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ENVIRONMENTAL TESTING SALES TAX EXEMPTION
On
Monday, February 24th, the
House Ways
and Means Committee
approved House File 2028, which removes the sales and use tax for
services provided by environmental testing laboratories. This
would include field-testing services and mobile environmental test
laboratories.
Environmental
laboratories provide a variety of services, including, water and
soil testing, testing underground storage tank sites, testing
sites involved in hazardous materials spills, and testing former
industrial sites in preparation for sale or redevelopment.
Over
the last 25 years environmental labs have changed dramatically.
These changes include enhanced technology, greater
efficiencies and more regionalization.
Hence, lab work is not limited to the state the lab is
located but now labs can compete outside the state for business.
Several
environmental laboratories brought this issue to the Legislature
this year for several reasons.
Currently,
Iowa
is the only state that
requires stales tax to be collected on environmental laboratory
services. This tax
policy is anti-competitive for environmental laboratory businesses
located in
Iowa
.
To get around the sales tax labs would likely shift work to
outside the state’s borders.
Iowa
would lose the sales tax
and possibly the state income tax paid by employees (well paid,
high-tech positions) when the company eventually reduces staff or
moves out of the state. Eliminating
the sales tax would lower the cost of environmental compliance for
business and would tend to encourage more compliance
It
is estimated the fiscal impact of HF 2028 would be a loss of
approximately $500,000 to the State General Fund in FY 05.
FEDERAL
INCOME TAX CHANGES
Last
year, the United States Congress adopted and the President signed
the Job Growth and Tax Relief Reconciliation Act of 2003 (Public
Law Number 108-27). Within
this law several tax changes that affect Iowans occurred.
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Lately,
many tax preparers have been contacting legislators regarding the
Section 179 expensing deduction.
The provisions of Internal Revenue Code Section 179 allow a
sole proprietor, partnership or corporation to fully expense
tangible property in the year it is purchased.
P.L. 108-27 changed the maximum amount of the deduction from
$25,000 to $100,000 on the federal income tax form.
The issue that
Iowa
now faces is coupling with
the federal changes, which would increase the deduction from $25,000
to $100,000 on the state income tax form.
Because
the Legislature must take action on either coupling or decoupling
with the federal changes, Chairman Van Fossen filed House Study Bill
676. This bill couples
with the federal tax changes from 2003.
However, since the Legislature has not taken formal action on
coupling to date, the Iowa Department of Revenue (IDR) is advising
taxpayers to file their returns assuming that the Section 179 limit
is $25,000. If the
Legislature adopts the $100,000 Federal provision and the Governor
signs the bill, then an amended return would need to be filed to
claim the higher expense amount.
The
estimated fiscal impact to the State General Fund of the Section 179
provision is: -$3.5
million in FY 04, -$6 million in FY 05, and -$5 million in FY 06.
WHERE
IS THE GOVERNORS TAX INCREASE?
It
is the Week 7 of the Legislative session, nearly half of the session
has been completed and the people of
Iowa
still haven’t seen the Governor’s bill to increase taxes.
Why?
It
is disingenuous to tell the people of
Iowa
he has a plan to fund
certain priorities and then fail to show the people of
Iowa
that plan.
What
is there to hide?
Ways
& Means Update
Bills
introduced in committee this week:
HF2229-An
Act providing for an annual tax levy on real property used in gaming
operations and providing an effective date.
Bills passed out of committee
this week:
HF2229- An
Act providing for an annual tax levy on real property used in gaming
operations and providing an effective date.
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