All Roll Calls
Yes: 129 • No: 0
IowaHF 97691st General Assembly (2025–2026)HouseWALLET
A bill for an act relating to the administration of the tax by the department of revenue by modifying provisions related to personal income, property, sales and use, motor fuel, and inheritance taxes, changing tax expenditure reviews, and including effective date and retroactive applicability provisions. (Formerly HSB 89.) Effective date: 06/06/2025, 07/01/2025, 01/01/2026. Applicability date: 01/01/2024, 01/01/2025, 01/01/2026.
Sponsored By: COMMITTEE ON WAYS AND MEANS
Signed by Governor
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Bill Overview
Analyzed Economic Effects
19 provisions identified: 9 benefits, 2 costs, 8 mixed.
Retirees avoid extra lump-sum distribution tax
Iowa exempts qualifying lump-sum retirement payments from its extra tax, otherwise equal to 25% of the separate federal tax. Recipients qualify through disability, age 55 or older, or qualifying survivor status. Covered sources include government and other retirement plans, annuities, individual retirement accounts, and deferred compensation plans. Qualifying survivors include surviving spouses and survivors with an insurable interest in someone who would have qualified. Effective June 6, 2025, the exemption applies to tax years beginning on or after January 1, 2025.
Tax break for longtime farm owners
Eligible individuals can subtract qualifying net income received under a farm tenancy agreement from Iowa taxable income. They must have held the real property for at least 10 years. They must also have materially participated in a farming business for at least 10 years total. Federal holding-period rules under Internal Revenue Code section 1223 determine how long the property was held.
Tax breaks for qualifying Iowa bondholders
Bonds issued under Iowa Code section 16.177, and their interest, are exempt from Iowa inheritance tax. Interest on these bonds is also exempt from Iowa income tax. These exemptions have no stated dollar cap.
Property taxpayers get clearer refund rights
County boards must refund property taxes paid in error or illegally, including interest, fees, and costs actually paid. Claims must be presented within two years of the tax due date. After an appeal, the two years run from the final decision, including decisions by Iowa's Department of Revenue. The change took effect June 6, 2025.
Fewer taxpayers need estimated tax payments
For tax years beginning on or after January 1, 2026, Iowa raises its estimated-payment threshold from $200 to $1,000. Filers must make estimated payments when their expected yearly Iowa income tax liability is at least $1,000. Taxpayers below that threshold avoid this estimated-payment requirement, but their final tax bill does not fall.
Newer estates face fewer tax filings
The specified inheritance tax probate, reporting, and administration rules apply only to deaths before January 1, 2025. Estates involving deaths on or after that date are not subject to those requirements. The change took effect June 6, 2025, and applies retroactively to those newer estates.
Tax agency can share suspected crimes
Beginning June 6, 2025, Iowa's Department of Revenue can refer suspected tax crimes to federal, state, or local law enforcement. It can share state returns, return information, investigative records, and audit information. This authority applies when information indicates intentional tax fraud, intentional filing or payment evasion, or another crime under administered tax laws. It creates no new disclosure duty for taxpayers.
Expired business exemptions fund energy loans
Iowa directs tax revenue tied to specified expired data center and web search portal exemptions to its Energy Infrastructure Revolving Loan Fund. The use-tax transfer covers all related use-tax revenue and took effect June 6, 2025, outside the general-fund deposit rule. Transfers of the specified sales-tax portion begin July 1, 2025. The provisions state no transfer amount or household eligibility for loans.
Leased data centers gain tax access
Businesses leasing space to operate data centers can qualify for Iowa's data center sales and use tax exemption. For facilities using the specified materials, equipment, and systems, property tax relief starts in the year investment or construction is first assessed. For leased facilities, it can start in the assessment year when the initial lease term begins. The property tax timing change took effect June 6, 2025.
Data businesses face energy tax limits
Qualifying new data center and web search portal construction or additions face time limits on backup-fuel and electricity tax exemptions. The limit is 10 years if any property lies in a city over 30,000 people; otherwise, it is 15 years. Population is based on the latest decennial federal census; facilities operating before the division's effective date retain unlimited exemptions. Claimants must register and file annual reports on prior-year purchases and use, first due January 31, 2026, to maintain registration. After January 31, 2026, they must present an annually issued exemption certificate to retailers for exempt purchases.
Fuel reporting violations bring rising fines
Iowa's revenue director can fine people who file required motor fuel reports late or fail to keep required records. The first violation carries a $100 civil penalty. Each additional violation in the same calendar year raises that violation's penalty by $100. The second violation is $200, and the third is $300.
Property tax claim extension options change
Iowa's health and human services director can extend property tax reimbursement claim deadlines for sickness, absence, disability, or good cause. An extension cannot go beyond December 31 of the year after the claim was due. The revenue director no longer has authority under this provision to extend property tax credit claim deadlines.
Estate rules clarify savings plan taxes
The law limits the specified inheritance tax treatment for education and disability savings plans to deaths before January 1, 2025. Covered plans include Iowa educational savings plans, Iowa ABLE plans, and the contracted qualified ABLE program. This provision does not establish a general rule for deaths on or after that date.
Contractors get clearer materials tax rules
Contractors' building-material purchases for new construction, reconstruction, alterations, expansions, and remodeling are taxable retail sales. Materials bought for repairs or installation in existing buildings count as purchases for resale. Building equipment remains taxable, and carpeting is taxed as ordinary personal property rather than building materials. Materials taken from inventory for construction outside Iowa are not taxed.
Partnership audits bring appeals and penalties
Partnership and pass-through audit adjustment notices count as tax assessments that entities can appeal through Iowa's tax appeal process. State partnership audits cannot use the penalty exceptions in Iowa Code section 421.27(2)(b) and (c). These changes took effect June 6, 2025; the partnership audit changes apply retroactively to January 1, 2024.
Blended fuel tax calculations allow corrections
Before June 1, Iowa's Department of Revenue can correct distribution percentages used to set certain blended-fuel excise tax rates. Covered fuels are gasoline with at least 15% ethanol and biodiesel blends with at least 20% biodiesel. Corrections can address late retailer reports, mistakes, or inaccurate percentages. The provisions do not specify a tax-rate increase or decrease from these corrections.
Business direct-pay tax permit threshold changes
Purchasers can qualify for a direct-pay permit after accruing more than $8,000 in covered sales and use taxes in one month. This replaces the threshold of more than $4,000 in a half-month. Applicants must apply to the revenue director and receive a permit. Permit holders file returns and pay covered taxes directly to the Department of Revenue.
Data center investment clocks include leases
Data center investment deadlines can run from the initial lease start, when applicable, instead of site preparation. One program requires a $200 million Iowa investment within six years; its exemption period also uses the applicable lease start. Missing its 80% investment test within six years means losing the exemption and owing tax, penalties, and interest. Another program requires $10 million for new construction or $5 million for rehabilitation within six years. A separate three-year investment deadline also uses the applicable lease start; its investment amount is not specified here.
Electric fuel sellers face filing changes
Electric fuel tax dealers and users file twice yearly, with returns due July 31 and January 31. The January return covers July through December and lists delivery locations; returns are certified under penalties for false certification. Beginning January 1, 2026, the Department of Revenue can require quarterly returns by rule. Purchasers receiving electric fuel for a nontaxable purpose can give the license holder a department certificate documenting that sale.
Sponsors & Cosponsors
Sponsor
COMMITTEE ON WAYS AND MEANS
Affiliation unavailable
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
Senate vote • 5/13/2025
Passed Senate
Yes: 45 • No: 0
House vote • 5/8/2025
Passed House
Yes: 84 • No: 0
Actions Timeline
Signed by Governor.
6/6/2025HouseFiscal note.
6/6/2025legislatureReported correctly enrolled, signed by Speaker and President, and sent to Governor.
5/27/2025HouseMessage from Senate.
5/13/2025HouseImmediate message.
5/13/2025SenatePassed Senate, yeas 45, nays 0.
5/13/2025SenateSubstituted for SF 614.
5/13/2025SenateExplanation of vote.
5/13/2025HouseRead first time, attached to SF 614.
5/9/2025SenateMessage from House.
5/9/2025SenateImmediate message.
5/8/2025HousePassed House, yeas 84, nays 0.
5/8/2025HouseFiscal note.
3/27/2025legislatureIntroduced, placed on Ways and Means calendar.
3/24/2025House
Bill Text
As Introduced
Enrolled
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