March 1997
Some beneficiaries will avoid
NEWS The quarterly newsletter of the Iowa Department of Revenue and Finance
inheritance tax under new law
O
n February 11, 1997,
the governor signed
Senate File 35. Effec-
tive July 1, 1997, this law
eliminates Iowa inheritance tax
previously imposed on prop-
erty, income or interest re-
ceived by lineal ascendants,
descendants and stepchildren.
Currently, Iowa law only
provides this type of exemp-
tion from inheritance tax to a
surviving spouse. Under this
new law, the exemption for a
surviving spouse remains and
has been expanded to include
the previously mentioned
classes of beneficiaries. Inher-
Specifically, this bill elimi- itance tax liability for non-
nates the inheritance tax on lineal heirs such as siblings,
property of a decedent dying cousins, aunts, uncles and
on or after July 1, 1997, when non-related beneficiaries
that property passes to: remains the same.
• parents, grandparents, Note that while the new law
great-grandparents and eliminates inheritance tax in
other lineal ascendants. the cases described, this does
not mean that all estates
• children (including
which have property passing
adopted and biological
to these exempt individuals
children entitled to inherit
will avoid death tax liability
under Iowa law), stepchil-
altogether. Certain estates
dren, grandchildren, great-
may still have an Iowa estate
Iowa Tax
grandchildren and other
tax liability.
lineal descendants.
Health insurance premiums, Medicare ‘B’
may be deductible on line 18 of IA 1040
owa taxpayers who pay This deduction is not limited
I for their own health
insurance may qualify to
deduct 100% of the premium
payments they made in 1996
to self-employed individuals.
Premium payments and
insurance plans which are not
deductible include:
on their Iowa income tax
• Premiums that are pre-
return. This includes not only
taxed do not qualify.
typical health insurance, but
“Pretax” is when an em-
also Medicare B supplemen-
ployer subtracts the
tal insurance premiums.
amount of the premium
The deduction is taken on
line 18 of the 1996 IA 1040. continued, page 2
Route to: u __________ 1
u __________ u __________ Iowa Tax NEWS
u __________
DEPARTMENT SERVICES New IA 1040X to be used for
ONLINE
all amended income tax returns
n July 1996, the depart- free 1-800-572-3943 and re-
Internet Address (URL)
http://www.state.ia.us/
government/drf
I ment revised the IA 1040X
to simplify the information
necessary to complete the form.
questing document 96-41-122
or by calling our toll free forms
order line at 1-800-532-1531.
This new form no longer re-
E-mail quires information from the Department urges use of
iadrf@iadrf.e-mail.com “originally filed” return to be ‘Where’s My Refund’ line
repeated.
Iowa taxpayers and practition-
BY TELEPHONE The IA 1040X is now required ers are being urged to use the
for all amended returns, prior department’s toll free
Taxpayer Services
and current year. This also “Where’s My Refund” tele-
from Des Moines includes the current year phone number when check-
or out of state,
amended returns that were ing the status of income tax
(515) 281-3114 previously submitted by writ- refunds. The number to call
from elsewhere in Iowa or ing “amended” at the top of the is 1-800-572-3944. Callers
Rock Island-Moline or Omaha 1040(A) return. from the Des Moines area or
Practitioners are asked to de- from outside of Iowa should
1-800-367-3388
stroy any forms dated prior to call (515) 281-4966. You must
July 1996. New forms are avail- supply the first Social Secu-
To Order Iowa Tax Forms rity number listed on the re-
able in the Iowa Package X and
(515) 281-7239 or may also be obtained from our turn and the exact amount of
1-800-532-1531 the refund you are expecting.
Tax-Fax system by calling toll
“Where’s My Refund?”
Health insurance premiums may be deductible
(515) 281-4966 or continued from page 1 use the Iowa income tax long
1-800-572-3944
from an employee’s wages form. Taxpayers do not need
before applying federal to itemize to take advantage of
BY FAX this deduction.
and state income taxes.
Receive Iowa Tax Forms by Fax It is to a taxpayer’s advantage
• For 1996, most long-term
1-800-572-3943 care insurance does not to report on line 18 of the Iowa
qualify. Long-term premiums 1040 the amount of health
Department Fax Number qualify if they can be deducted insurance premiums that
as medical expenses on the qualify. However, if you
(515) 242-6040 itemize deductions on Sched-
1996 federal return
ule A and have included any
BY MODEM • Premiums paid by an health insurance premiums
employer-sponsored
ERIN (electronic bulletin board) under medical and dental
health insurance plan expenses, then you must
(515) 281-3248 or (cafeteria plan) do not
1-800-972-2028 reduce the medical and dental
qualify unless they were expense deduction on Sched-
included as part of taxable ule A by the amount of health
income on the W-2. insurance premiums deducted
Taxpayers who qualify should on line 18 of the IA 1040.
Iowa Tax NEWS 2
that if you paid Illinois sales From the
Q
tax on the materials at the
time of purchase – but were DIRECTOR’S DESK
&
not legally required to do so – It seems that more evidence
Iowa will not allow a credit. is available each week to
If you did not pay Illinois verify the growing influence
sales tax on the materials you and benefit of new technolo-
gies in delivering services to
A
use in Iowa, you must pay
Iowa use tax on the materials. business customers. Here in
Do this by applying for an our agency, we continue to
Iowa Retailer’s Use Tax see the rewards of investing
Permit and reporting the tax in technology-based pro-
due for out-of-state purchases grams.
on line 2 of your return. After the first two weeks of
Question: I am an Illinois-based February, nearly 55,000
construction contractor who Iowa in-
frequently builds in Iowa. If I Question: We sell dyed diesel come tax
purchase materials in Illinois for fuel to contractors in Iowa. Since returns had
use in an Iowa building project, this sale is not subject to motor been re-
do I have any Iowa tax liability vehicle fuel tax, do we charge any ceived
on those materials? tax at all? electroni-
cally. This
Answer: If you paid Illinois Answer: The sale of dyed figure
sales tax on the materials and diesel fuel to contractors for represents
were legally required to do off road use is subject to Iowa a 40 percent Director Gerald D. Bair
so, Iowa allows a credit for sales tax. The seller of the fuel increase from the same time
those taxes. (If the other is responsible for collecting a year ago. It also puts the
state’s sales tax rate is higher and remitting the 5 percent growth rate of Iowa's elec-
than or equal to Iowa’s 5 sales tax. Local option sales tronic income tax filing
percent rate, no Iowa tax is tax does not apply. The con- program ahead of the na-
due. If the sales tax rate in the tractor is responsible for tional average for other
other state is less than 5 remitting 5 percent tax on states (28 percent average
percent, the contractor pays such purchases if the sales tax growth) and the Internal
the difference to Iowa.) Note is not properly charged. Revenue Service (14.6 per-
cent growth). Already, more
than 2,200 “balance due”
returns have been filed
Current Iowa Fuel Tax Rates electronically in this first
filing season for allowing
Gasoline $.20 per gallon transmission of such re-
Ethanol Blended Gasoline $.19 per gallon turns.
Aviation Gasoline $.08 per gallon We are proud of this filing
Special Fuel (Diesel) $.225 per gallon program and attribute its
success to the hard work of
Special Fuel (LPG) $.20 per gallon
our talented staff in devel-
Special Fuel (Aviation) $.03 per gallon oping, marketing and test-
Compressed Natural Gas $.16 per 100 cu. ft. ing this fine new service.
3 Iowa Tax NEWS
Iowa form 1040C redesigned for ’96
owa’s 1040C, the Compos- ship or trust and must be sent each application to determine
I ite Return, which may be
used by nonresident S
corporation shareholders,
beneficiaries or members of a
to:
Examination Section
Audit and Compliance Division
eligibility. Once permission to
file on a composite basis is
granted, the taxpayer must
continue to file composite
P.O. Box 10456
partnership or trust to join in Des Moines, IA 50306. returns until they notify the
filing a single individual in- department in writing that they
The department will review
come tax return has been wish to discontinue.
redesigned. It can be used when
the nonresident has income from Iowa cow-calf refund questions answered
Iowa sources greater than one
standard deduction plus an Q: Can farmers get credit on form including the two-month
amount of income to offset one IA 132 from cattle they purchased minimum holding period.
personal exemption at the effec- as calves if the cattle are sold at a Q: One of the qualifications for the
tive tax rate. weight of 700 pounds or more? cow-calf credit is the claimant must
The form and instructions have A: Yes, if the requirements for a have less than $1 million net
been revised to help filers avoid qualifying cow-calf operation worth. How is “claimant” defined?
some common problems. are met. The majority of the A: The claimant is the indi-
cattle in the operation must be vidual or C-corporation that
• The instructions have been born and raised in the operation. qualifies to file for the cow-calf
updated to show minimum
The cattle must be in the opera- refund with the tax return. The
dollar filing requirements for
tion two months or more at the less than $1 million net worth
each tax bracket.
time of sale. requirement does not apply to
• A statement involving a
Q: Do the sales of bred cows or an S corporation, partnership or
$1,000 threshold has been
breeding bulls sold in the tax year other entity from which the
removed from the instructions
qualify for the cow-calf refund? claimant is entitled to claim a
to simplify understanding of refund based on the claimant’s
the income filing requirement. A: They do if they are sold at
weights of 700 pounds or more. ownership interest in the entity.
• The exemption credit line has Of course, all other require- Note that the maximum cow-
been changed to facilitate the ments must be met as well, calf refund is $3,000.
correct computation.
• A line has been added to the
form for any applicable penalty Jurisdictions impose local option sales tax
due. oters in the following also available on our website.
• A line has been added to the
form for any applicable interest
due.
V 17 jurisdictions have
adopted the local
option sales tax effective April
Chickasaw (19) – Alta Vista,
Bassett, Fredericksburg, Ionia,
Lawler, Nashua, New Hamp-
Those considering filing on a 1, 1997. The counties and ton, North Washington,
composite basis on the 1040C county codes are listed in bold. Unincorporated Area
need to obtain prior approval A complete list of all current
Dickinson (30) – Lake Park,
from the department. An local option sales tax jurisdic-
Okoboji, Orleans, Spirit Lake,
application letter must in- tions can be obtained by calling
Superior, Terril
clude the name, address, and our fax-on-demand system at
1-800-572-3943. Order form Ida (47) – Galva
federal identification number
of the S corporation, partner- number 96 79 901. The list is Scott (82) – Durant
Iowa Tax NEWS 4
31-018 IOWA LOCAL OPTION SALES TAX
Jurisdiction codes effective for the quarter beginning April 1, 1997
• • • All jurisdictions listed below have imposed the local option tax at a rate of 1 percent • • •
COUNTY / CODE JURISDICTIONS EFFECTIVE COUNTY / CODE JURISDICTIONS EFFECTIVE
ALLAMAKEE / 03 Harpers Ferry, Postville, Waterville 1-1-95 HOWARD /45 Chester, Cresco, Lime Springs, Protivin 1-1-94
Waukon 1-1-96 Elma, Unincorporated Area 7-1-94
Lansing, New Albin 7-1-96 Riceville 1-1-95
BLACK HAWK / 07 Cedar Falls, Elk Run Heights, Evansdale, 4-1-91 IDA / 47 Galva 4-1-97
Hudson, Raymond, Waterloo IOWA / 48 Ladora, North English, Parnell, Williamsburg 4-1-94
Dunkerton, Gilbertville, Janesville, 10-1-91 Marengo, Millersburg, Victor, Unincorporated Area 4-1-95
La Porte City, Unincorporated Area
JACKSON / 49 Baldwin, La Motte, Miles, Preston, Sabula, 10-1-89
BOONE / 08 Berkley, Luther, Pilot Mound 4-1-89 Saint Donatus, Spragueville, Springbrook,
Boone 7-1-90 Bellevue, Zwingle 4-1-91
Boxholm, Ogden, Sheldahl, Unincorporated Area 1-1-91 Maquoketa, Monmouth 10-1-94
Madrid 7-1-91 Andrew, Unincorporated Area 1-1-95
Fraser 1-1-92 JONES / 53 Cascade, Center Junction, Morley, Olin, Onslow, 4-1-95
Beaver 1-1-95 Oxford Junction
BUCHANAN / 10 Aurora, Lamont, Stanley 10-1-95 Monticello, Wyoming 1-1-96
BUENA VISTA / 11 Albert City, Linn Grove, Marathon, Newell, 7-1-91 LEE / 56 Fort Madison, Franklin, Keokuk, Montrose 10-1-91
Sioux Rapids, Truesdale, St. Paul 1-1-93
Alta, Lakeside, Rembrandt, Storm Lake, 10-1-95 Donnellson, Houghton, West Point, 1-1-95
Unincorporated Area Unincorporated Area
BUTLER / 12 Allison, Aplington, Aredale, Bristow, Dumont, 1-1-97 LINN / 57 Bertram 1-1-86
Greene, New Hartford, Parkersburg
LYON / 60 Alvord, Doon, George, Inwood, Lester, Little Rock, 10-1-96
CASS / 15 Anita, Cumberland, Griswold, Lewis, Marne, 1-1-97 Rock Rapids, Unincorporated Area
Massena, Wiota
MAHASKA / 62 Barnes City, Beacon, Fremont, Keomah Village, 4-1-95
CERRO GORDO / 17 Clear Lake, Dougherty, Mason City, Meservey, Plymouth, 7-1-92 Leighton, New Sharon, Oskaloosa, Rose Hill,
Rock Falls, Rockwell, Swaledale, Thornton, Ventura University Park, Unincorporated Area
Unincorporated Area 1-1-93 Eddyville 10-1-95
CHEROKEE / 18 Aurelia, Cleghorn, Larrabee, Marcus, Meriden, Washta 7-1-96 MARSHALL / 64 Liscomb 1-1-97
CHICKASAW / 19 Alta Vista, Bassett, Fredericksburg, Ionia, Lawler, Nashua, 4-1-97 MILLS / 65 Emerson, Henderson, Malvern, Tabor 1-1-96
New Hampton, North Washington, Unincorporated Area
MITCHELL / 66 Carpenter, Mitchell, Orchard, Osage, 1-1-95
CLAYTON / 22 McGregor 1-1-90 Riceville, St. Ansgar, Stacyville
Elkader, Garnavillo, Luana, 4-1-94 McIntire, Unincorporated Area 7-1-95
Millville, Marquette, Saint Olaf
MONONA / 67 Blencoe, Castana, Mapleton, Moorhead, Onawa, 7-1-90
Elkport, Farmersburg, Garber, Guttenberg, 10-1-94 Rodney, Soldier, Turin, Ute, Whiting,
Littleport, Monona, Volga Unincorporated Area
Edgewood, North Buena Vista, 10-1-95 MONTGOMERY /69 Coburg, Elliott, Stanton, Villisca 1-1-96
Strawberry Point, Unincorporated Area
Grant 4-1-96
CLINTON / 23 Andover, Calamus, Camanche, Clinton, Delmar, 10-1-89
De Witt, Goose Lake, Grand Mound, MUSCATINE / 70 Atalissa, Conesville, Fruitland, Muscatine, Stockton, 7-1-94
Low Moor, Toronto, Welton, Wheatland, Wilton
Charlotte, Lost Nation, Unincorporated Area 1-1-90 Nichols, Unincorporated Area 1-1-95
DECATUR / 27 Davis City, Decatur, Garden Grove, Grand River, 1-1-97 Durant, West Liberty 7-1-95
Lamoni, Leroy, Pleasanton, Van Wert O’BRIEN / 71 Archer, Calumet, Paullina, Primghar, Sanborn, 1-1-96
DELAWARE / 28 Colesburg, Delaware, Delhi, Earlville, 10-1-94 Sheldon, Sutherland, Unincorporated Area
Greeley, Manchester, Masonville, PAGE /73 Blanchard, Braddyville, Coin, College Springs, 1-1-96
Dundee, Dyersville, Hopkinton, 4-1-95 Essex, Shambaugh, Shenandoah, Yorktown
Ryan, Unincorporated Area Clarinda, Hepburn, Northboro, Unincorporated Area 7-1-96
Edgewood 4-1-96 POLK / 77 Polk City 1-1-86
DES MOINES / 29 Burlington, Danville, Middletown, West Burlington 10-1-94 Sheldahl 7-1-87
Mediapolis, Unincorporated Area 4-1-95 POTTAWATTAMIE / 78 Macedonia, Minden 1-1-89
DICKINSON / 30 Lake Park, Okoboji, Orleans, Spirit Lake, Superior, Terril 4-1-97 Council Bluffs 4-1-90
DUBUQUE / 31 Asbury, Balltown, Centralia, Dubuque, 4-1-88 Avoca, Carson, Carter Lake, Crescent, Hancock, 1-1-95
Holy Cross, Sageville, Zwingle McClelland, Neola, Oakland, Treynor, Underwood, Walnut
Bankston, Bernard, Epworth, Farley, Graf, 7-1-88 Unincorporated Area 4-1-95
Peosta, Sherrill, Unincorporated Area SCOTT / 82 Bettendorf, Blue Grass, Buffalo, Davenport, 1-1-89
Cascade, Dyersville, Luxemburg, 10-1-89 Dixon, Donahue, Eldridge, LeClaire, Long Grove,
New Vienna, Rickardsville, Worthington Maysville, McCausland, New Liberty, Panorama Park,
Princeton, Walcott, Riverdale, Unincorporated Area
FAYETTE / 33 Arlington, Clermont, Elgin, Hawkeye, Maynard, 1-1-95
Oelwein, Randalia, St. Lucas, Wadena, Durant 4-1-97
Waucoma, Westgate SIOUX / 84 Alton, Boyden, Chatsworth, Granville, Hawarden, 10-1-95
Fayette, West Union, Unincorporated Area 7-1-95 Hull, Ireton, Matlock, Maurice, Orange City,
Sioux Center, Unincorporated Area
FLOYD / 34 Floyd, Marble Rock, Nora Springs, Rockford, Rudd 10-1-96
Hospers, Rock Valley, Sheldon 7-1-96
FRANKLIN / 35 Coulter, Dows, Geneva, Hansell, Latimer, Sheffield 10-1-95
STORY / 85 Ames, Huxley 1-1-87
Hampton, Popejoy, Unincorporated Area 10-1-96
Cambridge, Collins, Colo, Gilbert, Kelley, McCallsburg, 7-1-87
FREMONT / 36 Farragut, Hamburg, Imogene, Randolph, Riverton, 1-1-96 Roland, Sheldahl, Slater, Unincorporated Area
Shenandoah, Sidney, Tabor, Thurman, Unincorporated Area
Nevada, Maxwell, Zearing 1-1-89
HANCOCK / 41 Corwith, Crystal Lake, Garner, Goodell, Kanawha, 1-1-96
Klemme, Woden Story City 10-1-90
Britt 1-1-97 WINNESHIEK / 96 Decorah 4-1-91
HARDIN /42 Alden, Buckeye, Eldora, Hubbard, Iowa Falls, 4-1-96 Calmar, Castalia, Fort Atkinson, Jackson Junction, 7-1-91
Radcliffe, Steamboat Rock, Unincorporated Area Ossian, Ridgeway, Spillville, Unincorporated Area
Ackley, New Providence, Owasa, Union, Whitten 1-1-97 WOODBURY / 97 Bronson, Cushing, Moville, Oto, Salix, 1-1-87
Sergeant Bluff, Sioux City, Sloan
HENRY / 44 Coppock, Hillsboro, Mount Pleasant, 10-1-95
Mount Union, New London, Olds, Rome, Anthon, Correctionville, Danbury, Hornick, Lawton, 10-1-88
Salem, Westwood, Winfield Pierson, Smithland, Unincorporated Area
Wayland, Unincorporated Area 1-1-96 5 WORTH / 98 Fertile, Grafton, Hanlonton, Joice, Kensett,
Manly, Northwood Iowa Tax NEWS 1-1-97