Government Affairs Weekly Report - Week 7: Feb. 19-22, 2018

by CBI Lobbyist Jeff Boeyink - Partner, LS2 Group
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View the Iowa Legislative Bill Tracker

Overview / Major Events
The first week post-funnel #1 has been dominated by floor work in the House and Senate as policy committees take a break and bills are debated and sent to their opposite Chambers. Most current work involves legislation that is not controversial or has a high level of consensus amongst the members. That said, next week expect debate on more controversial subjects such as the energy omnibus bill (SF 2311) and workers’ comp fraud (SF 2305), which do not have House companion legislation and will need to clear a House committee prior to March 16 to remain eligible.

The biggest news of the week arrived with the release of the Senate Republicans’ tax reform package—the most significant overhaul of the tax code proposed in more than three decades.

Senate Republicans Propose Sweeping Tax Reform and Relief
On Wednesday, Senate Republicans introduced SSB 3197, a sweeping and comprehensive reform of Iowa’s state income tax code (both personal and corporate). The bill was quickly fast-tracked through subcommittee and full Senate Ways and Means Committee on Thursday and will be eligible for full Senate consideration next week.

Here are the major components of the legislation:

• Full implementation results in annual total tax reduction of more than $1 billion.
• Cuts individual income tax rates by 30%, with the top tax rate moving from 8.98% to 6.3%.
• Fully couples the Iowa tax code with the federal tax code, meaning the new simplified Iowa tax return would start with Federal taxable income.
• Eliminates federal deductibility for both individual and corporate income taxes and plows the tax savings into rate reductions.
• Drops the top corporate income tax rate from 12% to 7%.
• Modernizes the Iowa sales tax to add Internet sales and digital downloads to the sales tax base.
• Creates tax equity between banks and credit unions, while providing modest tax relief to most banks and credit unions.
• Eliminates most state tax credits by the year 2015.

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According to calculations provided by Senate Republican research staff, here are some examples of the kind of tax relief that will occur:

• Single mother with one child making less than $30,000 will see a 65% reduction.
• Single taxpayer making $40,000 will see a 16.4% reduction.
• A married couple with two children making $48,000 will see a 20.5% reduction.

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Thus, we currently have tax reform plans from Governor Reynolds and Senate Republicans. It is not yet clear how House Republicans intend to approach this issue.

Interesting Legislation from Week 7
Here are four of the more interesting bills that cleared either the House or Senate this week:

• HF 2383, a bill that allows employers who do employee alcohol testing to lower the threshold from .04 to .02 (meaning they can impose discipline if they exceed this new lower level). Passed 96-2
• HF 2235, a bill that instructs the Board of Education to use, for student assessment purposes, the assessment developed by the Iowa testing program at the University of Iowa (this bill is intended to implement the assessment requirement of the 2013 education reform law and end the multi-year battle on what test would be used). Passed 95-3
• SF 2113, a bill that would require all teachers to receive at least one hour of suicide prevention training as part of their license or certification process. Passed 48-0
• SF 2135, a bill that allows a judge to reduce damages claimed in an auto accident if the individual injured was NOT wearing a seat belt. Currently law limits the reduction to five percent, this bill increases that to 25%. Passed 48-0

Efforts on Behalf of Community Bankers of Iowa:

• Reviewed Senate Republicans’ tax reform legislation and confirmed that Section IV of SSB 3197 DOES include tax equity provisions for banks and credit unions.
• The bank franchise tax would be extended to state-chartered credit unions and pay taxes at the same rates as banks.
• Tax rate would be based on net income and replace the flat five percent tax rate currently in code.
• For those banks and credit unions with net incomes of $7.5 million and LESS, the tax rate will be two percent.
• For those banks and credit unions with net incomes of MORE than $7.5 million, the tax rate will be four percent.
• Functionally, this will mean that ALL banks get some form of tax relief, regardless of size (with most banks seeing the tax drop from 5% to 2%, and even the largest banks seeing taxes lowered from 5% to 4%).