Iowa Introduces IRC Conformity Bill

A bill introduced in the Iowa Senate has set an IRC conformity date of January 1, 2018, for the:

  • franchise tax;
  • corporate income tax; and
  • personal income tax.

Current Iowa Conformity Date

The current IRC conformity date is January 1, 2015, except for the solar energy system and research activities tax credits. The bill would also update the conformity date for those credits.

Sales and Use Tax Deduction

Further, a deduction for state sales and use taxes would be made permanent after January 1, 2018. The deduction is allowed when an individual chooses to deduct:

  • sales and use tax in lieu of state income taxes, or
  • the standard deduction for federal income tax purposes.

Decoupling from the IRC

The Iowa bill decouples from the IRC two items.

Qualified Business Income Deduction

The Iowa bill would decouple from the qualified business income deduction provided to noncorporate taxpayers for up to 20% of certain domestic qualified business income earned from:

  • a partnership,
  • an S corporation,
  • a limited liability company,
  • other pass-through entity, or a
  • a sole proprietorship.

Bonus Depreciation

Iowa also would not conform on “bonus depreciation,” enacted by the PATH Act of 2015 and the Tax Cuts and Jobs Act of 2017.

Taxpayers claiming “bonus depreciation” would add the amounts back to Iowa net income. However, taxpayers would then be allowed to deduct the amount of depreciation without regard to the bonus depreciation allowance.

S.F. 2384, as introduced in the Iowa Senate on February 26, 2018

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