SF 2396 — A bill for an act relating to state taxation by modifying lottery and alcoholic beverages provisions under the purview of the department of revenue, changing the taxation of lump sum distributions of retirement income, increasing estimated tax thresholds, making appropriations, and including effective date and retroactive applicability provisions.

Notwithstanding the provisions of section 99G.34 which prohibit disclosure by the department of certain portions of the contents of prize winner records or information, and notwithstanding any other confidentiality statute, the department may provide to a claimant agency the setoff program and public agency, as defined in section 421.65, all LSBinformation 5331SVnecessary (2)to 90accomplish -9-and jm/jheffectuate 9/29the S.F.intent of this section.

2396 information necessary to accomplish and effectuate the intent of this section.

24.23.

“Operating still” means a still that is registered with the federal alcohol and tobacco tax and tradeSF bureau2396 of(3) the90 United-9- Statesjm/jh/mb department9/23 ofS.F. the treasury and is actively used to manufacture spirits.

2396 trade bureau of the United States department of the treasury and is actively used to manufacture spirits.

25.24.

A person holding a retail LSBalcohol 5331SVlicense (2)to 90sell -10-alcoholic jm/jhbeverages 10/29for S.F.consumption on the licensed premises may permit a customer to carry an open container of wine from the person’s licensed premises into another immediately adjacent licensed premises that is covered by a license or permit that authorizes the consumption of wine, a temporarily closed public right-of-way, or a private place.

2396 alcohol license to sell alcoholic beverages for consumption on the licensed premises may permit a customer to carry an open container of wine from the person’s licensed premises into another immediately adjacent licensed premises that is covered by a license or permit that authorizes the consumption of wine, a temporarily closed public right-of-way, or a private place.

26.25.

27.26.

Section 123.43A, subsection 6, Code 2024, is amendedSF to2396 read(3) as90 follows:-10- jm/jh/mb 10/23 S.F.

2396 amended to read as follows:

28.27.

A person engaged in the wholesaling of beer or wine LSBmay 5331SVsell (2)only 90disposable -11-glassware, jm/jhwhich 11/29is S.F.constructed of paper, paper laminated, or plastic materials and designed primarily for personal consumption on a one-time usage basis, to retailers for use within the premises of licensed establishments, for an amount which is greater than or equal to an amount which represents the greater of either the amount paid for the disposable glassware by the supplier or the amount paid for the disposable glassware by the wholesaler.

2396 may sell only disposable glassware, which is constructed of paper, paper laminated, or plastic materials and designed primarily for personal consumption on a one-time usage basis, to retailers for use within the premises of licensed establishments, for an amount which is greater than or equal to an amount which represents the greater of either the amount paid for the disposable glassware by the supplier or the amount paid for the disposable glassware by the wholesaler.

A native brewery may be issued a class “C” retail alcoholSF license2396 or(3) a90 special-11- classjm/jh/mb “C”11/23 retailS.F. alcohol license, regardless of whether that person is also a manufacturer of native distilled spirits pursuant to a class “A” native distilled spirits license or a manufacturer of native wine pursuant to a class “A” wine permit.

2396 alcohol license or a special class “C” retail alcohol license, regardless of whether that person is also a manufacturer of native distilled spirits pursuant to a class “A” native distilled spirits license or a manufacturer of native wine pursuant to a class “A” wine permit.

29.28.

A manufacturer of native wine LSBmay 5331SVbe (2)issued 90a -12-class jm/jh“C” 12/29retail S.F.alcohol license or special class “C” retail native wine license regardless of whether the manufacturer is also a manufacturer of beer pursuant to a class “A” beer permit or a manufacturer of native distilled spirits pursuant to a class “A” native distilled spirits license.

2396 may be issued a class “C” retail alcohol license or special class “C” retail native wine license regardless of whether the manufacturer is also a manufacturer of beer pursuant to a class “A” beer permit or a manufacturer of native distilled spirits pursuant to a class “A” native distilled spirits license.

30.29.

31.30.

State For a death occurring before January 1, 2025, state inheritance tax treatment of interests in Iowa ABLE savings plansSF shall2396 be(3) as90 provided-12- injm/jh/mb section12/23 450.4,S.F. subsection 9.

2396 plans shall be as provided in section 450.4, subsection 9.

32.31.

33.32.

34.33.

The persons entitled under the laws of descent and LSBdistribution 5331SVto (2)the 90possession -13-and jm/jhownership 13/29of S.F.a vehicle owned in whole or in part by a decedent who died intestate, upon filing an affidavit stating the name and date of death of the decedent, the right to possession and ownership of the persons filing the affidavit, and that there has been no administration of the decedent’s estate, which instrument must also contain an agreement by the affiant to indemnify creditors of the decedent who would be entitled to levy execution upon the motor vehicle to the extent of the value of the motor vehicle, shall, upon complying with the other title transfer requirements of this chapter, be issued a registration card for the decedent’s interest in the vehicle and a certificate of title to the vehicle.

2396If distribution to the possession and ownership of a vehicle owned in whole or in part by a decedent who died intestate,testate, uponand filingeither an affidavit stating the namewill andis datenot ofprobated deathor ofis theadmitted decedent, the right to possessionprobate andwithout ownershipadministration, of the persons filingentitled to the affidavit,possession and thatownership there has been no administration of thea decedent’svehicle estate,owned whichin instrumentwhole mustor alsoin containpart an agreement by the affiant to indemnify creditors of the decedent whomay wouldfile bean entitledaffidavit toand, levy execution upon the motor vehicle to the extent of the value of the motor vehicle, shall, upon complying with the other title transfer requirements of this chapter, shall be issued a registrationSF card2396 for(3) the90 decedent’s-13- interestjm/jh/mb in13/23 theS.F. vehicle and a certificate of title to the vehicle.

If2396 a decedent died testate, and either the will is not probated or is admitted to probate without administration, the persons entitled to the possession and ownership of a vehicle owned in whole or in part by the decedent may file an affidavit and, upon complying with the other title transfer requirements of this chapter, shall be issued a registration card for the decedent’s interest in the vehicle and a certificate of title to the vehicle.

The department shall waive the certificate of title fee and surcharge required under sections 321.20, 321.20A, 321.23, 321.46, 321.52, and LSB321.52A 5331SVif (2)the 90person -14-entitled jm/jhto 14/29possession S.F.and ownership of a vehicle, as provided in this subsection, is the surviving spouse of a decedent.

2396 321.52A if the person entitled to possession and ownership of a vehicle, as provided in this subsection, is the surviving spouse of a decedent.

35.34.

36.35.

37.36.

(13)SF That2396 For(3) a90 death-14- occurringjm/jh/mb before14/23 JanuaryS.F. 1, 2025, that an Iowa inheritance tax return is filed for an estate within the later of nine months from the date of death or sixty days from the filing of a disclaimer by the beneficiary of the estate refusing to take the property or right or interest in the property.

2396 (13) That For a death occurring before January 1, 2025, that an Iowa inheritance tax return is filed for an estate within the later of nine months from the date of death or sixty days from the filing of a disclaimer by the beneficiary of the estate refusing to take the property or right or interest in the property.

38.37.

(1) If the notice of assessment or denial of a claim for refund relates to a tax return filed pursuant to section 422.14, or pursuant to chapter 450 for a death occurring before January 1, 2025, by the taxpayer which designates an individual as an authorized representative of the taxpayer with respect to that return, or if a power of attorney has been filed with the department by the taxpayer which designates an individual as an authorized representative of the taxpayer with respect to any tax that is included in the notice of assessment or denial LSBof 5331SVa (2)claim 90for -15-refund, jm/jha 15/29copy S.F.of the notice together with any additional information required to be sent to the taxpayer shall be sent to the authorized representative as well.

2396 of a claim for refund, a copy of the notice together with any additional information required to be sent to the taxpayer shall be sent to the authorized representative as well.

39.38.

For purposes of this subsection, “personal representative” means an administrator, executor, or trustee as eachSF is2396 defined(3) in90 section-15- 633.3.jm/jh/mb 15/23 S.F.

2396 each is defined in section 633.3.

40.39.

41.40.

Notwithstanding the provisions of this section, payment of any part of the purchase price for shares of a deceased shareholder shall not be required until the executor or administrator of the deceased shareholder provides any indemnity, release, or other document from any taxing authority, which is reasonably necessary to protect the LSBcorporation 5331SVagainst (2)liability 90for -16-any jm/jhestate, 16/29inheritance, S.F.and death taxes tax, or any inheritance tax for a death occurring before January 1, 2025.

2396 corporation against liability for any estate, inheritance, and death taxes tax, or any inheritance tax for a death occurring before January 1, 2025.

42.41.

After payment by the state bank, the proceeds shall remain subject to the any debts of the decedent and the any payment of Iowa inheritance tax, if any for a death occurring prior to January 1, 20252025. .

43.42.

Section 541A.2, subsection 6, unnumbered paragraph 1,SF Code2396 2024,(3) is90 amended-16- tojm/jh/mb read16/23 asS.F. follows:

2396 1, Code 2024, is amended to read as follows:

44.43.

45.44.

LSBThe 5331SVdistrict (2)judges 90of -17-each jm/jhjudicial 17/29district S.F.shall by rule fix the fees of probate referees, and also provide, insofar as practicable, a uniform schedule of compensation for inheritance tax appraisers, other appraisers, brokers, and agents employed at estate expense.

2396 The district judges of each judicial district shall by rule fix the fees of probate referees, and also provide, insofar as practicable, a uniform schedule of compensation for inheritance tax appraisers, other appraisers, brokers, and agents employed at estate expense.

46.45.

47.46.

When the gross value of the decedent’s personal property that would otherwise be distributed by will or intestate succession is or has been, at any time since the decedent’s death, fifty thousand dollars or less and there is no real property, or for deaths occurring before January 1, 2025, the real property passes to persons exempt from inheritance tax asSF joint2396 tenants(3) with90 full-17- rightsjm/jh/mb of17/23 survivorshipS.F. pursuant to chapter 450, and if forty days have elapsed since the death of the decedent, a successor as defined in subsection 2 may, by furnishing an affidavit prepared pursuant to subsection 3 or 8, and without procuring letters of appointment, do any of the following with respect to one or more items of such personal property:

2396 as joint tenants with full rights of survivorship pursuant to chapter 450 , and if forty days have elapsed since the death of the decedent, a successor as defined in subsection 2 may, by furnishing an affidavit prepared pursuant to subsection 3 or 8, and without procuring letters of appointment, do any of the following with respect to one or more items of such personal property:

48.47.

(3) That the gross value of the decedent’s personal property that would otherwise be distributed by will or intestate succession is, or has been at any time since the decedent’s death, fifty thousand dollars or less and there is no real property, or for deaths occurring before January 1, 2025, the real property passes to persons exempt from inheritance tax as joint tenants with full rights of survivorship pursuant to chapter 450450. .

LSBSec. 5331SV (2) 90 -18- jm/jh 18/29 S.F.

239648. Sec.

49.

50.49.

An affidavit furnished for the purpose of determining whether the value of the property is, or has been at any time since the decedent’s death, fifty thousand dollars or less need not contain the language required under subsectionSF 3,2396 paragraph(3) “a”,90 subparagraph-18- (3),jm/jh/mb but18/23 shallS.F. state that the affiant reasonably believes that the gross value of the decedent’s personal property that would otherwise be distributed by will or intestate succession is, or has been at any time since the decedent’s death, fifty thousand dollars or less and there is no real property or for deaths occurring before January 1, 2025, the real property passes to persons exempt from inheritance tax as joint tenants with full rights of survivorship pursuant to chapter 450.

2396 subsection 3, paragraph “a”, subparagraph (3), but shall state that the affiant reasonably believes that the gross value of the decedent’s personal property that would otherwise be distributed by will or intestate succession is, or has been at any time since the decedent’s death, fifty thousand dollars or less and there is no real property or for deaths occurring before January 1, 2025, the real property passes to persons exempt from inheritance tax as joint tenants with full rights of survivorship pursuant to chapter 450 .

51.50.

52.51.

LSBProperty 5331SVbelonging (2)to 90the -19-estate jm/jhneed 19/29not S.F.be appraised unless required for inheritance tax purposes for deaths occurring before January 1, 2025, under the provisions of this probate code, or by order of court.

2396 Property belonging to the estate need not be appraised unless required for inheritance tax purposes for deaths occurring before January 1, 2025, under the provisions of this probate code, or by order of court.

53.52.

provided, however, that in the event said real property has been sold at private sale withoutSF an2396 appraisal(3) for90 inheritance-19- taxjm/jh/mb purposes19/23 forS.F. a death occurring before January 1, 2025, or for purpose of such sale, or, if it has been so appraised and has been sold at private sale for less than the appraised value thereof, then, upon the filing of such report, the court may enter an order fixing a time and place for hearing thereon and prescribe a notice of such hearing to be served upon all interested persons, any one of whom, prior to the time fixed for such hearing, may file written objections to the entry of an order approving said sale.

2396 without an appraisal for inheritance tax purposes for a death occurring before January 1, 2025, or for purpose of such sale, or, if it has been so appraised and has been sold at private sale for less than the appraised value thereof, then, upon the filing of such report, the court may enter an order fixing a time and place for hearing thereon and prescribe a notice of such hearing to be served upon all interested persons, any one of whom, prior to the time fixed for such hearing, may file written objections to the entry of an order approving said sale.

54.53.

A statement as to whether or not all statutory LSBrequirements 5331SVpertaining (2)to 90taxes -20-have jm/jhbeen 20/29complied S.F.with including whether the federal estate tax due has been paid, whether a lien continues to exist for any federal estate tax, and whether inheritance tax was paid or a return was filed in this state for a death occurring before January 1, 2025 .

2396 requirements pertaining to taxes have been complied with including whether the federal estate tax due has been paid, whether a lien continues to exist for any federal estate tax, and whether inheritance tax was paid or a return was filed in this state for a death occurring before January 1, 2025.

55.54.

56.55.

When an inventory or report is filed under section 450.22 for deaths occurring before January 1, 2025, without administration of the estate of the decedent, the heir or heir’s attorney shall prepare and deliver to the county recorder of the county inSF which2396 the(3) real90 estate-20- isjm/jh/mb situated20/23 aS.F. certificate pertaining to each parcel of real estate described in the inventory or report.

2396 in which the real estate is situated a certificate pertaining to each parcel of real estate described in the inventory or report.

57.56.

This chapter does not exempt the personal representative from complying with the requirements of section 422.27, 450.22 , 450.58, 633.480, or 633.481, and the administration of an estate whether converted to or from a small estate shall be LSBconsidered 5331SVone (2)proceeding 90pursuant -21-to jm/jhsection 21/29633.330. S.F.

2396 considered one proceeding pursuant to section 633.330.

58.57.

59.58.

The court may consult with the county appraisers appointed pursuant to section 450.24 for deaths occurringSF before2396 January(3) 1,90 2025-21- ,jm/jh/mb or21/23 withS.F. one or more independent appraisers, to determine the fair market value of the designated homestead.

2396 occurring before January 1, 2025, or with one or more independent appraisers, to determine the fair market value of the designated homestead.

60.59.

61.60.

62.61.

The rate of tax is equal to twenty-five percent of LSBthe 5331SVseparate (2)federal 90tax -22-imposed jm/jhon 22/29the S.F.amount of the lump sum distribution.

2396 the separate federal tax imposed on the amount of the lump sum distribution.

The amount of a lump sum distribution that is received from a governmental or other pension or retirement plan, including defined benefit or defined contribution plans, annuities, individual retirement accounts, plans maintained or contributed to by an employer, or maintained or contributed to by a self-employed person as an employer, and deferred compensation plans or any earnings attributable to the deferred compensation plans is exempt from state tax imposed under paragraph “a” if received by a person who is disabled, or is fifty-five years of age or older, or is the surviving spouse of anSF individual2396 or(3) is90 a-22- survivorjm/jh/mb having22/23 anS.F. insurable interest in an individual who would have qualified for the exemption under this subsection for the tax year.

2396 an individual or is a survivor having an insurable interest in an individual who would have qualified for the exemption under this subsection for the tax year.

63.62.

64.63.

65.64.

66.65.

This division of this Act takes LSBeffect 5331SVJanuary (2)1, 902025. -23- jm/jh 23/29 S.F.

2396 effect January 1, 2025.

67.66.

EXPLANATIONSF The2396 inclusion(3) of90 this-23- explanationjm/jh/mb does23/23 not constitute agreement with the explanation’s substance by the members of the general assembly.

This bill relates to the administration of state taxation, the lottery, and alcoholic beverages under the purview of the department of revenue.

DIVISION I —— DISCLOSURE OF TAX INFORMATION.

The bill specifies and updates the circumstances the department of revenue (department) may disclose state tax return and audit information to law enforcement.

The division takes effect upon enactment.

DIVISION II —— ANNUAL REPORTING.

The bill strikes the requirement that the department annually report to the general assembly the areas of recurrent taxpayer noncompliance with the rules of the department including any recommendations relating to the noncompliance.

DIVISION III —— PROPERTY TAX —— EXTENSIONS.

Under current law, a claimant may ask the director of the department, the county treasurer, or the director of the department of health and human services for an extension to claim a reimbursement for rent constituting property taxes in case of sickness, absence, or disability.

The bill strikes the director of the department from involvement in the extension request by the claimant.

DIVISION IV —— FARM TENANCY INCOME TAX EXCLUSION.

Currently, an eligible individual may exclude income received by the individual pursuant to a farm tenancy covering real property held by the individual for 10 or more years, if the individual materially participated in a farming business for 10 or more years.

The bill allows the eligible individual to exclude such income under such circumstances, if the individual materially participated in a farming business for 10 or more LSB 5331SV (2) 90 -24- jm/jh 24/29 S.F.

2396 years in the aggregate.

The bill further specifies the term “held” is to be determined by the holding period provisions of section 1223 of the Internal Revenue Code and other federal regulations which is identical to the use of the term “held” under the farming business exclusion in Code section 422.7(13).

DIVISION V —— PASS-THROUGH ENTITIES.

Under current law, the department may issue a notice of adjustment (adjustment of tax) to a partnership or pass-through entity pursuant to Code section 422.25C, and specifies that the notice of adjustment is appealable pursuant to Code sections 422.28 and 422.29.

The bill specifies the notice of adjustment is not always appealable under the circumstances provided in Code section 422.25.

The division takes effect upon enactment and applies retroactively to January 1, 2024.

DIVISION VI —— SALES TAX CHANGES.

Under current law, a purchaser, user, and consumer of taxable property or services may be authorized to remit tax owed directly to the department instead of the tax being collected and paid by the seller.

The bill specifies that in order to qualify for the direct pay tax permit such a taxpayer must accrue a tax liability of more than $8,000 on a monthly basis.

Currently, such a taxpayer must accrue a tax liability of $4,000 on a semimonthly basis in order to qualify for the direct pay tax permit.

Currently, if the department determines a sales tax return is incorrect, the department may determine the amount of tax due from information or knowledge the department is able to obtain, including using any mutually agreed upon valid and reliable sampling technique.

The bill strikes the provision requiring the sampling technique be mutually agreed upon by the taxpayer and the department, and allows the department to use such a sampling technique without mutual agreement from the taxpayer.

DIVISION VII —— MOTOR FUEL TAXES.

Under current law and before July 1, 2026, the department determines the rate of LSB 5331SV (2) 90 -25- jm/jh 25/29 S.F.

2396 excise tax imposed on each gallon of ethanol blended gasoline based upon the distribution percentage calculated in Code section 452A.3(1)(b), and the excise tax rate imposed on each gallon of biodiesel blended fuel based on the distribution percentage calculated in Code section 453A.3(3)(a)(2).

The department determines the distribution percentage based upon data from reports filed pursuant to Code section 452A.33.

The bill allows the department to amend the initial distribution percentage due to a mistake, or if there is a late report filed by a retail dealer to the department, or the distribution percentage is not accurate.

The bill changes the due date of a biannual tax return relating to electric fuel tax due in January by one day, and modifies the biannual tax period by one day.

The bill allows a person who uses electric fuel for a nontaxable purpose to provide an exemption certificate to the license holder selling or dispensing the fuel, if the certificate is produced by the department.

DIVISION VIII —— VETERANS TRUST FUND AND LOTTERY.

The bill strikes the requirement that the department report semiannually to the general assembly’s standing committees on government oversight regarding the operations of the lottery.

The bill establishes new criteria triggering distributions from the veterans trust fund when the balance of the fund equals or exceeds $50 million.

Under the bill, if the balance of the veterans trust fund is $50 million or more on both July 1 of the current fiscal year and July 1 of the preceding fiscal year, the moneys from the veterans trust fund shall be appropriated to the department for distribution to county directors of veteran affairs as provided in current law in Code section 99G.39(3).

The bill establishes new setoff program procedures (debt collection) for a debtor’s lottery prize payment awarded as cash or cash equivalent.

The bill defines “setoff program” to mean the program administered by the department pursuant to LSB 5331SV (2) 90 -26- jm/jh 26/29 S.F.

2396 Code section 421.65.

DIVISION IX —— ALCOHOLIC BEVERAGES.

The bill defines “operating still” to mean a still that is registered with the federal alcohol and tobacco tax and trade bureau of the United States department of the treasury and is actively used to manufacture spirits.

The term “operating still” is used in the definition of “native distillery” in Code section 123.3(35).

The bill moves portions of Code section 123.30(4) to new Code section 123.30(5) and allows a person holding a retail alcohol license to permit a customer to carry an open container of beer from the person’s licensed premises into another immediately adjacent licensed premises that is covered by a license or permit that authorizes the consumption of beer.

Current law allows a person to carry an open container of wine under such circumstances but not beer.

The bill allows a person who is the holder of a class “A” native distilled spirits license to be granted a class “C” retail alcohol license for the same premises licensed under the class “A” native distilled spirit license where the manufacturing of native distilled spirits occurs.

The bill provides a native brewery may be granted a class “C” retail alcohol license or a special class “C” retail alcohol license for the premises licensed under a class “A” beer permit where the manufacturing of beer occurs.

The bill provides that a native brewery may be granted not more than two class “C” retail alcohol licenses or granted two special class “C” alcohol licenses.

Under the bill, a native brewery may be issued a class “C” retail alcohol license or a special class “C” alcohol license, regardless of whether the person is a manufacturer of native distilled spirits pursuant to a class “A” native distilled spirits license or a manufacturer of native wine pursuant to a class “A” wine permit.

The bill allows a person who is the holder of a class “A” wine permit to be granted a class “C” retail alcohol license or a special class “C” retail native wine license for the same LSB 5331SV (2) 90 -27- jm/jh 27/29 S.F.

2396 premises licensed under the class “A” wine permit where the manufacturing of native wine occurs.

DIVISION X —— INHERITANCE TAX —— FUTURE CODE CHANGES DUE TO REPEAL.

The bill changes numerous Code sections to reflect the future repeal of the inheritance tax beginning for the estates of decedents dying on or after January 1, 2025.

However, other provisions of Code chapter 450 relating to the inheritance tax have not been repealed.

The division takes effect January 1, 2025, and applies to the estates of decedents dying on or after that date.

DIVISION XI —— LUMP SUM DISTRIBUTION OF RETIREMENT INCOME.

Under current law, commencing with tax years beginning on or after January 1, 2023, retirement income is not subject to Iowa individual income tax.

However, under current law a lump sum distribution from a retirement account is subject to Iowa income tax under Code section 422.5(8) at a rate of 25 percent of the federal tax rate imposed on the amount of the lump sum distribution.

The bill provides that the taxation of a lump sum distribution from a retirement account is also exempt from state taxation by exempting the lump sum distribution for a person who is disabled, or 55 years of age or older, or who is the surviving spouse of an individual or is a survivor having an insurable interest in an individual who would have qualified for the exemption for the tax year.

The bill excludes the lump sum distribution exempt from state taxation from being included in calculating the individual income tax filing thresholds in Code section 422.5(2) and (3).

The division takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2024.

DIVISION XII —— ESTIMATED TAX THRESHOLD.

Under the bill, a taxpayer filing a return is required to make estimated tax payments if Iowa income tax liability can reasonably be LSB 5331SV (2) 90 -28- jm/jh 28/29 S.F.

2396 expected to exceed $1,000 or more.

Under current law, such a taxpayer filing a return is required to make estimated tax payments if Iowa income tax liability can reasonably be expected to exceed $200 or more.

The division takes effect January 1, 2025, and applies to tax years beginning on or after that date.

LSB 5331SV (2) 90 -29- jm/jh 29/29