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Ways and Means Committee Approves
Taxpayer-Friendly Bonus Depreciation Correction
On Tuesday, January 18th, the
House Ways and Means Committee unanimously approved House File
23 (Now HF102). The bill allows taxpayers who elected to take
advantage of the 50% bonus depreciation and Section 179
expensing allowance (as approved during the 2004 Special
Session) to file for this tax incentive in the following year,
rather than spend additional money to file an amended tax
return.
When the Legislature approved House File
2581 during the September 7th Special Session, most
of the 2003 tax returns had already been filed. It was
never the intent that the taxpayer would suffer time and
expense due to the changes in the depreciation provisions.
However, the Department of Revenue
determined that these changes would require Iowans to file
amended returns to take the additional 2003 depreciation and the
Section 179 allowance. Because amended returns were required,
many taxpayers found the expense of filing amended returns will
offset any gain. Due to the Department's ruling, clean-up
legislation was needed to avoid this unintended outcome.
Allowing taxpayers a “catch-up” on the 2004
Iowa return would resolve any issue to the taxpayer for the cost
of this legislative change.
Because the 50%
bonus depreciation and increased Section 179 deduction were
meant as an economic growth tool for businesses in Iowa there
was an increased need for prompt Legislative action for Iowa
taxpayers.
This bill will be
eligible for floor debate during the week of January 24th.
Governor’s FY 05
Supplemental Bill: $213 Million in New Spending, Violates Spirit
of Budget Law
On Wednesday, January 12, the
Governor released his supplemental appropriations
recommendations for FY 05. Expecting roughly $77 million in
supplemental requests (with most of the money going to
Medicaid),
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the
Governor instead sent up a bill which spends almost the entire FY 05
budget surplus ($213million).
While a supplemental is necessary for Medicaid, most of this is not
supplemental spending but rather additional funding for new or
existing programs. This is a bad budgeting practice that sets up
the state for a huge tax increase in FY 07 because the FY 06 budget
will be artificially low due to the funding carried over from FY 05.
Most of these
appropriation requests should be examined by the budget
subcommittees. If, for example, the Governor really needs $300,000
for security for the National Governors Association annual meeting
in July, then the Justice Systems budget sub should appropriate the
money in its budget bill.
Spending the entire
budget surplus before the end of the fiscal year is not only a bad
budgeting practice, it violates the rules of Generally Accepted
Accounting Principles (GAAP) and violates the spirit of the 99
percent expenditure limitation law. Under current law, the FY 05
ending balance will be used to refill the Cash Reserve Fund and
begin to repay the Senior Living Trust Fund.
Rather than fund
new programs with the surplus, it should be used to fund the
existing commitments to the priorities like education, public safety
and health care while repaying the funds that were borrowed in order
to balance the budget without raising taxes.
Ways
& Means Update
Bills introduced in committee this week:
House Study Bill 19,
A Joint Resolution proposing an amendment to the Constitution
of the State of Iowa to require approval by vote of the people
before certain tax or fee increases take effect.
Bills passed out of
committee this week:
House File 23, which
allows taxpayers who were eligible for the 50% bonus
depreciation (as approved during the 2004 special session) to take
the depreciation on their 2004 tax return, rather than file an
amended 2003 return. |
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