This 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 to oversee the transition. The Board will hold annual meetings starting July 1, 2027, to review the previous fiscal year's actions regarding the income tax elimination. The bill outlines the management of these funds, including significant transfers from the Taxpayer Relief Fund to the ITEF and the Trust Fund, with initial transfers of $100 million on July 1, 2025, and $2.6 billion on January 1, 2026. The Iowa Public Employees Retirement System (IPERS) will act as the custodian for both funds, and any remaining funds after the income tax is eliminated will revert to the state’s general fund.

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 tax rate annually, contingent upon meeting specific 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. It also mandates that any downward adjustment of the tax rate must be proportionate to the alternate state individual income tax rate. The director of revenue is required to publish an advisory notice with the new tax rates, exempt from certain administrative provisions, by December 31 of the year following the adjustment determination.

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