Administrative Rules

This rulemaking, pursuant to Part IV of Executive Order 10, implements, in part, 2022 Iowa Acts, House File 2317, and provides guidance as to how and when an employee-owner may make an election to exclude capital gain from the sale of qualifying capital stock in a qualifying corporation. The legislation allowed employee-owners of a qualified corporation to exclude the capital gain from the sale of qualifying capital stock.

This rulemaking implements 2020 Iowa Acts, House File 2565, which sets forth the statutory authority to transition the setoff program from the Department of Administrative Services to the Iowa Department of Revenue. The rules describe the priority of payment when multiple agencies within the same priority group make a claim to the same setoff payment, describe the frequency of certifications of debt by public agencies submitting debt to the program, and establish a minimum debt submission amount by rule.

This rulemaking implements deductions for farm tenancy agreement income and farm capital gains enacted by 2022 Iowa Acts, House File 2317, divisions II and III. These deductions are effective for tax years beginning on or after January 1, 2023. This rulemaking rescinds the rule for capital gains according to the law prior to the legislation.

This rulemaking implements the excise tax on electric fuel, enacted by the Iowa Legislature in 2019 Iowa Acts, House File 767, that will become effective July 1, 2023. These rules provide guidance as to what entities need to obtain a license to sell or dispense electric fuel either as a user, dealer, or both. Several changes were made to the Notice of Intended Action for these rules, ARC 6921C. Read more about those changes in the rule filing.

Pursuant to Part IV of Executive Order 10, the Department proposed this Notice of Intended Action in light of the concerns received after the official public comment period for ARC 6577C and the effective date of the new rule implementing the taxable service of commercial recreation. The Department is rescinding rule 701—216.3(423) and replacing it with the text previously found in rule 701—26.24(422), with minor updates for consistency with other administrative rules. No changes were made from the Notice of Intended Action for this rulemaking.

Paragraph 8.5(2)“b” currently lists a requirement for electronic return originators to use a process for electronic signatures that is much more stringent than the current practice of the Department. The amendment changes the language of the rule to align with current practice.

This rulemaking is intended to provide updates and clarifications for the Department’s automatic extension of time for filing fiduciary income tax returns. The current rule includes detailed, outdated information relevant to tax years 1986 through 1991. The automatic filing extension applicable to current tax years is incorporated by reference to the automatic extension for individual income tax. This rulemaking removes the outdated information and provides the relevant extension language that was previously incorporated by reference.

The Iowa Legislature enacted a sales tax exemption for diapers in 2022 Iowa Acts, Senate File 2367, division II, which took effect January 1, 2023. New Iowa Code section 423.3(109) specifically exempts from sales tax “[t]he sales price from the sale of a child or adult diaper, whether cloth or disposable.” This adopted rule defines “diaper” in accordance with the definition adopted by the Streamlined Sales Tax Governing Board, of which Iowa is a member state. No changes were made to ARC 6920C.

The Department previously adopted rule 701—215.2(423) to implement an exemption found in Iowa Code section 423.3(49) for manufacturers of “marketable food products for human consumption.” Senate File 2367, division VIII, amended that exemption, such that it now applies to manufacturers of “food or food ingredients.” The Department has amended the rule implementing that exemption so that it conforms to the statutory change. The Department made changes from ARC 6924C to clarify that a business that cannot claim this exemption may still be able to claim other exemptions in the law.

The amendments accomplish a variety of objectives. The rule regarding applicability and scope was amended in Item 1. Definitions are amended in Item 2 to eliminate unnecessary duplication of statute. The list of tax types now available on GovConnectIowa is updated in Item 3. Changes to the Department’s rules on taxpayer representation more clearly describe the Department’s signature requirements, to modify the Department’s procedures related to tax returns of minors, and to add clarity to the rules.