Small business owners across Iowa are thanking Gov. Kim Reynolds for signing a bill that will save Iowa small business owners and taxpayers $1 billion dollars over the next eight years.
“This key piece of legislation is a huge win for small business owners, many, who have been devastated by the COVID-19 pandemic,” said Matt Everson, NFIB State Director in Iowa. “This legislation will allow our small business owners to re-invest in their business, give employees raises, and hire new workers. In short, it ensures that Iowa’s economy can continue to grow. Today is a good day for all Iowans.”
NFIB members celebrate the passage of the tax reform bill with Gov. Reynolds.
Below is a summary of how SF 619, or the Tax Omnibus Bill, will help small business owners.
Income Tax Reform
This section eliminates the 2018 revenue growth triggers which ensures the full implementation of the 2018 tax legislation beginning in tax year 2023. The top rate in Iowa will be reduced from 8.53% to 6.5%.
This section implements Paycheck Protection Program (PPP) equity regarding income tax exemptions and deductions for all taxpayers who have a forgiven PPP loan regardless of when they received it.
Inheritance Tax Reform
This section proportionally reduces over a four-year period the rates of tax applicable to the state inheritance tax, beginning for estates of decedents dying on or after January 1, 2021.
For property passing from the estate of a decedent dying on or after January 1, 2021, but before January 1, 2022, there shall be imposed a rate of tax equal to the applicable tax rate in present statue, reduced by twenty percent, and rounded to the nearest one-hundredth of one percent. On or after January 1, January 2024-2025 will be reduced by 80%. The bill then repeals the state inheritance tax and the state qualified use inheritance tax effective January 1, 2025.
This section allows businesses to expense up to 100% of the cost of the qualifying asset in the purchasing year if they so choose.
The Tax Cut and Jobs Act established the full expensing beginning for Tax Year (TY) 2018. SF 619 conforms to that code section retrospective to January 1, 2021.
Businesses can claim this deduction for TY 2021 & 2022, then the federal government phase out begins in TY 2023. For TY 2023 expensing of up to 80% is allowed, TY 2024 60%, TY 2025 40%, and TY 2026 20%. Beginning in TY 2027 the “bonus” ends, and businesses will follow regular depreciation schedule.
Property Tax Reform
This section of SF 619 phases out the mental health levy off of county property taxes and eliminates the levy completely in 2023. The elimination of the mental health levy will result in over $100 million dollars in property tax savings for all property owners. Mental health services will now be funded through the state’s budget.