The bill aims to eliminate the individual income tax in Iowa by creating the Taxpayer Relief Trust Fund and the Income Tax Elimination Fund (ITEF), along with the establishment of the Income Tax Elimination Board. This board will oversee the reduction of the individual income tax rate to zero, with annual meetings starting July 1, 2027. The legislation outlines specific transfers from the Taxpayer Relief Fund to both the ITEF and the Trust Fund, including an initial $100 million transfer on July 1, 2025, followed by a $2.6 billion transfer on January 1, 2026. The Trust Fund will be managed by the Iowa Public Employees Retirement System (IPERS) and will include all collected or transferred moneys, along with interest and investment income.

Additionally, the bill introduces provisions for adjusting the individual income tax rate based on the state's financial performance, with the Department of Revenue responsible for determining the new rate annually, contingent upon meeting certain financial thresholds. The legislation specifies conditions for rate adjustments, including a minimum adjustment of one-tenth of 1 percent and requirements related to the balance in the ITEF. If the tax rate is reduced to zero, any remaining funds in both the Trust Fund and ITEF will be transferred to the state’s general fund. The bill also includes liability protections for IPERS and board members regarding investment losses, ensuring they are not personally liable unless there is malicious misconduct.

Statutes affected:
Introduced: 2.46, 8.54, 97E.4, 97E.3, 12B.10C, 97B.1, 12C.7, 422.5B, 422.36, 422.5