HF 352 — A bill for an act relating to an entity-level taxation election for pass-through entities and allowing a partner or shareholder to claim a credit against the individual and corporate income taxes and the franchise tax, and including effective date and retroactive applicability provisions.

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Section 11. .

A taxpayer who is a shareholder in a financial institution, as defined in section 581 of the Internal Revenue Code, which has in effect for the tax year an election under subchapter S of the Internal Revenue Code, or is a member of a financial institution organized as a limited liability company under chapter 524 that is taxed as a partnership for federal income tax purposes, shall compute the amount of the tax credit by recomputing the amount of tax under this subchapter by House File 352, pp. .

2 reducing the taxable income of the taxpayer by the taxpayer'staxpayer’s pro rata share of the items of income and expense of the financial institution and subtracting the credits allowed under section 422.12.

The resulting amount, which shall not exceed the taxpayer'staxpayer’s pro rata share of the franchise tax paid by the financial institution, is the amount of the franchise tax credit allowed.

422.16C Pass-through entity ——— election ——— entity-level tax ——— credit.

-Partnership“Partnership” -meansmeans the same as defined in section 422.25A, except a partnership“partnership” " does not include a pass-through entity that is a publicly traded partnership as defined in section 7704 of the Internal Revenue Code.

-Taxpayer“Taxpayer” -meansmeans a partnership or an S corporation.

For tax years beginning on or after January 11, , 2022, notwithstanding any other provision of law to the contrary, a taxpayer may elect to be subject to the provisions of this section.

The tax shall be due with the taxpayer'staxpayer’s return required under this chapter.

The tax under this section shall be reduced by the credit provided in subsection 55, , paragraph 'b“b”, -, and the franchise tax credit in section 422.11, subsection 22, , and the composite credit in section 422.16B, subsection 44. .

(1) The ratio of the partner'spartner’s or shareholder'sshareholder’s share of the taxpayer'staxpayer’s taxable income over the taxpayer'staxpayer’s total taxable income multiplied by the state tax liability actually paid by the taxpayer.

In lieu of claiming a refund, the partner or shareholder may elect to have the overpayment shown on the partner'spartner’s or shareholder'sshareholder’s final, completed return credited to the tax liability for the following tax year.

A nonresident individual who is a partner or shareholder of a taxpayer for a tax year in which an election is made under this section shall not be required to file an individual income tax return under section 422.13 for such tax year if the only Iowa source income of the individual is from a taxpayer making the election under this section, the credit allowed to the partner or shareholder equals or exceeds the tax liability of House File 352, pp. .

In addition to and not in lieu of any period of limitation provided in section 422.25, if a taxpayer files an amended return that requests a refund of tax previously paid within one year prior to the expiration of the department'sdepartment’s applicable period of limitations in section 422.25, the department has one year from the date of receipt of the amended return to assess any direct or indirect partners and shareholders related to the reduction of any tax credit provided under subsection 55. .

For purposes of this subchapter, estimated“estimated tax-tax” means the amount which the taxpayer estimates to be the tax due and payable under subchapter II, III, or V of this chapter for the taxable year.

This Act applies retroactively to January 11, , 2022, for tax years beginning on or after that date.

______________________________ ______________________________ PAT `GRASSLEYGRASSLEY AMY SINCLAIR Speaker of the House President of the Senate I hereby certify that this bill originated in the House and is known as House File 352, Ninetieth General Assgmbly.Assembly.

f______________________________ MEGHAINMEGHAN NELSON Chief Clerk of the House Approved ,_______________, 2023 ______________________________ KIM REYNOLDS Governor