Archive for the ‘Eye on the Legislature 2009’ Category

Lots of changes

Thursday, April 30th, 2009 by Joe Kristan

Roger McEowen has put together a great summary of Iowa tax changes arising out of the recent General Assembly session.


Tax return mission creep

Wednesday, April 29th, 2009 by Joe Kristan

Get a load of this recently-passed Iowa legislation (SF 389, Sec. 26):

Beginning with the income tax return for tax year 2010, a person who files an individual or joint income tax return with the department under section 422.13, shall report on the income tax return, in the form required, the presence or absence of health care coverage for each dependent child for whom an exemption is claimed.
a. If the taxpayer indicates on the income tax return that a dependent child does not have health care coverage, and the income of the taxpayer’s tax return does not exceed the
highest level of income eligibility standard for the medical assistance program pursuant to chapter 249A or the hawk=i program pursuant to chapter 514I, the department shall send a notice to the taxpayer indicating that the dependent child may be eligible for the medical assistance program or the Hawk-I program and providing information to the taxpayer about how to enroll the dependent child in the appropriate program. The taxpayer shall submit an application for the appropriate program within ninety days of receipt of the enrollment information.

So now instead of just trying to collect the revenue to feed Iowa’s government, now the Department of Revenue is also helping to enforce mandatory applications for government-sponsored health insurance. I’m not sure what the penalties will be if you plead “none of your business.”
Next up? Maybe a tax return line requiring parents to disclose whether the children are allowed too much time in front of the TV, and whether they are eating their vegetables. It can’t possibly be good tax policy to use tax returns as a disguised social welfare questionnaire.


Federal deductibility survives; Corporate NOL carrybacks don’t.

Monday, April 27th, 2009 by Joe Kristan

The General Assembly went home for the year after 5 a.m. yesterday without killing the Iowa deduction for federal taxes paid. They were never able to get the 51st vote they needed to get this tax increase through the Iowa House of Representatives.
Yet Iowa taxpayers didn’t escape undamaged. Perhaps the nastiest knock was the repeal of corporate NOL carrybacks starting with 2009 losses. So all you corporations with losses, you just better hope that they’ll cut you in on the big bonding boondoggle, as they won’t let you get back your own taxes just because you are losing money.
The Department of Revenue will also get to keep your tax refunds an extra month without paying you interest. Like the NOL carryback repeal, this was part of a bill that put a cap on certain corporate welfare tax credits – a morsel of fiscal sanity wrapped in a poop sandwich.
The legislature never did conform with the latest federal extenders, so taxpayers taking the educator expense deduction or the tuition deductions on their federal returns will be out of luck on their Iowa returns.
They did manage to find time to expand the Microsoft/Google boondoggle to more server farms and to worsen the glut of unrented real estate by increasing the cap on historic rehab credits.
It always could have been worse. The legislature never did pass the proposal to allow counties and municipalities to impose their own income taxes, for example. Unfortunately, they’ll be back again next year for a new round of fiscal incontinence.


They kicked ’em when they were down

Friday, April 24th, 2009 by Joe Kristan

The Iowa House tonight went along with the repeal of Iowa’s corporation net operating loss carryback, effective starting with 2009 losses. After rejecting an amendment to strip the loss language from the bill (SF 483), it passed on a 52-48 vote. The bill also limits the use of corporate welfare tax credits and allows the department of revenue to keep your tax refund longer without paying interest.
If your corporation is having a tough 2009 – and who isn’t? – remember, your legislators think they need the money to stimulate the economy more than you need a carryback refund to keep your doors open and your employees paid.
Prior coverage: Kick ’em when they’re down: Iowa looks to raise taxes of businesses with losses


Frenzy day at the statehouse?

Friday, April 24th, 2009 by Joe Kristan

Reporter Charlotte Eby hints at her Twitter feed that the Iowa Legislature might pull an all-nighter to maximize the damage complete their business for the session and adjourn.
Open tax items include:
– The potential retroactive repeal of the state income tax deduction for federal taxes paid.
The disallowance of corporate net operating loss carrybacks starting with 2009 losses, in favor of a carryforward-only system.
– A potential cap on the amount of corporate welfare tax credits to be issued.
It could be an interesting day.


Great moments in legislative compromise

Friday, April 24th, 2009 by Joe Kristan

Governor Culver: Let’s spend $750 million we don’t have on things we don’t need.
Iowans: No, let’s not.
Legislature: OK, $650 million, then.


Kick ’em when they’re down: Iowa looks to raise taxes of businesses with losses

Wednesday, April 22nd, 2009 by Joe Kristan

A little-noticed hidden tax increase advanced in the Iowa House yesterday. The bill (SF 483), primarily touted for putting a cap on corporate welfare tax credits, would also end the ability of Iowa corporations to carry net operating losses back to recover old taxes. Instead, they could only carry losses forward.
This bill is a tax increase on businesses that can least afford it – ones that are losing money. A simple example:

Bob Corporation makes $200,000 in Iowa-source taxable income in 2008, its first tax year. It pays Iowa tax of $17,500. Like with so many businesses, things go bad in 2009 and Bob loses $200,000. Between the two years, Bob has no income. Bob throws in the towel and closes the business after 2009.
Under current law, Bob could carry the 2009 loss back to 2008 and recover the taxes paid. It’s a fair result – no income for two years, and no tax. Under the proposed change, Bob would never recover the 2008 tax. The 2009 loss could only be carried forward – a useless privilege when the business closes.

HF 483 has passed the Iowa Senate and was voted out of the House Ways and Means Committee yesterday. If you want it stopped, call your legislator today.


An Iowa Corporate Welfare Frenzy

Tuesday, April 21st, 2009 by Joe Kristan

As busy as they are in scrambling to get out of town, the Iowa General Assembly still finds time to give more of your money to the well-lobbied by way of tax credits. Three bills advanced yesterday:
HF 810, providing credits for “small wind innovation zones,” passed the Senate unanimously. It’s already cleared the House, so now it goes to the Governor. This way you can pay for people to build windmills, whether or not they make economic sense, and whether or not there is transmission and storage capacity in place for the power generated.
SF 481 eases requirements for qualifying for the old building rehab credit, and it raises the annual limit for credits from $20 million to $50 million. This bill passed 86-3, even though Downtown Des Moines is full of empty rehabbed residential units, the state is participating in the nationwide real estate slump, and the state still hasn’t figured out how it will balance its budget in the upcoming fiscal year. This already has passed the Iowa Senate without dissent.
For what it’s worth, the three House dissenters were Democrats; Every legislative Republican, and all but three Democrats, voted in favor of this spending (and it is spending, just spending disguised as tax reduction).
HF 824, expanding the Microsoft/Google giveaway to more server farms, passed 91-1, with Des Moines’ Bruce Hunter again casting the sole vote on behalf of those of us who are not out-of-state multi-millionaires. Unfortunately, the state failed to pass the much more worthy bill to help a locally-based accounting firm that has already created as many jobs as Microsoft will, at a fraction of the cost.
But there’s more! A press release from Senator “All-night Long” Murphy promises to expand our 50-percent filmmaker subsidy. HF 818 will make it easier squander still more of your hard-earned tax dollars to subsidize itinerant filmmakers who deign to film here before they go back to their Hollywood mansions.
Tourists throng downtown Des Moines, filming location of part of the 1990s remake of “The Puppet Masters
All of this frantic spending on well-lobbied business interests comes in the face of a flicker of sanity in this score: SSB 1316 , which would cap economic development tax credits at a mere $175 million annually. That bill has passed the Senate, but hasn’t moved out of committee in the House. It’s easier to spend a lot of your money than to save a little.


Big week for federal deductibility

Monday, April 20th, 2009 by Joe Kristan

This may be the last week before the Iowa General Assembly heads home for the year (promises, promises), and several key tax issues remain unresolved.
The biggest issue, of course, is the attempt to repeal Iowa’s deduction for federal income taxes. The bill seems to be stuck one vote short of passage in the Iowa House of Representatives. Any Iowan who had a big balance due payable to IRS last Wednesday should watch with great interest: the repeal would be retroactive to January 1, and the cost of paying those federal taxes will have increased by 6.98%.
The state also has yet to fully conform with the federal law for several items that affect many returns, including the deduction for teacher expenses. The Department of Revenue had to reverse its initial guidance when it became clear the legislature was dragging its heels in conforming Iowa computations to the federal rules. It doesn’t appear that they will.
Also, additional server farms are trying to climb on board the Microsoft/Google corporate welfare gravy train. They count on Iowa’s time-honored economic development philosophy of taxing you to lure and subsidize your competitors.
It should be an interesting week.


Can Iowa survive a limit on its subsidies for Hollywood?

Friday, April 10th, 2009 by Joe Kristan

It’s suddenly occurred to our legislators that our current no-limits subsidy program for filmmakers may not be entirely wise. The Des Moines Register reports:

Companies that create high-quality jobs in Iowa, film movies or television shows in Iowa, or invest in a targeted areas would collectively have to split $175 million a year in tax credits, under a plan before lawmakers.

Maybe this means some legislators finally are beginning to realize that “tax credits,” and especially “transferable tax credits,” is just another way to say “spending.” For example, the outfits that generate film credits often have no Iowa source income, so they sell the credits at a discount to people who do. It’s just as much a loss to the state as if somebody drove an armored car full of income tax deposits into the Mississippi – and with about as much long-term economic benefit.
Another way to look at it: it’s spending in the same way as the Democrats’ proposed $100 per-college-student beer money tax credit.
Unfortunately, the learning curve at the statehouse appears to be steep:

Republican lawmakers said this would thwart growth if the state caps the tax credits.

The more you spend, the more you save? With that kind of budget outlook on the supposedly thrifty side of the aisle, it’s no wonder the state is having money trouble.