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HOUSE
PASSES TUITION INCENTIVE PLAN FOR PRIVATE COLLEGES, UNIVERSITIES
The Iowa House Thursday
passed House File 400 on a 69 to 29 vote, which is a bill that
would allow parents an income tax deduction for private college
tuition.
The bill is based on
the Independent 529 program, the first national tuition plan of
its kind that would allow savings for private colleges and
universities the same tax benefits as those currently used by
parents sending their children to Iowa’s three Regents
institutions.
“We are committed to
the success of both our public and private institutions,” said
Rep. Jamie Van Fossen, chair of the House Ways and Means
Committee. “This bill allows parents and students an additional
option in higher education that they might not otherwise have.
This is important to keep all of Iowa’s educational system
thriving and healthy.”
The amount that can be
deducted from net income is the same amount allowed for Iowa’s
current state program, the Iowa Educational Savings Plan. Each
plan allows for up to a $2,000 deduction adjusted for inflation.
This amount will be subtracted from any amount that has been
deducted for the tax year for contributions to the state
program.
The governor vetoed the
bill last year.
“I was disappointed by
last year’s setback because this is a great opportunity for
parents who are starting to save for their child’s education,”
said House Speaker Christopher Rants, R-Sioux City. “Every
little bit helps, and I am pleased we are offering this
assistance to Iowa’s families.”
STRONG REVENUE GROWTH CONTINUES THROUGH FEBRUARY
On Tuesday, March 1,
Fiscal Services released the revenue figures through the first
eight months of the fiscal year. The strong revenue growth of
the first half of the fiscal year continued in February.
Year-to-date revenue
growth was $228 million, or 6.8 percent above the first eight
months of FY 04. The December Revenue Estimating Conference (REC)
estimate for the entire fiscal year is $142 million, or 2.7
percent above FY 04. Since the REC estimate has already been
exceeded, it would take negative revenue growth over the
remaining four months to not meet or exceed the REC estimate.
Through the first eight
months of the fiscal year, personal income tax receipts were up
$139.4 million, or 8.6 percent compared to this point in FY 04.
Sales and use tax receipts increased by $51.2 million, or 4.3
percent. Corporate income tax receipts increased by $25.3
million, or 20 percent compared to FY 04.
In addition, Fiscal Services
reports that income tax estimate payments increased
substantially in December and February, posting a $24.1 million
gain over the two months. As this is the final estimate payment
for most taxpayers’ 2004 tax year, it could mean the income
Iowans receive from sources not subject to withholding increased
for the year. If this is the case, the state could see strong
net revenue gains through the return/refund season (March
through May). This is the good news.
Tempering that good news is the fact that tax
law changes related to bonus depreciation and Section 179
expensing will impact the remainder of the year and should
reduce the percentage growth going forward. In addition,
revisions to income tax withholding tables will negatively
impact the last three months.
the current REC
estimate, if the supplemental appropriations don’t exceed $75
million, FY 05 will end with a surplus of $169 million.
However, if revenue exceeds the estimate (which seems likely at
this point), it would increase the amount of the surplus and
therefore the amount going into the cash reserves.
The REC will meet again
on Friday, April 8, to review and revise the FY 05 and FY 06
revenue estimates. However, even if the REC increases the
revenue estimate, the expenditure limitation law requires that
the Legislature use the December estimate when crafting the FY
06 budget. |
GOV.
VILSACK SIGNS HF 102,
A BILL TO EASE TAX FILING BURDENS
ON ACCELERATED DEPRECIATION
This past week Governor
Vilsack signed House File 102. HF 102 allows a taxpayer to elect to
take the additional first-year (bonus) depreciation allowance in
computing the individual, corporate, and franchise taxes and
specifies the adjustments to be made in determining net or taxable
income, if such election is not made. This provision is retroactive
to tax years ending after May 5, 2003.
The bill allows a taxpayer that was eligible, under the individual
or corporate income tax, for the additional first-year (bonus)
depreciation allowance or the increased expensing allowance for a
tax year for which an income tax return for that tax year was filed
prior to the effective date of the provision of the bill, to elect,
in lieu of filing an amended return, to take the bonus depreciation
allowance or increased expensing allowance in the taxpayer’s
subsequent tax year.
DEPARTMENT of REVENUE SET to CHANGE WITHHOLDING TABLES
Beginning April 1, 2005,
employers will be reducing the amount of Iowa tax deducted from
employees’ paychecks. The Iowa Department of Revenue has mailed the
new tax tables and formulas to more than 80,000 withholding agents
at the end of February.
Iowa withholding tax rates
have not changed since 1998. The withholding tables are revised
when changes in state or federal law result in a significant
imbalance between the amount of tax withheld and the amount of tax
actually owed. The new tables are intended to restore the balance
and should reduce the amount of withholding tax sent to the state by
approximately $100 million in 2005.
According to the Iowa
Department of Revenue, most taxpayers will see an increase in their
take-home pay throughout the year; however, the size of the refund
they receive after filing their 2005 tax returns will decrease.
Furthermore, some taxpayers who now receive refunds may end up
paying additional tax when they file their 2005 tax returns.
Ways
& Means Update
Bills introduced in committee this week:
House Study Bill 205
- A study bill providing for the property taxation of the facilities
of city-operated cable communications systems and including
effective and applicability date provisions.
House Study Bill 206
- A study bill relating to horse racing, including fees for breeders
of certain native horses and minimum racing days and supplemental
purses for registered Iowa-bred horses.
House File 387
- A bill for an act relating to tax credits provided for purposes of
acquiring agricultural assets by beginning farmers, and providing
effective and applicability dates.
House File 455 - A bill for an act relating to fees imposed
for certified copies of death certificates.Bills passed out of
committee this week:
House File 311 -A
bill for an act relating to tax credit certificates issued by the
Iowa capital investment board and providing an effective date.
House File 164 - A
bill for an act providing a sales and use tax exemption for certain
appliances that meet the energy efficiency rating established for
the appliance by the United States environmental protection agency
and providing an effective date.
House Study Bill 189
- A study bill relating to the property taxation of nursing
facilities and including effective and applicability date
provisions.
House File 198- A bill for an act relating to the property
tax levy for emergency services provided to residents of certain
townships and including effective date and applicability date
provisions.
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