsection 13, Code Supplement 4 28 2005, is amended to read as follows: 4 29 13. a. Subtract, to the extent included, the amount of 4 30 additional social security benefits taxable under the Internal 4 31 Revenue Code for tax years beginning on or after January 1, 4 32 1994, but before January 1, 2014. The amount of social 4 33 security benefits taxable as provided in section 86 of the 4 34 Internal Revenue Code, as amended up to and including January 4 35 1, 1993, continues to apply for state income tax purposes for 5 1 tax years beginning on or after January 1, 1994, but before 5 2 January 1, 2014. 5 3 b. (1) For tax years beginning in the 2007 calendar year, 5 4 subtract, to the extent included, thirty=two percent of 5 5 taxable social security benefits remaining after the 5 6 subtraction in paragraph "a". 5 7 (2) For tax years beginning in the 2008 calendar year, 5 8 subtract, to the extent included, thirty=two percent of 5 9 taxable social security benefits remaining after the 5 10 subtraction in paragraph "a". 5 11 (3) For tax years beginning in the 2009 calendar year, 5 12 subtract, to the extent included, forty=three percent of 5 13 taxable social security benefits remaining after the 5 14 subtraction in paragraph "a". 5 15 (4) For tax years beginning in the 2010 calendar year, 5 16 subtract, to the extent included, fifty=five percent of 5 17 taxable social security benefits remaining after the 5 18 subtraction in paragraph "a". 5 19 (5) For tax years beginning in the 2011 calendar year, 5 20 subtract, to the extent included, sixty=seven percent of 5 21 taxable social security benefits remaining after the 5 22 subtraction in paragraph "a". 5 23 (6) For tax years beginning in the 2012 calendar year, 5 24 subtract, to the extent included, seventy=seven percent of 5 25 taxable social security benefits remaining after the 5 26 subtraction in paragraph "a". 5 27 (7) For tax years beginning in the 2013 calendar year, 5 28 subtract, to the extent included, eighty=nine percent of 5 29 taxable social security benefits remaining after the 5 30 subtraction in paragraph "a". 5 31 c. Married taxpayers, who file a joint federal income tax 5 32 return and who elect to file separate returns or who elect 5 33 separate filing on a combined return for state income tax 5 34 purposes, shall allocate between the spouses the amount of 5 35 benefits subtracted under paragraphs "a" and "b" from net 6 1 income in the ratio of the social security benefits received 6 2 by each spouse to the total of these benefits received by both 6 3 spouses. 6 4 d. For tax years beginning on or after January 1, 2014, 6 5 subtract, to the extent included, the amount of social 6 6 security benefits taxable under section 86 of the Internal 6 7 Revenue Code. 6 8 Sec. 5. EFFECTIVE AND APPLICABILITY DATE PROVISIONS. 6 9 1. The section of this Act enacting section 422.5, 6 10 subsection 2A, takes effect January 1, 2007, and applies to 6 11 tax years beginning on or after January 1, 2007, but before 6 12 January 1, 2009. 6 13 2. The section of this Act enacting section 422.5, 6 14 subsection 2B, takes effect January 1, 2009, for tax years 6 15 beginning on or after that date. 6 16 3. The section of this Act amending section 422.5, 6 17 subsection 7, takes effect January 1, 2007, for tax years 6 18 beginning on or after that date. 6 19 4. The section of this Act amending section 422.7, 6 20 subsection 13, takes effect January 1, 2007, for tax years 6 21 beginning on or after that date. 6 22 EXPLANATION 6 23 This bill makes changes to the individual income tax that 6 24 benefits elderly individuals. 6 25 Code section 422.5, new subsections 2A and 2B, are enacted, 6 26 which provide that no tax is owed if an individual is 65 years 6 27 of age and has a net income of less than certain amounts. 6 28 These amounts are $24,000 if the individual is married, a head 6 29 of household, or a surviving spouse, and $18,000 for all other 6 30 persons. These amounts apply to the 2007 and 2008 tax years. 6 31 Beginning with the 2009 tax year, the amounts are increased to 6 32 $32,000 and $24,000, respectively. Code section 422.5, 6 33 subsection 7, is amended to specify that the total amount of a 6 34 lump=sum distribution subject to federal tax is to be included 6 35 in income for purposes of determining eligibility under new 7 1 subsection 2A or 2B, as applicable. 7 2 Code section 422.7, subsection 13, relating to the amount 7 3 of social security benefits taxed, is amended to phase out the 7 4 taxing of such benefits beginning with the 2007 tax year and 7 5 ending with the 2014 tax year when the entire amount of social 7 6 security benefits is exempt from tax. 7 7 LSB 6729SV 81 7 8 mg:rj/je/5
Text: SF2407 Text: SF2409 Complete Bill History