Iowa bill expanding tax credits proceeds to the governor


Iowa taxpayers would see sweeping changes to tax policy if Gov. Kim Reynolds signs a bill passed this week by the Iowa House and Senate.

The Senate approved SF619 in a 29-15 vote May 17, and the House signed onto it in a 64-28 vote May 18. The 64-page bill strikes triggers from the 2018 tax reform bill and expands various tax credits.

Reynolds praised the legislation on Twitter May 18, calling it a “WIN for Iowans” that “addresses critical needs for our state.”

The state general fund revenue in fiscal year 2022 would decrease by $64.4 million, with $233.3 million less for fiscal year 2023 and $278.9 million less for fiscal year 2024, according to the fiscal note on the bill. Appropriations from the state general fund would be $53 million more in fiscal year 2022, $112.1 million more in fiscal year 2023 and $99.5 million more in fiscal year 2024.

Among its many provisions, the bill doubles the maximum net income amount eligible for the Early Child Development and Child and Dependent Care tax credits from $45,000 to $90,000, as of tax year 2021. It exempts proceeds of Economic Development Authority, Iowa Finance Authority and Department of Agriculture and Land Stewardship grant programs to taxpayers from COVID-19 assistance programs through tax year 2023, and expands income tax exemptions for forgiven federal Paycheck Protection Program loans for certain taxpayers.

The bill also phases out inheritance tax rates and raises the Housing Trust Fund maximum fiscal year deposit from $3 million to $7 million, beginning in fiscal year 2022. It extends the Redevelopment Tax Credit Program for 10 years and expands the Beginning Farmer Tax Credit Program from 10 to 15 years as well as the Homestead Property Tax Credit for Elderly and Disabled. School district backfill payments would end after fiscal year 2022.

Under the bill, Iowa health carriers would need to reimburse telehealth services at the same rate as in-person services. Mental health and disability services would become entirely state-funded rather than based on county property taxes by fiscal year 2023.

National Alliance on Mental Illness-Iowa Executive Director Peggy Huppert told The Center Square in an email that the organization supports the bill because it ensures “significant” state investment in the mental health system, “which is badly needed and long overdue.”

“It will assure statewide standards, equity and accountability so that no matter where you live in the state you will have access to the help you need, when you need it,” Huppert said. “Second, it includes a requirement that private insurers reimburse at the same rate for telehealth behavioral health services as they do for in-person services. The explosion in the use of telehealth has been a silver lining of the pandemic, especially in a rural state like Iowa that has a critical shortage of mental health clinicians. We must maintain access for the thousands of Iowans who have benefitted from this over the past year.”

The bill also creates the Manufacturing 4.0 Technology Investment Program to encourage manufacturers to adopt the use of smart technologies, and it establishes a new Downtown Loan Guarantee Program and Disaster Recovery Housing Assistance Program. Workforce housing tax credits would increase from $25 million and $10 million designated for small cities to $40.0 million for FY 2022, and $35.0 million for FY 2023 and after. Small city designations would increase to $12.0 million for FY 2022, and $17.5 million for FY 2023 and after.

Americans for Prosperity-Iowa praised the Senate’s passage of the bill in a news release.

“The strength of Iowa’s economy is no accident,” AFP-IA State Director Drew Klein said in the release. “It's the result of legislators stepping up in recent years to create a pro-growth environment by restraining the growth of unnecessary regulations and creating real opportunities in communities from river to river. Accelerating the adoption of 2018 income tax cuts, delivering new relief to property taxpayers, and phasing out the remnant of our state's inheritance tax represents one of the best ways to ensure an even better tomorrow for all Iowans.”

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