| 1 | 1 | | House File 566 - Introduced HOUSE FILE 566 BY WHEELER A BILL FOR An Act modifying individual income tax rates and providing tax 1 credits for certain married persons filing a joint return, 2 and including effective date and retroactive applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2504YH (3) 91 jm/jh |
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| 3 | 3 | | H.F. 566 Section 1. Section 421.27, subsection 9, paragraph a, 1 subparagraph (3), Code 2025, is amended to read as follows: 2 (3) In the case of all other entities, including 3 corporations described in section 422.36, subsection 5 , and all 4 other entities required to file an information return under 5 section 422.15, subsection 2 , the entitys Iowa net income 6 after the application of the Iowa business activity ratio, if 7 applicable, multiplied by the highest income tax rate imposed 8 under section 422.5 for the tax year, less any Iowa tax credits 9 available to the entity. 10 Sec. 2. Section 422.5, subsection 1, paragraph a, Code 2025, 11 is amended to read as follows: 12 a. A tax is imposed upon every resident and nonresident 13 of the state which tax shall be levied, collected, and paid 14 annually upon and with respect to the entire taxable income as 15 defined in this subchapter at a rate of three and eight-tenths 16 percent. the following rates: 17 (1) In the case of married persons filing jointly with five 18 or more dependents under the age of eighteen, zero percent. 19 (2) In the case of married persons filing jointly for the 20 first or second time in their lifetimes, zero percent. 21 (3) In the case of any other taxpayer other than described 22 in subparagraphs (1) and (2), three and eight-tenths percent. 23 Sec. 3. NEW SECTION . 422.10C Additional dependent tax 24 credit. 25 1. For married persons filing a joint return the taxes 26 imposed under this subchapter less the credits allowed under 27 section 422.12 shall be reduced by an additional dependent 28 tax credit equal to the product of the number of dependents 29 exceeding five but not more than ten that are under the age of 30 eighteen multiplied by one thousand dollars. 31 2. Any credit in excess of the tax liability is refundable. 32 In lieu of claiming a refund, the taxpayer may elect to have 33 the overpayment shown on the taxpayers final, completed return 34 credited to the tax liability for the following five years 35 -1- LSB 2504YH (3) 91 jm/jh 1/ 3 |
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| 5 | 5 | | H.F. 566 until depleted, whichever is earlier. 1 3. The director of revenue shall adopt rules to implement 2 this section. 3 Sec. 4. Section 422.16, subsection 2, paragraph e, Code 4 2025, is amended to read as follows: 5 e. For the purposes of this subsection , state income 6 tax shall be withheld at the highest rate described in 7 section 422.5 from supplemental wages of an employee in those 8 circumstances in which the employer treats the supplemental 9 wages as wholly separate from regular wages for purposes 10 of withholding and federal income tax is withheld from the 11 supplemental wages under section 3402(g) of the Internal 12 Revenue Code. 13 Sec. 5. Section 422.16B, subsection 2, paragraph a, 14 subparagraph (2), Code 2025, is amended to read as follows: 15 (2) The tax rate applicable to a tiered pass-through entity 16 shall be the highest state income tax rate under section 422.5 . 17 Sec. 6. Section 422.16C, subsection 4, paragraph a, Code 18 2025, is amended to read as follows: 19 a. A taxpayer making an election under this section shall 20 be subject to tax in an amount equal to the maximum rate under 21 section 422.5 , imposed against the taxable income of the 22 taxpayer for the taxable year properly determined under this 23 chapter and allocated and apportioned to the state under the 24 rules adopted by the department. The tax shall be due with the 25 taxpayers return required under this chapter . 26 Sec. 7. Section 422.16C, subsection 5, paragraph a, 27 subparagraph (2), Code 2025, is amended to read as follows: 28 (2) The difference between one hundred percent and the 29 highest individual income tax rate in effect for the tax year. 30 Sec. 8. EFFECTIVE DATE. This Act, being deemed of immediate 31 importance, takes effect upon enactment. 32 Sec. 9. RETROACTIVE APPLICABILITY. This Act applies 33 retroactively to January 1, 2025, for tax years beginning on 34 or after that date. 35 -2- LSB 2504YH (3) 91 jm/jh 2/ 3 |
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| 7 | 7 | | H.F. 566 EXPLANATION 1 The inclusion of this explanation does not constitute agreement with 2 the explanations substance by the members of the general assembly. 3 This bill modifies individual income tax rates and provides 4 tax credits for certain married persons filing a joint return. 5 The bill decreases the income tax rate on taxable income for 6 married persons filing jointly from 3.8 percent to 0 percent, 7 if such married persons have 5 or more dependents under the 8 age of 18. The bill decreases the income tax rate on taxable 9 income for married persons filing jointly from 3.8 percent to 10 0 percent, if such married persons are filing jointly for the 11 first or second time in their lifetimes. 12 The bill also creates an additional dependent credit for 13 married persons filing a joint return equal to the product of 14 the number of dependents exceeding 5 but not more than 10 that 15 are under the age of 18 multiplied by $1,000. 16 Any credit in excess of the tax liability is refundable. In 17 lieu of claiming a refund, the taxpayer may elect to have the 18 overpayment shown on the taxpayers final, completed return 19 credited to the tax liability for the following five years 20 until depleted, whichever is earlier. 21 The bill takes effect upon enactment and applies 22 retroactively to tax years beginning on or after January 1, 23 2025. 24 -3- LSB 2504YH (3) 91 jm/jh 3/ 3 |
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