~by Sen Jerry Behn
January 21, 2016
This week was a short week due to the Martin Luther King holiday on Monday. In our Education meeting on Wednesday, we heard a presentation on dyslexia. The presentation was an attempt to illustrate the issues dyslexic students face in the classroom. It was a fascinating lesson as we used mirrors and our non-dominant hand to draw and write. I was pleased at how much progress has been made in the diagnosis of this condition and how well it can be managed.
Also, I have heard from many small businesses in recent days regarding the Iowa Legislature coupling with Section 179 federal tax depreciation changes. In December 2015, the United States Congress approved tax changes that extended many beneficial tax provisions that impact Iowans. Before Iowans can take advantage of these provisions, the Iowa Legislature must review and act to approve these changes into our Iowa tax code – should Iowa couple or conform. In recent years, the bill known as the “coupling” bill has been debated in January at the Statehouse.
It is important we act quickly to allow Iowa taxpayers to begin their tax preparation. Over the years, the Iowa Legislature has generally voted to adopt the federal tax changes or -“couple.”
We need to support Iowa small businesses and couple with Section 179 (changes to how you can depreciate an asset), which could save Iowa taxpayers significantly on their 2015 income taxes. I understand hard-working Iowa farmers and small business job creators use Section 179 expensing and not coupling could create hardships for those anticipating that the Legislature would continue its practice of recent years.
It is no secret we face a challenging budget year. Revenue growth was lower than previously forecast. Last week we learned Governor Branstad’s budget supports updating Iowa tax law to conform with changes in the Internal Revenue Code that resulted from federal legislation enacted during 2015. However, there are three significant exceptions:
- No tax year 2015 coupling. Meaning most of the changes are effective for federal tax purposes beginning in tax year 2015, but the bill will not incorporate recent federal changes until tax year 2016. (Specific examples are: deduction for state and local sales taxes, above the line deduction for teacher classroom expenses ($250), above the line deduction for qualified tuition and related expenses, discharge of indebtedness on principal residence excluded from gross income.) The estimated fiscal impact of these changes in total is minimal compared to Section 179.
- No section 179 expensing for tax year 2015 now or into the future (affects small businesses), and
- No bonus depreciation for now or into the future (affects large businesses).
Estimates project just coupling with Section 179 for one year is an approximate $90 million decrease in FY 2016 and a revenue increase in FY 2017 that has been estimated roughly to be over $20 million.
Many have been warning of a forthcoming financial storm. It’s here. Supporting Section 179 works to keep Iowa’s economy strong to weather the storm. Conformity allows Iowans to invest back into Iowa and provide stability for Iowa’s small businesses. I will continue to work with our colleagues in the House and Senate to find the resources to support conforming with Section 179.
As always, I want to hear from you. My Senate number is (515) 281-3371 and my home number is (515) 432-7327. Write me at: State Capitol, Des Moines, IA 50319 or at my home address: 1313 Quill Avenue, Boone, IA 50036. Email me at jerry.behn@legis.state.ia.us.
