Fiscal Note
Fiscal Services Division
HF 607 – Public Water Utility Corporate Tax Exemption (LSB1291HV)
Staff Contact: Jeff Robinson (515.281.4614) jeff.robinson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 607 exempts certain income earned by a public utility from the State corporate
income tax. The exemption includes income earned from the operation of piped systems that
distribute water for public consumption and systems that dispose of sanitary sewage or storm
water. The change applies to tax years beginning on or after January 1, 2023.
Background
There is currently one Iowa public utility, Iowa American Water Company, that provides water
and/or wastewater disposal services in Iowa. Iowa American Water Company is a subsidiary of
American Water.
Assumptions
According to an August 2020 rate increase filing by the company, Iowa American Water
Company expects 2022 operating revenue to equal $46.2 million and projects State corporate
income tax expenses for that year to equal $0.5 million. This includes $4.4 million from the
requested rate increase. The rate increase filing also lists an expected deferred State corporate
income tax amount of $0.6 million. The amounts supplied by the company to the Iowa Utilities
Board indicate that annual Iowa corporate income tax liability represents 1.0% of company
revenue and deferred State corporate income tax represents a potential additional one-time cost
equal to 1.0% of annual company revenue.
The tax exemption will begin with the start of the company’s tax year that begins in calendar
year 2023. The start of the company’s tax year is not known but is assumed for this estimate to
be the calendar year. The company is assumed to make quarterly corporate income tax
payments equal to 25.0% of projected liability for a tax year.
Fiscal Impact
The proposed corporate income exemption for public water/wastewater income is projected to
reduce Iowa General Fund revenue by $0.9 million in FY 2023 and FY 2024, and $0.5 million in
FY 2025 and succeeding fiscal years.
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Source
Iowa Utilities Board Rate Filings
/s/ Holly M. Lyons
February 23, 2021
Doc ID 1213668
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in
developing this fiscal note is available from the Fiscal Services Division of the Legislative Services
Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 422.35, 476.6