House Study Bill 694 - Introduced
SENATE/HOUSE FILE _____
BY (PROPOSED DEPARTMENT OF
REVENUE BILL)
A BILL FOR
1 An Act relating to the administration of state taxation, the
2 lottery, and alcoholic beverages under the purview of the
3 department of revenue, making appropriations, and including
4 effective date and retroactive applicability provisions.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 DIVISION I
2 DISCLOSURE OF TAX INFORMATION
3 Section 1. Section 421.19, subsection 2, Code 2024, is
4 amended by striking the subsection and inserting in lieu
5 thereof the following:
6 2. The department may notify federal, state, or local
7 law enforcement agencies, and may disclose state returns,
8 state return information, state investigative information or
9 audit information, or any other state information, to such law
10 enforcement agencies, if the department has information that
11 indicates any of the following:
12 a. A person intentionally filed a false claim, affidavit,
13 return, or other information with intent to evade tax or obtain
14 a refund, credit, or other benefit from the department.
15 b. A person failed to file a return with intent to evade a
16 tax or filing requirement.
17 c. A person failed to pay with the intent to evade tax.
18 d. A person committed any act or omission that is a criminal
19 offense under a provision of this title administered by the
20 department.
21 Sec. 2. Section 421.19, subsection 3, Code 2024, is amended
22 to read as follows:
23 3. Notwithstanding sections 422.20 and 422.72, the
24 department may disclose state returns, state return
25 information, state investigative or audit information, or any
26 other state information as provided under this section.
27 Sec. 3. EFFECTIVE DATE. This division of this Act, being
28 deemed of immediate importance, takes effect upon enactment.
29 DIVISION II
30 ANNUAL REPORTING
31 Sec. 4. Section 421.60, subsection 2, paragraph k, Code
32 2024, is amended by striking the paragraph.
33 Sec. 5. Section 422.75, Code 2024, is amended to read as
34 follows:
35 422.75 Statistics —— publication.
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1 The department shall prepare and publish an annual report
2 which shall include statistics reasonably available, with
3 respect to the operation of this chapter, including amounts
4 collected, classification of taxpayers, and such other facts
5 as are deemed pertinent and valuable. The annual report shall
6 also include the reports and information required pursuant to
7 section 421.60, subsection 2, paragraph “k”.
8 DIVISION III
9 PROPERTY TAX —— EXTENSIONS
10 Sec. 6. Section 425.20, subsection 3, Code 2024, is amended
11 to read as follows:
12 3. In case of sickness, absence, or other disability of
13 the claimant or if, in the judgment of the director of revenue
14 or the director of health and human services, as applicable,
15 good cause exists and the claimant requests an extension, the
16 director of health and human services may extend the time for
17 filing a claim for reimbursement and the director of revenue
18 may extend the time for filing a claim for credit. However,
19 any further time granted shall not extend beyond December 31
20 of the year following the year in which the claim was required
21 to be filed. Claims filed as a result of this subsection shall
22 be filed with the director of health and human services or the
23 director of revenue, as applicable, who shall provide for the
24 reimbursement of the claim to the claimant.
25 DIVISION IV
26 FARM TENANCY INCOME TAX EXCLUSION
27 Sec. 7. Section 422.7, subsection 14, paragraph a, Code
28 2024, is amended to read as follows:
29 a. Subtract, to the extent included, net income received
30 by an eligible individual pursuant to a farm tenancy agreement
31 covering real property held by the eligible individual for
32 ten or more years, if the eligible individual materially
33 participated in a farming business for ten or more years in the
34 aggregate.
35 Sec. 8. Section 422.7, subsection 14, paragraph f, Code
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1 2024, is amended by adding the following new subparagraph:
2 NEW SUBPARAGRAPH. (04) “Held” shall be determined with
3 reference to the holding period provisions of section 1223 of
4 the Internal Revenue Code and the federal regulations pursuant
5 thereto.
6 DIVISION V
7 PASS-THROUGH ENTITIES
8 Sec. 9. Section 422.25C, subsection 2, Code 2024, is amended
9 to read as follows:
10 2. For tax years beginning on or after January 1, 2020, any
11 adjustments to a partnership’s or pass-through entity’s items
12 of income, gain, loss, expense, or credit, or an adjustment to
13 such items allocated to a partner that holds an interest in a
14 partnership or pass-through entity for the reviewed year by
15 the department as a result of a state partnership audit, shall
16 be determined at the partnership level or pass-through entity
17 level in the same manner as provided by section 6221(a) of the
18 Internal Revenue Code and the regulations thereunder unless a
19 different treatment is specifically provided in this title.
20 The provisions of sections 6222, 6223, and 6227 of the Internal
21 Revenue Code and the regulations thereunder shall also apply to
22 a partnership or pass-through entity and its direct or indirect
23 partners in the same manner as provided in such sections unless
24 a different treatment is specifically provided in this title.
25 For purposes of applying such sections, due account shall be
26 made for differences in federal and Iowa terminology. The
27 adjustment provided by section 6221(a) of the Internal Revenue
28 Code shall be determined as provided in such section but shall
29 be based on Iowa taxable income or other tax attributes of
30 the partnership or pass-through entity as determined pursuant
31 to this chapter for the reviewed year. The department shall
32 issue a notice of adjustment to the partnership or pass-through
33 entity. Such notice shall be treated as an assessment for the
34 purposes of section 422.25, and the notice shall be appealable,
35 except as provided in section 422.25, by the partnership or
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1 pass-through entity pursuant to sections 422.28 and 422.29 and
2 shall be issued within the time period provided by section
3 422.25. Once the adjustments to partnership-related or
4 pass-through entity-related items or reallocations of income,
5 gains, losses, expenses, credits, and other attributes among
6 such partners for the reviewed year are finally determined,
7 the partnership or pass-through entity and any direct partners
8 or indirect partners shall then be subject to the provisions
9 of section 422.25, subsection 1, paragraph “e”, and section
10 422.25A in the same manner as if the state partnership audit
11 were a federal partnership level audit, and as if the final
12 state partnership audit adjustment were a final federal
13 partnership adjustment. The penalty exceptions in section
14 421.27, subsection 2, paragraphs “b” and “c”, shall not apply
15 to a state partnership audit.
16 Sec. 10. EFFECTIVE DATE. This division of this Act, being
17 deemed of immediate importance, takes effect upon enactment.
18 Sec. 11. RETROACTIVE APPLICABILITY. This division of this
19 Act applies retroactively to January 1, 2024.
20 DIVISION VI
21 SALES TAX CHANGES
22 Sec. 12. Section 423.36, subsection 9, paragraph a, Code
23 2024, is amended to read as follows:
24 a. Except as provided in paragraph “b”, purchasers, users,
25 and consumers of tangible personal property, specified digital
26 products, or enumerated services taxed pursuant to subchapter
27 II or III of this chapter or chapter 423B may be authorized,
28 pursuant to rules adopted by the director, to remit tax owed
29 directly to the department instead of the tax being collected
30 and paid by the seller. To qualify for a direct pay tax permit,
31 the purchaser, user, or consumer must accrue a tax liability of
32 more than four eight thousand dollars in tax under subchapters
33 II and III in a semimonthly monthly period and make deposits
34 and file returns pursuant to section 423.31. This authority
35 shall not be granted or exercised except upon application to
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1 the director and then only after issuance by the director of a
2 direct pay tax permit.
3 Sec. 13. Section 423.37, subsection 1, paragraph a, Code
4 2024, is amended to read as follows:
5 a. As soon as practicable after a return is filed and
6 within three years after the return is filed, the department
7 may examine the return, assess and determine the tax due if
8 the return is found to be incorrect, and give notice to the
9 person liable for the tax of the assessment and determination
10 as provided in paragraph “b”. If a return, when filed, is
11 incorrect or insufficient, the department shall determine
12 the amount of tax due from information or knowledge the
13 department is able to obtain. The determination may be made
14 using any generally recognized valid and reliable sampling
15 technique, whether or not the person being audited has complete
16 records, and if mutually agreed upon by the department and
17 the person being audited. The period for the examination and
18 determination of the correct amount of tax is unlimited in the
19 case of a false or fraudulent return made with the intent to
20 evade tax.
21 DIVISION VII
22 MOTOR FUEL TAXES
23 Sec. 14. Section 452A.3, subsection 1, paragraph b,
24 unnumbered paragraph 1, Code 2024, is amended to read as
25 follows:
26 On and after July 1, 2026, an excise tax of thirty cents is
27 imposed on each gallon of ethanol blended gasoline classified
28 as E-15 or higher. Before July 1, 2026, the rate of the
29 excise tax on ethanol blended gasoline classified as E-15 or
30 higher shall be based on the number of gallons of ethanol
31 blended gasoline classified as E-15 or higher that are
32 distributed in this state as expressed as a percentage of the
33 number of gallons of motor fuel distributed in this state,
34 which is referred to as the distribution percentage. For
35 purposes of this paragraph, only ethanol blended gasoline and
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1 nonblended gasoline, not including aviation gasoline, shall
2 be used in determining the percentage basis for the excise
3 tax. The department shall determine the percentage basis
4 for each determination period beginning January 1 and ending
5 December 31 based on data from the reports filed pursuant to
6 section 452A.33. Before June 1, the department may amend the
7 distribution percentage due to a mistake, if there is a late
8 report filed by a retail dealer to the department under section
9 452A.33, subsection 1, or if the distribution percentage is
10 not accurate. The rate for the excise tax shall apply for the
11 period beginning July 1 and ending June 30 following the end
12 of the determination period. Before July 1, 2026, the rate
13 of the excise tax on each gallon of ethanol blended gasoline
14 classified as E-15 or higher shall be as follows:
15 Sec. 15. Section 452A.3, subsection 3, paragraph a,
16 subparagraph (2), unnumbered paragraph 1, Code 2024, is amended
17 to read as follows:
18 Except as otherwise provided in this section and in this
19 subchapter, this subparagraph shall apply to the excise tax
20 imposed on each gallon of biodiesel blended fuel classified
21 as B-11 or higher used for any purpose for the privilege of
22 operating motor vehicles in this state. On and after July 1,
23 2026, the rate of the excise tax on each gallon of biodiesel
24 blended fuel classified as B-11 or higher is thirty-two
25 and five-tenths cents. Before July 1, 2026, the rate of
26 the excise tax shall be based on the number of gallons of
27 biodiesel blended fuel classified as B-11 or higher that are
28 distributed in this state as expressed as a percentage of
29 the number of gallons of special fuel for diesel engines of
30 motor vehicles distributed in this state, which is referred
31 to as the distribution percentage. The department shall
32 determine the percentage basis for each determination period
33 beginning January 1 and ending December 31 based on data from
34 the reports filed pursuant to section 452A.33. Before June
35 1, the department may amend the distribution percentage due
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1 to a mistake, if there is a late report filed by a retail
2 dealer to the department under section 452A.33, subsection 1,
3 or the distribution percentage is not accurate. The rate of
4 the excise tax shall apply for the period beginning July 1 and
5 ending June 30 following the end of the determination period.
6 Before July 1, 2026, the rate of the excise tax on each gallon
7 of biodiesel blended fuel classified as B-11 or higher shall
8 be as follows:
9 Sec. 16. Section 452A.15, subsection 5, Code 2024, is
10 amended to read as follows:
11 5. The director may impose a civil penalty against any
12 person who fails to timely file the reports or keep the records
13 required under this section. The penalty shall be one hundred
14 dollars for the first violation and shall increase by one
15 hundred dollars for each additional violation occurring in the
16 calendar year in which the first violation occurred.
17 Sec. 17. Section 452A.33, subsection 2, unnumbered
18 paragraph 1, Code 2024, is amended to read as follows:
19 On or before April 1 the department shall deliver a report
20 to the governor and the legislative services agency. Before
21 June 1, the department may amend the report due to a mistake,
22 if there is a late report by a retail dealer under subsection
23 1, or if the report is not accurate. The report shall compile
24 information reported by retail dealers to the department as
25 provided in this section and shall at least include all of the
26 following:
27 Sec. 18. Section 452A.41, subsection 5, paragraph a, Code
28 2024, is amended to read as follows:
29 a. For the purpose of determining the amount of liability
30 for the electric fuel tax, each dealer and user shall file with
31 the department not later than July 31 for the period beginning
32 January 1 and ending June 30, and not later than January 30
33 31 for the period beginning July 1 and ending December 30 31,
34 a biannual tax return certified under penalties for false
35 certification. The return shall show, with reference to each
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1 location at which fuel is delivered or placed by the dealer or
2 user into the battery or other energy storage device of any
3 electric motor vehicle during the next preceding six calendar
4 months, information as required by the department. On and
5 after January 1, 2026, the department may require by rule that
6 such tax returns be filed quarterly.
7 Sec. 19. Section 452A.44, Code 2024, is amended by adding
8 the following new subsection:
9 NEW SUBSECTION. 4. If electric fuel is sold or dispensed
10 for a nontaxable purpose, the purchaser may complete and
11 provide an exemption certificate produced by the department to
12 the license holder.
13 DIVISION VIII
14 VETERANS TRUST FUND AND LOTTERY
15 Sec. 20. Section 99G.3, Code 2024, is amended by adding the
16 following new subsection:
17 NEW SUBSECTION. 17A. “Setoff program” means the program
18 administered pursuant to section 421.65.
19 Sec. 21. Section 99G.7, subsection 1, paragraph e, Code
20 2024, is amended by striking the paragraph.
21 Sec. 22. Section 99G.39, subsection 3, Code 2024, is amended
22 to read as follows:
23 3. Two million five hundred thousand dollars in lottery
24 revenues shall be transferred each fiscal year to the veterans
25 trust fund established pursua