On March 21 Iowa Gov. Terry Branstad signed into law the tax policy legislation approved last week by the 2016 Iowa Legislature. The main news for farmers in this new law is that it allows farmers, business owners and some others to write off up to $500,000 of certain purchases but only for the 2015 income tax year.
Branstad signed House File 2433: It is a law relating to state taxation by temporarily updating the Code of Iowa references to the Internal Revenue Code, decoupling from certain federal bonus depreciation provisions, rescinding certain administrative rules and rule amendments and modifying the sales tax exemptions related to the purchase of items used in manufacturing and other activities, and including effective date and retroactive applicability provisions.
Provides tax certainty and relief to Iowa farms, families and businesses
Branstad said, “I’m pleased the Legislature was able to come together and reach a consensus on this bill. I support coupling for one year and placing into Iowa Code an exemption for supplies consumed in manufacturing from the sales tax that will help Iowa taxpayers and businesses. Although I am disappointed that the exemption does not go as far as the administrative rules that were passed through the Administrative Rules Review Committee earlier this year that dealt with advanced manufacturing, I’m proud to sign the bill that moves Iowa forward on both of these key issues.”
Lt. Gov. Kim Reynolds added, “The Iowa Legislature did a great service by passing this bill in a bipartisan fashion that will provide tax certainty and relief to Iowa families and businesses. I’m pleased to see them reach an agreement that will help grow jobs in the Iowa economy.” The bill passed the Iowa House 79-18 on March 15, 2016 and the Iowa Senate on March 15, 2016, 50-0.
Cattlemen and other farm groups appreciate tax coupling relief
The Iowa Cattlemen’s Association immediately issued a press release on March 21 applauding Branstad for signing into law the state tax coupling provision, which couples state of Iowa tax law with portions of federal tax code Section 179. This action follows the legislation’s movement from the Iowa House and Senate to the governor’s desk for signing. The bipartisan approved legislation addresses two key tax policies for Iowans:
* Coupling with federal tax policy for the 2015 tax year.
* Signing the state’s manufacturing sales tax relief into law.
Coupling the state income tax policy with federal income tax policy allows farmers, business owners and some others to write off up to $500,000 of certain purchases. But it will cost the state about $97.6 million in lost tax revenue for the current budget year. This Iowa income tax break is for only one year, the 2015 tax year.
Iowa farmers can benefit from investments made in 2015
By coupling state and federal tax policy, Iowa farmers and small business owners can truly benefit from investments made in 2015, says the ICA. The legislation will provide $98 million in tax relief for Iowa farmers and small business owners. According to the state’s fiscal agency, this year’s federal tax coupling legislation could result in an additional $30 million of state revenue next year. This projection includes tax coupling; which legislators would need to address again during the 2017 Iowa Legislative session, because the bill signed into law by the governor on March 21, 2016 applies only to the 2015 tax year.
“Iowa cattlemen appreciate the support of our legislative leaders on the tax coupling issue,” says Justine Stevenson, ICA’s director of government relations. “Coupling with federal tax policy allows our members to reinvest in their businesses and continue to grow Iowa’s economy.”
The ICA encourages members to take advantage of this tax savings for their 2015 state income tax, says Stevenson. If farm income tax returns for 2015 were filed by the typical March 1 deadline, those farmers will need to file an amended return to take advantage of the new state income tax provisions. In late February Gov. Branstad and the Iowa Department of Revenue extended the state income tax filing deadline for Iowa farmers from March 1 to April 30.