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Article 11/20/2018

Iowa Department of Revenue Update

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Dollar Bill

The Iowa Society of Certified Public Accountants (ISCPA) Tax and Legislation Committee members met with the Iowa Department of Revenue (Department) on August 23, 2018, to discuss recently passed state tax legislation, the recent landmark ruling by the U.S. Supreme Court in South Dakota v. Wayfair, Inc. pertaining to sales tax and the effect it will have on Iowa.

Key information regarding the Iowa tax reform bill was reviewed along with available resources that clarify these new rules. A useful summary of key effective dates was published on the Department’s Iowa Tax Reform page, which also includes proposed administrative rules currently available for public comment. In addition, taxpayers may sign up to receive email updates as information is published through the Department’s Newsroom page.

The research and development (R&D) credit and Section 179 expensing were discussed at length during the meeting. The Department addressed industry classification and the effect on R&D eligibility for taxpayers who had multiple business lines with industry classifications. The Department said it expects the taxpayer’s primary business to be used in cases where multiple industry classifications may apply for a taxpayer. Final rules relating to these issues are expected in November 2018. Tax year 2018 tax forms and schedules are expected by November as well.

Two topics of interest included the South Dakota v. Wayfair, Inc. ruling and Iowa’s current legislation effective January 1, 2019. The Department indicated it didn’t expect legislation to include a retroactive lookback as a result of the ruling. Starting January 1, 2019, an out-of-state retailer must register with the state and collect and remit Iowa sales and use taxes when, in the current or immediately preceding calendar year, it either: (1) has gross revenue from Iowa sales equal to or exceeding $100,000 or (2) makes Iowa sales in 200 or more separate transactions. These economic nexus thresholds pertain to all remote sellers, including marketplace facilitators and sellers, as well as those that use in-state software to generate business in Iowa.

The Department said it expects no changes to the e-filing rules for 1099 and W-2 forms. Small business taxpayers previously exempt from the 1099 and W-2 e-filing requirements will now need to e-file the forms for the 2018 tax year unless a waiver is filed. In addition, the Department has been addressing open tax protests, resulting in a reduced number of protests outstanding. The Department also reminded meeting attendees of the expedited hearing option available for cases involving small dollar amounts (less than $25,000) in which the protester agrees to waive discovery and precedential value. Further, efforts by the Department to prevent identity fraud successfully prevented $1 million of fraudulent claims in the past year.

Iowa taxpayers should continue to monitor legislation and regulations and provide their feedback to the Department. For more information, contact Todd or your BKD trusted advisor.