Bill > SSB1239

Introduced Session

This bill relates to the elimination of the individual income tax and alternate income tax by creating the taxpayer relief trust fund and income tax elimination board and fund. S.F. _____ CREATION OF TAXPAYER RELIEF TRUST FUND, INCOME TAX ELIMINATION FUND, AND BOARD. The bill creates the taxpayer relief trust fund (trust fund) and the income tax elimination fund (ITEF) for the purpose of reducing future individual income tax rates to zero. Under the bill, moneys are transferred through both funds before being used to fund the reduction of the individual income tax rate. TRANSFERS FROM TAXPAYER RELIEF FUND. Beginning on July 1, 2025, the bill transfers $100 million from the taxpayer relief fund (TRF) to the ITEF. On January 1, 2026, the bill transfers $2.6 billion from the TRF to the trust fund. For FY 2028, and each fiscal year thereafter, the bill transfers from TRF to the trust fund, an amount equal to 25 percent of moneys transferred into the TRF each fiscal year. TRUST FUND. The trust fund is created beginning January 1, 2026, separate and apart from all other public moneys or funds of this state and the balance in the trust fund shall not be considered part of the balance of the general fund of the state. The trust fund shall consist of all moneys collected by or appropriated or transferred to the trust fund including all interest, dividends, and rents, and shall also include all securities or investment income and other assets acquired by the use of the moneys in the trust fund and any other moneys that have been transferred or paid into the fund. The trust fund shall be administered by the Iowa public employees’ retirement system (IPERS). Beginning July 1, 2029, and each July 1 thereafter, the bill transfers 5 percent of the remaining balance of the trust fund at the close of the preceding fiscal year into the ITEF. After the individual income tax rate is adjusted to zero, the bill requires any moneys remaining in the trust fund to be transferred to the general fund of the state in the fiscal year the rate is adjusted to zero. S.F. _____ ITEF. The bill establishes the ITEF on January 1, 2026. The ITEF shall consist of all moneys transferred to the fund from the trust fund or appropriated to or otherwise collected by ITEF for the purpose of reducing the individual income tax rate to zero. The ITEF shall also be administered by IPERS. The moneys in the ITEF are deposited into the general fund of the state when the individual income tax rate is adjusted pursuant to the procedures in new Code section 422.5B in the bill. After the rate is adjusted to zero, the bill requires any moneys remaining in the ITEF to be transferred to the general fund of the state in the fiscal year the rate is adjusted to zero. EXPENSES. The investment management and administrative expenses for the trust fund and fund shall be first charged against the expense account established in new Code section 97E.5, and if the expense account is insufficient to pay the expenses, the expenses shall be paid next from ITEF and then from the trust fund. The administrative expenses shall be the higher of $5 million or two-tenths of 1 percent of the combined value of the trust fund and elimination fund on June 30 each year either fund contained moneys in the preceding fiscal year. BOARD. The bill creates the income tax elimination board to establish policy and to review implementation of the policy, in matters relating to the investment of the trust fund and the ITEF. The bill establishes the board as trustee of both funds. The board shall review and approve the administrative expenses of the system each fiscal year. Prior to July 1, 2027, the system may contract with any custodian bank currently being utilized for the custody of retirement fund assets. On or after July 1, 2027, the system shall not select any bank or other third party for the purposes of investment asset safekeeping, other custody, or settlement services without prior consultation with and approval of the board. S.F. _____ The bill requires the board to report to the fiscal committee of the legislative council. The board shall consist of 11 members, including 7 voting members and 4 nonvoting members. The voting members shall be as follows: four public members, appointed by the governor who each have substantial experience in institutional investment, institutional finance, or business management; two public members, appointed by the governor who are citizens of the state; and the director of the department of management. The nonvoting members of the board shall be two state representatives, one appointed by the speaker of the house of representatives and one by the minority leader of the house, and two state senators, one appointed by the majority leader of the senate and one by the minority leader of the senate. Code section 4A.5 (dissolution of boards) does not apply to the board. IPERS. The bill requires IPERS and the board to develop separate investment policies for each fund. IPERS and the board have broader authority to establish the investment policy for the trust fund than the investment policy for ITEF. The investment policy for the ITEF shall be similar to the Iowa public employees’ retirement system in Code chapter 97B. In developing the investment policy for either fund, the bill requires IPERS and the board to exercise judgment and care that requires prudence, discretion, probable income, and probable safety, as if investing personal funds. The board is required to give appropriate consideration to investments that are reasonably designed to further the purposes of each fund, taking into consideration the risk of loss and the opportunity for gain or income associated with the investment or investment policy. The bill allows each fund to acquire and retain every kind of property and every kind of investment which persons of prudence, discretion, and intelligence acquire or retain for a S.F. _____ personal account. The bill specifies if there is loss to either fund, IPERS, the employees of IPERS, the members of the board severally, and the board are not personally liable, and the loss shall be charged against the trust fund or fund, as applicable, unless the conduct involves malicious or wanton misconduct. IPERS, in accordance with the investment policy established by the board, is authorized under the bill to sell any securities or other property in the trust fund and reinvest the proceeds when such action may be deemed advisable by IPERS for the protection of the fund or the preservation of the value of the investment. The bill allows IPERS, subject to board approval, to execute contracts and agreements with investment advisors and consultants in the administration of investments of moneys in either fund. ADJUSTING INDIVIDUAL AND ALTERNATE INCOME TAX RATE. By November 1, 2029, and by November 1 each year thereafter, the department of management shall determine the amount of moneys available in the ITEF, and the net individual income tax receipts at the close of the preceding fiscal year. The amount available in the ITEF and the net tax receipts shall be provided to the department of revenue for the calculation to determine if the individual income tax rate may be adjusted. The bill specifies the department of revenue shall adjust and apply a new individual income tax rate in such a way that the rate would have generated an amount equal to the net receipts generated from the rate in the preceding fiscal year less the amount transferred from the ITEF. The bill prohibits the individual income tax rate from being adjusted unless the amount of net sales and use tax revenue collected by the state during the most recent October 1 through September 30 calculation period is greater than 103 percent of the net sales and use tax revenue collected during the preceding calculation period covering the same months. S.F. _____ The bill prohibits the rate from being adjusted unless the rate is able to be adjusted at least one-tenth of 1 percent. The rate, when adjusted, shall be rounded down to the nearest one-tenth of 1 percent. The bill prohibits the rate from being adjusted unless there is less than $450 million in the ITEF, excluding the amount in the expense account, and at least 150 percent of the amount to be transferred to the general fund of the state is available in the ITEF. The bill requires the moneys in the ITEF be transferred to the general fund of the state in the fiscal year the rate is adjusted. The bill specifies the transfer from the ITEF to the general fund of the state shall not be considered “new revenue” for purposes of the general fund expenditure limitation in Code section 8.54. If the rate is adjusted downward pursuant to the bill, the alternate state individual income tax rate shall be adjusted downward in the same proportion to the nearest one-tenth of 1 percent. If a tax rate is adjusted, the bill requires the director of revenue to cause an advisory notice containing the new individual income tax rate and alternate tax rate to be published in the Iowa administrative bulletin and on the internet site of the department of revenue. The calculation and publication of the adjusted tax rates by the director of revenue is exempt from Code chapter 17A, and shall be submitted for publication by the first December 31 following the determination date to adjust the tax rates.

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No sponsors listed

Other Sponsors (1)

Subcommittee: Dawson, Schultz, and Townsend. (on 05/12/2025)

Official Document