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
20 provisions identified: 7 benefits, 4 costs, 9 mixed.
Lump-sum retirement tax relief
The state exempts lump-sum retirement distributions from the state lump-sum tax if you qualify. You qualify if you are disabled, age 55 or older, the surviving spouse of a qualifying person, or a survivor with an insurable interest. The rule covers lump-sum payouts from pensions, annuities, IRAs, employer plans, and deferred compensation, including related earnings.
Tax break for longtime farm rentals
Eligible individuals can subtract net income from a farm tenancy from Iowa taxable income. You must have held the land for 10 or more years and have materially farmed for 10 or more years in total. The word "held" follows the federal holding period rules in Internal Revenue Code section 1223.
Fixed fuel taxes start July 2030
Beginning July 1, 2030, E-15 and higher gasoline is taxed at $0.30 per gallon. B-20 and higher biodiesel is taxed at $0.325 per gallon. Before that date, rates depend on distribution percentages set and updated by the Department of Revenue. These taxes are likely passed into fuel prices.
Data centers and web portals tax breaks
Data centers and web search portals get sales and use tax exemptions for backup power fuel and electricity. Existing sites have no time limit; new builds in cities over 30,000 get 10 years; other new builds get 15 years. To qualify, a data center must invest at least $200 million within six years (some required within three years), and lessees can qualify. For local property tax exemptions, invest at least $10 million in new construction or $5 million in a rehabilitation within six years; the exemption starts when the investment is first assessed or the initial lease begins. The state also routes some revenue from expiring exemptions to the Energy Infrastructure Revolving Loan Fund.
New tax on lump-sum retirements
If you take a lump-sum retirement payout that the IRS taxes separately, Iowa now charges a state tax equal to 25% of that federal tax. Nonresidents pay only the Iowa portion. The lump-sum amount counts in Iowa net income for some eligibility rules, except amounts already exempt under state law. The rules take effect upon enactment and apply to tax years beginning on or after January 1, 2025. Some people are exempt, including those who are disabled, age 55 or older, surviving spouses, and certain survivors with an insurable interest.
Direct-pay permits now harder to get
To qualify for an Iowa direct‑pay sales and use tax permit, you must now accrue more than $8,000 in tax in a semimonthly period. The old threshold was $4,000. Permit holders must continue to make deposits and file returns under section 423.31.
Probate and inheritance rules for 2025 deaths
This probate and inheritance division takes effect on enactment and applies to estates of people who die on or after January 1, 2025. For deaths before January 1, 2025, an inheritance tax return is due by the later of nine months after death or 60 days after a beneficiary files a disclaimer. Interests in the state‑contracted ABLE program follow section 450.4(9) for those earlier deaths. A court will not approve a final account unless taxes due are paid and future taxes are secured, unless all property is in joint tenancy by husband and wife. When a homestead is designated, the court must set fair market value before a sheriff’s sale and may consult appraisers for deaths before January 1, 2025.
Pass-through audits follow federal rules
Iowa now uses a federal-style partnership audit system. State adjustments are made at the entity level, and the Department’s notice counts as an assessment you can appeal. These rules apply to tax years beginning on or after 2020. The division of law applies retroactively to January 1, 2024.
Sales tax rules for building materials
Sales of building materials for construction are retail and taxable in Iowa. Retailers with a sales/use tax permit may buy without tax and then owe tax when items are withdrawn for construction or sold at retail. Sales for construction outside Iowa are not taxed. Carpet is taxed as ordinary tangible personal property.
Tax agency can share data for crimes
The Department of Revenue may tell law enforcement and share state tax returns and audit information when it has signs of tax crimes, like filing false claims or evading tax. The law says this disclosure power overrides the usual secrecy rules. Still, tax returns stay confidential by default except for the listed exceptions.
Expired data center taxes fund energy loans
Beginning July 1, 2025, state sales tax money that returns when listed exemptions end goes to the Energy Infrastructure Revolving Loan Fund. Use‑tax revenues tied to the end of those exemptions are also transferred to the same fund. This boosts money for energy projects and redirects those dollars from other state uses.
Data centers and web portals must register
Data center and web search portal businesses must register with the Department of Revenue and file a yearly report. The first report is due January 31, 2026, and then each January 31. After you file, the department issues an annual exemption certificate that you must show retailers to buy exempt backup fuel or electricity. The law also defines who is a data center or data center business and what counts as site preparation, so eligibility and timelines are clear.
529 and ABLE inheritance tax rules
For deaths before January 1, 2025, Iowa 529 plan interests follow section 450.4(8) for inheritance tax. Iowa ABLE accounts follow section 450.4(9). This clarifies how these accounts are treated for heirs.
Estimated payments only above $201,000
Beginning with tax years that start on January 1, 2026, you make Iowa estimated payments only if your expected Iowa tax is $201,000 or more. Below that amount, no estimated Iowa payments are required.
More time to claim tax refunds
You can get more time to file a reimbursement or credit claim for sickness, absence, disability, or other good cause, but not past December 31 of the next year. You must file county tax refund claims within two years of when the tax was due, or within two years of the final decision if you appealed. Approved refunds include the tax plus interest, fees, and costs you actually paid.
Some state bonds are Iowa tax-free
Bonds issued under section 16.177 and their interest are exempt from Iowa tax. Those bonds and their interest are also exempt from Iowa inheritance tax.
More frequent electric-fuel tax filings
Electric-fuel dealers and users now file returns for Jan 1–Jun 30 by July 31, and for Jul 1–Dec 31 by January 31. Starting January 1, 2026, the Department may require quarterly returns instead. Filing more often can raise administrative costs.
Probate and inheritance steps for pre-2025 deaths
For deaths before January 1, 2025, small estates can use an affidavit if personal property is $50,000 or less; after 40 days, successors can act. A $15 fee applies to short-form probates, and the title fee and surcharge are waived for a surviving spouse. Probate filings must list items subject to inheritance or federal estate tax; appraisals are only required if needed for inheritance tax or by court. Private real estate sales without an appraisal may face a court hearing; banks may pay named beneficiaries and corporations may delay paying for a decedent’s shares until tax releases are provided; paid funds remain subject to debts and inheritance tax. Authorized representatives receive tax notices, heirs must file recorder certificates for listed real estate, and courts must carry out inheritance-tax duties.
Electric fuel exemptions and higher late fees
If you buy electric fuel for a nontaxable use, you can give the seller a department exemption certificate so the sale is tax‑free. People who must file fuel reports face a civil penalty of $100 for the first late filing each year, plus $100 for each additional violation in the same year.
Tax-break reviews and reports updated
Agencies that run tax breaks must review them on the set schedule unless the program is effectively repealed, and agencies must work together when more than one runs a program. The law changes which tax breaks appear on the review schedule and pushes one previously enacted change to July 1, 2039. It removes a specific reporting paragraph and updates what must go in the department’s yearly tax statistics report.
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.
6/6/2025GovernorFiscal note.
6/6/2025legislatureReported correctly enrolled, signed by Speaker and President, and sent to Governor.
5/27/2025SenateMessage from Senate.
5/13/2025SenateImmediate message.
5/13/2025legislaturePassed Senate, yeas 45, nays 0.
5/13/2025SenateSubstituted for SF 614.
5/13/2025legislatureExplanation of vote.
5/13/2025legislatureRead first time, attached to SF 614.
5/9/2025legislatureMessage from House.
5/9/2025HouseImmediate message.
5/8/2025legislaturePassed House, yeas 84, nays 0.
5/8/2025HouseFiscal note.
3/27/2025legislatureIntroduced, placed on Ways and Means calendar.
3/24/2025legislature
Bill Text
As Introduced
Enrolled
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