From the Desk of Representative Chuck Soderberg
It’s hard to believe but only two weeks remain before the first legislative deadline occurs. Numerous committees are meeting to get legislation passed out of committee to keep them on the legislative calendar for further review and debate. By March 7th, most House bills must pass out of a House committee or they will no longer be eligible for further action this year. Thank you so much for the phone calls and emails this week on many important issues.
Statewide Smoking Ban Passes the House
After the statewide smoking ban legislation, HF 2212, stalled in the House last week, it was debated and passed the House this week. I could not support the bill as it includes a number of exemptions and is riddled with many unresolved issues and legal questions. Questions were asked during the debate but very few answers were given. The House Republicans offered amendments to improve the bill but they were ALL rejected. The bill now moves to the Senate for their consideration. The unresolved issues include:
· It exempts Iowa casinos from the smoking ban and was admittedly done to avoid a revenue loss to the state. However, the smoking ban includes ALL restaurants and bars.
· It infringes upon private property rights.
· The smoking ban includes all businesses and corporations, including farming corporations. Smoking would be banned in all buildings and vehicles owned, leased, or rented by the business or corporation including tractors, semi trucks, pickups and/or cars.
· Fines for violating the ban would be $50 for a smoker, and from $100 to $500 for a business owner or employer. Enforcement would be done by the Department of Public Health.
Bonus Depreciation – Iowa Legislation needed for Iowans to Benefit
A key piece of the federal economic stimulus package, the bonus depreciation element, was recently passed in Washington D.C. This provides taxpayers an additional 50-percent, first-year depreciation allowance for certain depreciable property. This depreciation allowance is in addition to the amount of depreciation otherwise allowable in the first year. The 50% bonus depreciation is for property acquired during 2008. Here is an example of how it would work:
Example: An individual purchases a new tractor in January of 2008 for $100,000 to use for his farming business. The asset would normally be depreciated over a 5 year period or 20% each year. The new law changes the total depreciation that could be taken for 2008 is $60,000:
· $100,000 (asset) x 50% (bonus) = $50,000 bonus depreciation
· $50,000 (new asset cost for calculation) x 20% = $10,000 regular depreciation
· Total Bonus Depreciation With New Provisions in 2008 = $60,000
What does all this mean for Iowa tax law? As far as the individual income tax rebates, Iowans will not receive a check from the state – only from the U.S. Treasury. It is estimated that those check will be mailed out in May of this year. Leaders of both parties have assured Iowans that these rebates will be exempt from state income taxes.
Bonus depreciation is different because those provisions need Iowa tax law changes. Iowa income tax provisions are rooted in federal tax law. When determining Iowa taxable income under the individual income tax, the starting point is the federal adjusted gross income. This means changes made to federal tax law has the potential to impact Iowa law. It is very important the Iowa Legislature adopt changes made at the federal level or “couple” with the federal law so that hometown Iowa businesses are not hit with an income tax increase of up to $30 million.
SILO Moves Out of House Education Committee – To Ways and Means.
The House Education Committee approved HF 2066. This bill would replace the current local option tax for school infrastructure (SILO) with an additional penny of statewide sales and use tax. Each additional penny of sales and use tax raises about $400 million.
As of last year, voters in all 99 Iowa counties have adopted the SILO and are collecting the tax. HF 2066 would eliminate local voters from the approval process and make the tax a permanent statewide penny. In addition, the bill increases the state use tax by a penny, resulting in a one cent tax increase when purchasing a car and/or truck. It will also increase the use tax on Iowa businesses who buy taxable products from out of state vendors. The bill now moves to the House Ways and Means Committee for consideration.
Proponents of the bill say it keeps important school infrastructure funding in place, provides property tax relief and raises much needed revenue to fix Iowa’s bridges and roads.
Opponents cite the tax increases, the collected tax would not be properly protected and could be scooped for other unrelated uses, it abandons local voter approval and breaks the promise to sunset the tax.
On February 20, Governor Culver stated he supports schools to use the local sales tax revenues to pay for teacher salaries. I have attached the news release. This is very disappointing and confirms the fact that this fund, to be used for school infrastructure projects, will not be protected and could be used for purposes unrelated to the original intended use. It appears that the only way to fully protect this money from being scooped and used for unrelated purposes is to pass a constitution amendment. The fuel tax placed in the Road Use Fund is protected in this manner.
I will be participating in a forum in Sioux City on February 23rd at the Siouxland Senior Center beginning at 10:00am. On March 1st, Senator Mulder and I are holding joint Legislative Forums at the Le Mars Public Library beginning at 9:00am and the Orange City City Hall beginning at 10:30am. I hope to see you all there to discuss these and other issues. Please feel free to reach me during the week at (515)-281-3221, on weekends at (712)-546-6136 or email me at Chuck.Soderberg@legis.state.ia.us