Iowa’s tax law: is there anything it can’t do? The 100 supergeniuses in the Iowa House of Representatives have decided that our dozens of economic development tax credits and breaks just aren’t quite enough to make us creative. To get us off the sofa they Iowa House yesterday passed HF 615 to modify the “innovation fund investment tax credit.” What, you didn’t know there was such a thing? No wonder you can’t innovate your way out of a wet paper bag, Iowa!
Naturally, this requires a political “board,” in this case the Iowa Economic Development Authority. That spells “innovation” right there! And they start out with a new innovation for the innovation tax credit: make it bigger! As explained in an early version of the bill:
Under current law, the economic development authority is required to issue nontransferable tax credit certificates equal to 20 percent of a taxpayer’s equity investment in an innovation fund. The tax credits available for issuance are under the aggregate tax credit limit for certain economic development programs in Code section 15.119, and are limited to a total of $8 million per fiscal year. The bill modifies the credit by removing the 20 percent limitation and specifying that for each fiscal year a total of $8 million in innovation fund investment tax credit certificates shall be issued by the authority to one or more nonprofit corporations operating an innovation fund.
The bill provides that tax credit certificates may be transferred no more than two times and establishes procedures for transferring the credit to another person.
So: the state would now be able to pay up to 100% – or more! of somebody’s investment in an “innovation fund.” And the credits may now be sold — just like in the film credit program! I can practically feel the innovation already.
A decade after the state tried to spark investment in young innovative companies, Iowa taxpayers will foot a $26 million bill — and potentially more — to meet the program’s obligations.
State attorneys reached an agreement in August to avoid a lawsuit from two lenders who backed the Iowa Fund of Funds, a program lawmakers created in 2002 to attract more venture capital investment in Iowa startups.
So the answer to a disastrous and failed tax credit program to jump-start innovation is a new tax credit program to jump-start innovation — only this time with transferable credits! That’s the ticket!
The Iowa House passed HF-615 by only a narrow margin of 97-2. The only no votes were Bruce Hunter of Des Moines, who consistently opposes these boondoggles, and Rick Olson, a Polk County Democrat. That’s one more “no” than for the film credit program, which passed the House 95-1. So progress, anyway.
Try a real innovation. Get rid of all of the useless economic development credits and tax breaks. Stop paying people to be our friends. Get rid of the futile corporation income tax. Pass a simple low-rate tax law for everyone, like the Quick and Dirty Iowa Tax Reform Plan.
Camp’s Proposed Passthrough Unification Is Not a Step Toward Corporate Integration is the headline of a gated article in this mornings tax notes. Maybe. But the proposal for a pass-through system with mandatory withholding looks to me like a close cousin to a corporate tax with a dividends received deduction. In both cases the tax is paid currently at the entity level, with only one level of taxation. The main difference is the formality of which entity claims the credit for the tax paid.
First Iowa, now New York: Rendering the U.S. Supreme Court Irrelevant (Cara Griffith, Tax.com). Like Iowa in its KFC decision, New York says the world has changed since the Supreme Court ruled that you had to have physical presence in a state before the state could tax you, and now “economic presence” is enough. This makes Cara Griffith uneasy:
We are on a dangerous path if we allow state courts to take this approach. The U.S. Supreme Court’s 1992 opinion in Quill Corp. v. North Dakota remains good law. Unless and until it is overturned (or federal legislation is enacted to the contrary), the bright-line physical presence rule established in Quill is the law of the land.
Not if you land in Iowa or New York.
Freakonomics blog: The Tax Man Nudgeth: A New Marketplace Podcast.
Or ever. Obamacare Won’t Be Doing Much for Small Business Next Year (Megan McArdle)
Tax Trials, Two Weeks Left to File FICA Refund Claims
Tracy Gordon, No City is an Island: What the Stockton City Bankruptcy Means (and Doesn’t) (TaxVox). Is Stockton just a suburb of Cyprus?
Russ Fox, Bozo Tax Tip #7: Honey, You Don’t Exist! “Perhaps it’s something in the water, but this year Aaron and I have seen multiple cases of individuals who have ignored that marriage license and filed as single if married.” Once you say “I do,” it’s either joint returns or “married filing separate.” You can’t file single, even if two can live cheaply as one.
Tony Nitti: Congress Embraces Dynamic Scoring. Somewhere, Mitt Romney Shakes His Fist In Anger
Career tip: Please Don’t Celebrate the End of Busy Season By Doing the Harlem Shake (Going Concern)