House Study Bill 720 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON KAUFMANN)
A BILL FOR
1 An Act relating to state taxation by modifying future
2 individual income tax rates, creating processes for
3 reducing the individual income tax rate to zero, reducing
4 future contingent corporate income tax rates, making
5 appropriations, and including effective date, applicability,
6 and retroactive applicability provisions.
7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 DIVISION I
2 CREATION OF TAXPAYER RELIEF TRUST FUND, INCOME TAX ELIMINATION
3 FUND AND BOARD
4 Section 1. Section 2.46, Code 2024, is amended by adding the
5 following new subsection:
6 NEW SUBSECTION. 6. Income tax elimination board. Beginning
7 on or after July 1, 2026, and each fiscal year thereafter
8 until the individual income tax is zero, schedule a meeting
9 to examine and discuss the actions taken by the income tax
10 elimination board in the previous fiscal year.
11 Sec. 2. Section 8.54, subsection 1, paragraph b, Code 2024,
12 is amended to read as follows:
13 b. “New revenues” means moneys which are received by the
14 state due to increased tax rates and fees or newly created
15 taxes and fees over and above those moneys which are received
16 due to state taxes and fees which are in effect as of January
17 1 following the December state revenue estimating conference.
18 “New revenues” also includes moneys received by the general fund
19 of the state due to new transfers over and above those moneys
20 received by the general fund of the state due to transfers
21 which are in effect as of January 1 following the December
22 state revenue estimating conference. The department of
23 management shall obtain concurrence from the revenue estimating
24 conference on the eligibility of transfers to the general
25 fund of the state which are to be considered as new revenue
26 in determining the state general fund expenditure limitation.
27 However, “new revenues” does not include transfers to the
28 general fund of the state from the income tax elimination fund
29 pursuant to section 97E.4 that occur during the fiscal year
30 immediately proceeding the fiscal year for which the adjusted
31 revenue estimate is determined.
32 Sec. 3. Section 8.57E, subsection 2, paragraph a, Code 2024,
33 is amended to read as follows:
34 a. Except as otherwise provided in this section, moneys
35 in the taxpayer relief fund shall only be used pursuant to
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1 appropriations or transfers made by the general assembly to
2 the taxpayer relief trust fund in section 97E.3 or the income
3 tax elimination fund in section 97E.4 or for tax relief or
4 reductions in income tax rates.
5 Sec. 4. Section 8.57E, Code 2024, is amended by adding the
6 following new subsection:
7 NEW SUBSECTION. 2A. a. On July 1, 2024, there is
8 transferred from the taxpayer relief fund to the income tax
9 elimination fund created in section 97E.4, one hundred million
10 dollars for administrative purposes under chapter 97E.
11 b. On January 1, 2025, there is transferred from the
12 taxpayer relief fund to the taxpayer relief trust fund created
13 in section 97E.3, two billion six hundred million dollars for
14 the purpose of producing investment returns for deposit into
15 the income tax elimination fund.
16 c. For the fiscal year beginning July 1, 2026, and each
17 fiscal year thereafter, there is transferred from the taxpayer
18 relief fund to the taxpayer relief trust fund created in
19 section 97E.3, an amount equal to twenty-five percent of the
20 moneys transferred to the taxpayer relief fund during the
21 preceding fiscal year.
22 Sec. 5. Section 12B.10, subsection 6, Code 2024, is amended
23 by adding the following new paragraphs:
24 NEW PARAGRAPH. o. Investments by the taxpayer relief trust
25 fund established in section 97E.3.
26 NEW PARAGRAPH. p. Investments by the income tax elimination
27 fund established in section 97E.4.
28 Sec. 6. Section 12B.10C, subsection 4, unnumbered paragraph
29 1, Code 2024, is amended to read as follows:
30 The following entities or funds are not subject to this
31 section:
32 Sec. 7. Section 12B.10C, subsection 4, Code 2024, is amended
33 by adding the following new paragraph:
34 NEW PARAGRAPH. l. The taxpayer relief trust fund
35 established in section 97E.3.
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1 NEW PARAGRAPH. m. The income tax elimination trust
2 established in section 97E.4.
3 Sec. 8. Section 97B.1, subsection 1, Code 2024, is amended
4 to read as follows:
5 1. The “Iowa Public Employees’ Retirement System” is
6 established as an independent agency within the executive
7 branch of state government. The Iowa public employees’
8 retirement system shall administer the retirement system
9 established under this chapter, and beginning July 1, 2024,
10 shall administer chapter 97E.
11 Sec. 9. NEW SECTION. 97E.1 Purpose.
12 The purpose of this chapter is to create and ensure economic
13 vitality and growth for the benefit of future generations of
14 Iowans by setting aside and protecting moneys today in order to
15 responsibly eliminate the individual income tax in the future.
16 Sec. 10. NEW SECTION. 97E.2 Definitions.
17 For the purpose of this chapter and unless otherwise
18 required by the context:
19 1. “Board” means the income tax elimination board.
20 2. “Elimination fund” means the income tax elimination fund.
21 3. “System” means the Iowa public employees’ retirement
22 system as defined in section 97B.1.
23 4. “Trust fund” means the taxpayer relief trust fund.
24 Sec. 11. NEW SECTION. 97E.3 Taxpayer relief trust fund.
25 1. a. Beginning January 1, 2025, a trust fund is created,
26 separate and apart from all other public moneys or funds of
27 this state and the balance in the trust fund shall not be
28 considered part of the balance of the general fund of the
29 state.
30 b. Notwithstanding section 12C.7, subsection 2, interest
31 or earnings on moneys deposited in the trust fund shall be
32 credited to the fund. Notwithstanding section 8.33, moneys
33 credited to the trust fund shall not revert at the close of a
34 fiscal year.
35 2. The trust fund shall consist of all moneys collected by
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1 or appropriated or transferred to the trust fund, together with
2 all interest, dividends, and rents, and shall also include all
3 securities or investment income and other assets acquired by
4 and through the use of the moneys belonging to the trust fund
5 and any other moneys that have been paid into the trust fund.
6 3. a. The system is hereby made the custodian of the trust
7 fund, and shall administer the trust fund, and shall hold and
8 disburse the trust fund in accordance with the requirements of
9 this chapter. As custodian, the system shall be authorized to
10 disburse moneys in the fund upon warrants drawn by the director
11 of the department of administrative services pursuant to the
12 order of the system.
13 b. The system shall not select any bank or other third
14 party for the purposes of investment asset safekeeping, other
15 custody, or settlement services without prior consultation with
16 and approval of the board.
17 c. The system, subject to board approval, may execute
18 contracts and agreements with investment advisors, consultants,
19 and investment management and benefit consultant firms in the
20 administration of investments of moneys in the trust fund.
21 4. a. All moneys that are appropriated or otherwise
22 transferred or deposited into the trust fund are appropriated
23 and made available to be used for transfers made to the income
24 tax elimination fund made pursuant to subsection 5.
25 b. The expenses to administer the trust fund shall be as
26 provided in section 97E.5.
27 5. Beginning July 1, 2028, and each July 1 thereafter, five
28 percent of the remaining balance of the trust fund at the close
29 of the preceding fiscal year shall be transferred to the income
30 tax elimination fund created in section 97E.4.
31 6. Moneys in the trust fund, except so much of the trust
32 fund as may be necessary to be kept on hand for the making of
33 disbursements under this chapter, shall be invested by the
34 board in any investments according to the investment policy of
35 the board, and subject to the requirements of chapters 12F,
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1 12H, 12J, and 12K, and the earnings therefrom shall be credited
2 to the fund.
3 7. After the individual income tax rate is adjusted to zero
4 pursuant to section 422.5B, any moneys remaining in the fund
5 shall be transferred to the general fund of the state in the
6 same fiscal year.
7 Sec. 12. NEW SECTION. 97E.4 Income tax elimination fund.
8 1. Commencing July 1, 2024, an income tax elimination fund
9 is created separate and apart from all other public moneys or
10 funds of this state and the balance of the elimination fund
11 shall not be considered part of the balance of the general fund
12 of the state.
13 2. a. The elimination fund shall consist of all moneys
14 transferred to the elimination fund pursuant to section 97E.3
15 or appropriated to or otherwise collected by the elimination
16 fund for the purpose of reducing the individual income tax to
17 zero.
18 b. Notwithstanding section 12C.7, subsection 2, interest or
19 earnings on moneys deposited in the income tax elimination fund
20 shall be credited to the elimination fund. Notwithstanding
21 section 8.33, moneys credited to the income tax elimination
22 fund shall not revert at the close of a fiscal year.
23 3. a. The system is hereby made custodian of the
24 elimination fund, and shall administer the elimination fund,
25 and shall hold and disburse the fund in accordance with the
26 requirements of this chapter. As custodian, the system shall
27 be authorized to disburse moneys in the elimination fund
28 upon warrants drawn by the director of the department of
29 administrative services pursuant to the order of the system.
30 b. The system shall not select any bank or other third
31 party for the purposes of investment asset safekeeping, other
32 custody, or settlement services without prior consultation with
33 and approval of the board.
34 c. The system, subject to board approval, may execute
35 contracts and agreements with investment advisors, consultants,
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1 and investment management and benefit consultant firms in the
2 administration of investments of moneys in the elimination
3 fund.
4 4. a. All moneys that are appropriated or otherwise
5 transferred or deposited into the elimination fund are
6 appropriated and made available to be used for transfers to the
7 general fund as provided in section 422.5B.
8 b. The expenses to administer the elimination fund shall be
9 as provided in section 97E.5.
10 5. Moneys in the elimination fund, except so much of the
11 elimination fund as may be necessary to be kept on hand for the
12 making of disbursements under this section, shall be invested
13 by the board in investments authorized for the Iowa public
14 employees’ retirement system in section 97B.7A, and subject to
15 the requirements of chapters 12F, 12H, 12J, and 12K, and the
16 earnings therefrom shall be credited to the fund.
17 6. After the individual income tax rate is adjusted to
18 zero pursuant to section 422.5B, any moneys remaining in the
19 elimination fund shall be transferred to the general fund of
20 the state in the same fiscal year.
21 Sec. 13. NEW SECTION. 97E.5 Expenses.
22 1. The investment management and administrative expenses
23 for the trust fund and elimination fund shall be charged
24 against the investment income of the elimination fund.
25 2. The total expenses for investment management and
26 administration of the trust fund and elimination fund shall not
27 exceed two million dollars in the aggregate per year.
28 Sec. 14. NEW SECTION. 97E.6 Income tax elimination board.
29 1. Beginning July 1, 2024, a board is established. The
30 duties of the board are to establish and implement policy in
31 matters relating to the investment of the trust fund and the
32 elimination fund. The board shall be the trustee of the trust
33 fund and the elimination fund.
34 2. a. At least annually the board shall have a public
35 meeting and review the investment policies and procedures used
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1 by the board and system. Following the review and a public
2 meeting, the board shall, pursuant to the requirements of
3 section 97E.7, and in consultation with the chief investment
4 officer of the system and other relevant personnel of the
5 system, establish an investment policy and goal statement that
6 shall direct the investment activities concerning each fund.
7 b. The board shall review and approve, prior to the
8 execution of a contract with the system, the hiring of each
9 investment manager and investment consultant outside of state
10 government.
11 c. The board shall review and approve the selection of any
12 bank used by the system pursuant to this chapter.
13 3. a. The board shall consist of eleven members, including
14 seven voting members and four nonvoting members.
15 b. (1) The voting members shall be as follows:
16 (a) Four public members, appointed by the governor who
17 each have substantial experience in institutional investments,
18 institutional finance, or other business management.
19 (b) Two public members, appointed by the governor who are
20 citizens of the state.
21 (c) The director of the department of management.
22 (2) A voting member shall not hold other office or position
23 under the laws of this state, or any other state or territory
24 or of the United States.
25 c. The nonvoting members of the board shall be two state
26 representatives, one appointed by the speaker of the house of
27 representatives and one by the minority leader of the house,
28 and two state senators, one appointed by the majority leader of
29 the senate and one by the minority leader of the senate.
30 d. Four voting members of the board shall constitute a
31 quorum.
32 e. The four members who have substantial institutional
33 investment experience or substantial institutional financial
34 experience shall be paid actual expenses incurred as a member
35 and shall receive a per diem as specified in section 7E.6
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1 for each day of service not exceeding forty days per year.
2 Legislative members shall be paid the per diem and expenses
3 specified in section 2.10, for each day of service. The per
4 diem and expenses of the legislative members shall be paid
5 from funds appropriated under section 2.12. The two remaining
6 public members and the director of the department of management
7 shall be paid actual expenses incurred as members of the board
8 and such performance as members of the board shall not affect
9 benefits such as salary, vacation accrual, or a leave of
10 absence for sickness or injury.
11 f. The appointive terms of the members appointed by the
12 governor are for six-year staggered terms whose initial terms
13 shall be designated by the governor beginning and ending as
14 provided in section 69.19. If there is a vacancy in the
15 membership of the board for one of the members appointed by
16 the governor, the governor has the power of appointment.
17 Gubernatorial appointees to this board are subject to
18 confirmation by the senate.
19 4. a. Prior to any rule or policy adopted by the board,
20 the board shall notify the fiscal committee of the legislative
21 council the content of any rule or policy by electronic means,
22 and shall provide the fiscal committee at least ten days to
23 comment on the rule or policy before adopting the rule or
24 policy.
25 b. Beginning on or after July 1, 2026, and each fiscal year
26 thereafter, the board shall report to the fiscal committee of