Administrative Rules - Available for Public Comment; Adopted & Filed

Wednesday - 02/22/2023

The Iowa Department of Revenue has submitted new proposed rules to the Iowa Legislature, available for public comment through March 14, 2023. See individual notices for details.

  • Fiduciary Income Tax Returns—Extension of Time to File
    This proposed 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 The current rule includes detailed, outdated information relevant to tax years 1986 through 1991.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 This proposed rulemaking removes the outdated information and provides the relevant extension language that was previously incorporated by reference.
  • Sales Tax Exemption for Diapers
    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.” Since the statute does not define the word “diaper,” to avoid any confusion about what is exempt as a diaper, the Department proposes this new rule to define “diaper” in accordance with the definition adopted by the Streamlined Sales Tax Governing Board, of which Iowa is a member state.
  • Electric Fuel Excise Tax
    The Department proposes this rulemaking to implement 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 proposed 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. The rules make clear that all administration of this excise tax will be handled electronically through GovConnectIowa. The Department intends for these rules to take effect on July 1, 2023, in conjunction with the effective date of the excise tax on electric fuel.
  • Mandatory Electronic Filing—Exceptions
    The proposed amendment adds a new method for the Department to provide relief from the requirement that certain taxpayers file Iowa income tax returns electronically. The existing subrule offers relief only when a taxpayer requests it for good cause, and the subrule specifies that inadequate return preparation software would never be considered good cause. The Department has since encountered a scenario in which a legal requirement changed and required an update to forms after the electronic tax forms had been developed for the year. As a result of this change to the forms, no software provider will be able to offer an electronic version of the affected form that reflects the change. The proposed amendment allows the Department to provide blanket relief from the electronic filing requirement to taxpayers who are required to use the affected form, either by providing an exception in the instructions for obtaining relief on the affected form itself or by the issuance of an order by the Director granting such relief.
  • Appeals, Taxpayer Representation, and Other Administrative Procedures Amendments
    The proposed amendments accomplish a variety of objectives. The rule regarding applicability and scope is proposed to be amended in Item 1. Definitions are proposed to be amended in Item 2 to eliminate unnecessary duplication of statute. The list of tax types now available on GovConnectIowa is proposed to be updated in Item 3. Changes to the Department’s rules on taxpayer representation are proposed to 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. Amendments to the Department’s rules on motions to redact identifying details are proposed to correct an error and to clarify hearing procedures related to such motions. Rules are proposed to be amended to simplify the procedures related to appeals. Other amendments are proposed to reflect the use of electronic service by the Administrative Hearings Division of the Department of Inspections and Appeals. Finally, amendments are proposed to ensure matters that a taxpayer seeks to appeal to the district court are first appealed to the Director to exhaust administrative procedures and ensure the Department’s final order reflects the position of the Director rather than that of an administrative law judge.
  • Manufacturers of Food or Food Ingredients Exemption
    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 now proposes to amend the rule implementing that exemption so that it conforms to the statutory change. The Department also proposes to add several examples to the rule to illustrate situations where manufacturers may or may not be eligible to claim the exemption for eligible purchases based on the product being manufactured.

The Department previously submitted the following proposed rules to the Iowa Legislature. The following rules have been adopted and filed, effective March 29, 2023.

  • Pass-Through Entity Composite Returns
    This rulemaking implements the pass-through entity composite return requirements enacted in 2021 Iowa Acts, Senate File 608, division II. That legislation repealed the provisions of Iowa law that required a pass-through entity to withhold and remit income tax on a nonresident individual’s distributive Iowa-source income from the pass-through entity and that allowed a pass-through entity to elect to file an Iowa composite return on behalf of its nonresident individual members, and replaced them with a mandatory Iowa composite return filing and tax payment requirement that applies to all nonresident members of the pass-through entity. In general, under Iowa Code section 422.16B, a pass-through entity with nonresident members is required to file an annual Iowa composite return and pay Iowa income or franchise tax on behalf of its nonresident members related to their Iowa-source income from the pass-through entity. These changes take effect for tax years beginning on or after January 1, 2022.
  • Farm to Food Donation Tax Credit
    This rulemaking modifies the process for claiming the Farm to Food Donation Tax Credit. For tax years beginning on or after January 1, 2022, taxpayers who wish to claim the Farm to Food Donation Tax Credit will no longer be required to submit donation receipts issued by registered feeding organizations directly to the Department prior to making a tax credit claim. Further, the Department will no longer issue to taxpayers tax credit certificates that indicate the verified tax credit amount taxpayers may claim. Instead, this rulemaking permits taxpayers to make a tax credit claim directly on their Iowa income tax returns by utilizing a tax credit form provided by the Department. This rulemaking does not remove the requirement that registered feeding organizations issue Department-approved donation receipts to donors or the requirement that registered feeding organizations report donation information to the Department by January 15 each year. It also strikes language allowing a taxpayer to transfer a Farm to Food Donation Tax Credit to the taxpayer’s estate or trust upon death because it is inconsistent with Iowa Code.
  • Income and Franchise Tax — Qualifying COVID-19 Grant Exclusion
    This rulemaking adds the Iowa bowling center relief fund, the Iowa charter bus relief program, the Iowa sports entertainment relief program, and the Iowa fitness center relief program, all administered by the Iowa Economic Development Authority, to the definition of “qualifying COVID-19 grant”, pursuant to a recent notification from the Authority. Iowa law and Iowa administrative rules require an eligible administering agency to notify the Director of the Department of the existence of any grant program it believes may be a qualifying COVID-19 grant program. The addition of these grant programs to the definition of "qualifying COVID-19 grant" will make them eligible for the Iowa income and franchise tax exclusion in Iowa Code sections 422.7(62) and 422.35(30).
  • Geothermal Heat Pump Tax Credit
    This rulemaking implements 2022 Iowa Acts, House File 2317, sections 6 and 7, which repeal the Iowa geothermal heat pump tax credit for installations occurring after December 31, 2023. This rulemaking also updates the Iowa geothermal heat pump tax credit rates from 5.2 percent to 6 percent of qualifying expenditures for installations in 2022, and from 4.4 percent to 6 percent of qualifying expenditures for installations in 2023, in response to the federal Inflation Reduction Act of 2022.
  • Withholding Filing and Penalty
    This rulemaking implements statutory changes to the penalty imposed on payers of withholding who fail to file income statements with the Department. Payers of withholding will now be penalized $500 for each instance of willful failure to file an income statement with the Department. This rulemaking implements a statutory change that eliminates the requirement that payers of withholding submit an annual summary of withholding payments. It eliminates references to responsible parties and amends other provisions related to withholding registration to better conform with how withholding registration is administered by the Department. Finally, this rulemaking amends language regarding filing of returns to conform with how withholding filings are administered by the Department and to make the rules easier to read.

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