On Thursday, April 14, the House and Senate finally reached a deal on Senate File 209, which is the federal tax code coupling, bonus depreciation and FY 2011 supplemental appropriations bill.
The key part of the compromise was the Senate finally agreeing to the creation of a Taxpayers Trust Fund (TTF). The original Tax Relief Fund language contained in HF 45 captured the entire ending balance at the end of the fiscal year and deposited it into the TRF. The compromise language captures the first $60 million of the revenue above the original adjusted revenue estimate and deposits it into the TTF for tax relief measures. The Ways and Means Committee will propose the tax relief measures.
House Republicans believe that the creation of the Taxpayers Trust Fund is the first step in giving taxpayers a seat at the table.
In addition, the bill reduces state tax revenue by $141 million over FY 2011 and FY 2012 as follows:
- Updates Iowa tax law to incorporate enhanced business depreciation schedules allowed under federal law beginning in tax year 2011. The depreciation schedules are for Section 179 expensing and bonus depreciation. Bonus depreciation allows a business to claim an enhanced or bonus tax deduction for depreciation on the cost of new equipment purchases, rather than depreciating the full cost gradually.
- The earned income tax credit is increased from the current level of 7 percent of the federal credit, to 10 percent of the federal credit. Applies retroactively to January 1, 2011, for tax years beginning on or after that date.
The bill also provides for supplemental appropriations for a total of $65.7 million as follows:
- $20 million to clear the mental health waiting lists and repeals the current mental health code by July 1, 2013 (House File 45 provided $25 million and a July 1, 2012 repeal date.)
- $5.9 million for the community colleges to restore Governor Culver’s cut
- $14.2 million for the Department of Corrections (prisons, CBCs and central office)
- $18.6 million for public defender and indigent defense to make up for the underfunding used by the Democrats to balance the budget in FY 2011 (HF 45 contained $16 million for this.)
- $2.96 million for the Department of Public Safety to restore Governor Culver’s cuts with $2 million going to the Iowa State Patrol, the rest going to administration, Narcotics Enforcement, DCI and the State Fire Marshal’s Office
- $1.2 million for the Department of Public Health to restore Governor Culver’s cuts to addictive disorders, community capacity, healthy aging, healthy children & families and infectious diseases
- $2.64 million to the Department of Human Services to restore Governor Culver’s cuts to the mental health institutions
- Allows the Department of Revenue to use previously appropriated funds for tax processing
- Corrects the appropriation for Terrace Hill. (This was originally in HF 45.)
- Allows the ICN to obtain a $16 million grant from the federal government. This will make the network more attractive in a potential sale or lease option, which was contained in HF 45.
The conference committee approved the final report on Monday, April 18 and the Senate approved the bill on a 49-0 vote. The House approved it on a 97-0 vote and sent the bill to the Governor. The Governor has three days to sign, veto or sign the bill with item veto.
House Republicans are pleased that a deal was reached on SF 209. The bill helps the state close the books on FY 2011, provides an important tax relief measure and finally gives taxpayers a seat at the table.