Capitol Update: Week 13


Federal Tax Code Changes Makes Changes to Iowa Tax Code Necessary

I sit on the Ways & Means Committee which is working on tax reform this session.  Due to some of the changes made in the Federal Tax Reform Act that passed late last year, we need to review our tax policies also. The goal is to more money in the taxpayer’s pocket and does so in a fiscally responsible way.

Due to tax reform at the national level, Iowans will pay $1.8 billion less in federal taxes in tax year 2018.  However, due to the fact that Iowa has federal deductibility, Iowans will pay additional state taxes totaling $107 million in tax year 2018 and grow to $153 million in tax year 2019.

One of the changes at the Federal level was like-kind exchanges.  They are now limited to real property. For example, farmers can still swap land for other land tax-free, but equipment trade-ins will no longer be a tax-free event.   This is a pretty drastic change that is not being discussed.   Let’s assume a farmer buys $500,000 of equipment but trades in $350,000 of equipment.   The used equipment that is being traded in still has $50,000 remaining in basis to be depreciated.   Under old law the $150,000 would treated as the purchase and the $50,000 remaining will be added to the basis so that $200,000 can be depreciated.   This would eligible for Section 179 and / or bonus depreciation.   Under old law the whole amount could be written off on the Federal return and only $25,000 plus normal depreciation on the Iowa return.

Under new law and without any changes to the Iowa tax code the $350,000 is now considered a sale (recapture and or capital gains on $300,000) and the $500,000 is a new capital purchase.   The taxpayer will not be hurt at all in regards to the Federal return as they can use section 179 or bonus depreciation.  However, under Iowa tax code, the taxpayer will only get a ¼ or ½ life first year depreciation (no bonus or Section 179 as they purchased over the $200,000 phase out limit) and will only receive normal depreciation of around $35,715.   Thus, the taxpayers difference in income between the federal and the state in this example is $265,000.  This would result in approximately $24,000 of extra taxes paid to the state of Iowa.

Small business across Iowa, not just farmers, will be affected by those changes. This is just one of the reasons why it is necessary to make changes to Iowa’s tax code.

Governor Reynolds Signs Future Ready Iowa Act

Gov. Kim Reynolds signed House File 2458, the Future Ready Iowa Act, on Tuesday at the Future Ready Iowa Summit in Des Moines.

Future Ready Iowa is the Governor’s plan to train Iowans for the jobs of today and tomorrow. The goal of Future Ready Iowa is for 70 percent of Iowa workers to have education or training beyond high school by 2025. In order to reach that goal, another 127,700 Iowans need to earn post-secondary degrees or other credentials.

This bill changes lives by helping Iowans earn credentials that prepare them for rewarding careers in advanced manufacturing, computer science, finance, health care and many other fields. It also helps employers hire the skilled workers they need to grow, which means Iowa communities will be even more prosperous.

The Governor called on the legislature to pass the Future Ready Iowa Act in her Condition of the State address in January. The bill passed both the Iowa House and Iowa Senate with unanimous, bipartisan support. It passed the Iowa House on March 13, 98-0 and the Iowa Senate on March 19, 47-0.


Capitol Update: Week 12


Skyrocketing Cost of Backfilling Local TIF’s with State Dollars

The House Appropriations Committee is beginning to look at a subject not easily understood and rarely discussed in the Iowa Capitol – the cost of the Tax Increment Financing program to the state budget.

The TIF program was established in 1992 as a method to help local communities finance community improvement projects.   Under the program, when a municipality (city or county) decides to set up a TIF project – known as an urban renewal area – the property tax from parcels within the project do not go to the levying authorities (school district, county, city, etc) but instead are used by the city or county establishing the TIF district to pay for the improvements made to the urban renewal area.  Local officials and economic development professionals are ardent supporters of TIF’s and the development fostered by their use.

However, it is important to note that there is little incentive on the part of certain local officials to support or oppose any local TIF project.  A school board or county board of supervisors that is not originating the TIF district does not have a vote to approve the use of their property tax revenue for this project.  Furthermore, schools are held harmless by the state, which replaces the lost property tax revenue through the school finance formula .  This means schools receive their property tax revenue regardless.

The cost of backfilling the schools’ lost property taxes is something not easily found, as there is no budget line item for it.  The funds needed to backfill the lost revenue are taken out of the General Fund before any action is taken on the budget.  It is not accounted for in a manner like normal spending or even the oft discussed tax credits.  If you don’t ask the right questions, one would never know it had any impact on state spending at all.  But it does, and that impact is growing every year.

When TIF started in 1992, it had a relatively small impact on the state budget of $5.2 million in backfill payments.  But as the use of TIF has proliferated across the state, the hidden impact on the budget has grown significantly.

In FY 2018, the state will send $59.5 million to local school districts to replace property tax revenue diverted to TIF projects.  Fiscal Year 2018 also was a milestone in the program, as the annual growth rate in the program was in single digits for the first time ever.

As a response to the skyrocketing cost of backfilling local TIF’s, House Study Bill 681 makes significant revisions to Iowa’s Tax Increment Financing program.  In order for a TIF district to retain property tax revenue of a school district or county under House Study Bill 681, the school board or county board of supervisors would have to take a vote to transfer the revenue to city or county organizing the TIF district.  Or, in other words, they would have to formally support the project.  If a school district agrees to transfer its property tax revenue, that amount would no longer be replaced by the state through the school finance formula.  After all, if a project is good for the community, widespread support should be a large hurdle to clear.

The changes implemented by House Study Bill 681 would be applied to TIF districts that are established after July 1, 2019 or to property that is annexed or otherwise included into an existing TIF after July 1, 2019.  This bill is still working its’ way through the process and has not been passed.

Improved Prescription Monitoring Program Launches April 4

The Iowa Board of Pharmacy will be launching an improved Prescription Monitoring Program (PMP) on April 4th. AWARxE was selected as the winning response to Iowa’s RFP regarding an updated PMP. This new platform will allow prescribers to have an easier way to find timely information on preventing patient misuse and abuse of opioids. Practitioners that wish to apply for a PMP account may complete online registration through the new website.

The Board also recently announced that effective May 16 dispensers will be required to report to the PMP no later than the next business day following dispensing the prescription. The change in reporting frequency will provide health care providers with more timely information when utilizing the PMP in their prescribing.

News from District 96

Thursday I had a visit from the eighth grade class of the Anamosa School District.  We had the chance to visit for about 45 minutes and I was very impressed with their questions.  They asked questions that directly related to them, such as school safety, and I shared information about bills we passed here in the House.  One of these bills requires an active shooter emergency plan to created and maintained by school district.

The students also took an interest in the legislative process asking about the daily life of a legislator.  One of the most impressive questions was what determines my votes on the floor, ie., do I look at issues as it impacts the entire state of Iowa or Delaware and Jones County.  Voting is continuously a balance of these two, but more often than not what is good for House District 96 is good for Iowa.

I also attended the Celebration of Ag banquet in Cedar Rapids on Wednesday night where President Wendy Wintersteen of Iowa State was the keynote speaker.  I enjoyed her remarks and the event.


Capitol Update: Week 11


Ensuring Schools Have High Quality Security Plans

The House took another step this week in passing legislation to help protect our schools.  Following on the heels of several other pieces of legislation that provided districts with options for school security, the bill this week, Senate File 2364, requires school districts and nonpublic schools to develop security plans for response to active shooter scenarios and natural disasters.

An informal survey of districts done in 2015 found that of 249 respondent school districts, roughly 85% of them had an Emergency Operations Plan (EOP) in place.  But the findings from the emergency management association doing the survey found that only 24 of those districts, or 9.6%, had plans that met the federal FEMA guidelines for what constitutes a “high quality” EOP.  A follow-up survey determined that the number rose slightly, to 11.2%, but this is still not sufficient.

The plans that local districts are to develop would take into consideration recommendations from the Department of Education for what makes a plan high quality.  These elements come from the federal guidelines and consist primarily of 5 concepts:  Prevention, Protection, Mitigation, Response, and Recovery.  The districts would also have to consult and work with their local emergency management organizations and local law enforcement agencies in the development.  Plans are required to be reviewed annually and districts shall conduct annual training and drills.

The bill passed the House with bipartisan support and will return to the Senate with a small amendment for final consideration before moving to the Governor for signing into law.

Iowa House Passes Affordable Health Options for Iowans

In January, the Commerce committee heard from the Insurance Commissioner on the state of the individual health insurance market in the state of Iowa. There was and continues to be an immediate concern for 20,000 Iowans who have no health insurance because they are priced out of the individual health insurance federal exchange market.

In February, the House Commerce committee took a first step to provide Iowans with some relief from unaffordable health care products on the individual market. The committee considered legislation which would provide the option of purchasing a health benefit plan. These plans would be sponsored and administered by Iowa based organizations. Health benefit plans act like insurance and are subject to oversight by the Insurance Commissioner. It is estimated that for individuals who do not qualify for a federal subsidy, these plans would be less than half the cost of plans available on the individual federal exchange.

There are currently proposed changes to the Department of Labor rules that will allow more types of employers to group together and form associations for the purposes creating a larger risk pool for the purpose of obtaining health insurance.  Some of the changes in the proposed rules include allowing sole proprietors to be considered an employer.  Multiple Employer Welfare Arrangements (MEWAs) offered in Iowa would be subject to the insurance regulations in the state and must comply with regulations and oversight from the insurance commissioner.

The Iowa House passed these proposals this week. They provide Iowans, who are unable to afford health insurance, additional options to cover their healthcare needs.

News from House District 96

This week I had the chance to visit with several groups when they came to the Capitol. Delaware County Farm Bureau and Jones County Farm Bureau Members as well as Iowa Corn Growers were here to discuss issues important to Iowa agriculture.  Iowa Bankers Association was also at the Capitol to chat about concerns of Iowa’s banking industry.

Capitol Update: Week 10


Future Ready Iowa Act

Iowa’s current unemployment rate of 2.9% is at its lowest point in 17 years and continues to remain well below the national average.  More Iowans are working than ever before, which is great news.

Even with nearly full employment, Iowa employers still have 50,000 job openings.  Iowa has a skilled workforce shortage, and businesses are struggling to find workers with the necessary skills to fill high-paying careers.

The Future Ready Iowa Act takes a number of steps to increase and improve the skills of Iowa’s workforce beyond a high school degree. The goal of Future Ready Iowa is to ensure Iowans are trained for the jobs of today and tomorrow, with at least 70 percent of Iowa workers equipped with education or training beyond high school by 2025.

Future Ready Iowa will further increase collaboration between our K-12 schools, community colleges, local businesses, and skilled trade associations.

The Future Ready Iowa Act creates opportunities for Iowans of all ages and experiences through a number of programs and opportunities.  It does this through new job training and support programs, new financial assistance programs, and creates new education and career opportunities.

The Future Ready Iowa Act will improve the lives of Iowans by helping workers attain the skills they need for high-paying careers.  It will also help businesses grow and expand by ensuring they have the skilled workforce needed for a 21st century economy.

School Safety Measures Pass House

The issue of school safety has been in the news lately and Iowans have expressed concerns.  The House Majority is working to advance common sense school safety measures that ensure students are secure while in a learning environment.

Suicide prevention training

The House passed Senate File 2113 this week which requires all licensed school staff to go through annual suicide prevention and adverse childhood experience training.  This will help teachers and school administrators identify potential problems or signs that may lead to a student hurting themselves or others.

Active shooter plans

This week, the House Education Committee advanced Senate File 2364, which will require every Iowa school district to coordinate with local law enforcement to develop an active shooter plan.  While most schools already have a strategy in place, some schools lack this critical plan.  In addition, teachers will be required to go through active shooter training once a year.

This bill will protect Iowa students and school staff by ensuring that if an active shooter situation arises, schools are prepared.

News from District 96

Wednesday morning I toured the Des Moines Airport Control Tower.  It was very interesting to see the technology that is used in controlling aircraft around the Des Moines airspace.

Cattlemen Association members from across Iowa came to the Capitol on Thursday.  We had the chance to visit with them about issues important to the beef industry and Iowa agriculture.

Capitol Update: Week 9


School Flexibility and Safety

Over the last year, the House Majority championed legislation to provide schools with unprecedented flexibility and control over their resources.  This week, the Iowa House passed legislation that provides schools with even greater flexibility.

These new options build off of last year’s efforts that allow school districts greater ability to make decisions that work best for them.  No two schools are exactly alike, and we shouldn’t take one-size-fits-all approach to their needs.   Local school boards are much better equipped to make decisions, rather than top-down directives from bureaucrats in Des Moines.

We also included an amendment to the bill that will allow schools to direct more funding to hire school security personnel.  After listening to the concerns of Iowans, we are providing schools with the additional flexibility needed to improve safety and security measures.

Increased school flexibility is just a piece of the House plan to improve and support schools across the state.

The House has already acted on many other pieces of the K-12 package announced earlier in the session including:

  • Additional state investment: Schools will receive an additional $32 million in funding next school year.  This brings total annual investment in K-12 schools to more than $3.2 billion, an increase of $765 million since 2011.
  • Transportation cost relief: Schools in rural Iowa often face disproportionately higher transportation costs compared to their urban counterparts.  The House Majority has committed an additional $11.2 million to go towards the state’s most needy school districts, freeing up dollars that can then be used in classrooms.
  • Reducing the per pupil equity disparity: Due to a longstanding issue in the per pupil school funding formula, some schools receive $175 less per student.  The House Majority has taken a big step forward, investing almost $3 million to reduce this gap to $170 per student.  This is the first time the gap has been narrowed since the 1980s.

Work continues to extend the school infrastructure fund, known as SAVE.  A House subcommittee met on the SAVE extension on Thursday and advanced the bill to the full Ways and Means Committee.

The SAVE fund has served as an important tool for schools to make much-needed improvements that ensure modern facilities, safe classrooms, and state of the art technology that enhance students’ educational experience.

Another important aspect of SAVE is that schools can use these funds to make security upgrades to their facilities to improve school safety.

Budget Discussions Taking Place

This week, the House Appropriations Committee heard a presentation from the non-partisan Pew Charitable Trusts on ways that states like Iowa can manage uncertainty in revenue forecasting.  Pew brought several ideas that other states have implemented to improve their revenue forecasting processes.  It is likely that legislation will be brought forward to implement some of Pew’s proposals to make changes to Iowa’s process.

Additionally, the Revenue Estimating Conference (REC) will meet on Friday to set their estimate for the FY19 budget year.

Once the projection is determined, we can begin crafting a responsible budget plan for the next fiscal year.  The House Majority will likely release budget targets shortly after the new REC projections.

News from District 96

Matt and Beth McQuillen were part of nearly 50 landowners, families and organization recognized at the Gift to Iowa’s Future Ceremony by the Governor and Lt. Governor for their donation of a permanent conservation easement to the Iowa DNR on their property next to Oxford Junction Wildlife Management Area to protect wildlife habitat. The easement restricts development on the property and also allows for the development of a public parking area for Oxford Junction Wildlife Management Area.  Thank you, Matt and Beth for your donation to Iowa.

Capitol Update: Week 8


House Advances Bipartisan Comprehensive Mental Health Bill

On Tuesday the Iowa House passed House File 2456, a bill that addresses gaps in the mental health system in the state.

This is an issue that is personal to many Iowans. Few people are immune from the loss of a family member or friend who suffered from a lifelong battle with depression. Too often there is another tragic story in the news of a family feeling hopeless as they seek treatment far from home for their loved one’s chronic mental illness; but sadly, even more frequently, the stigma associated with mental illness drives the family to silence.

Legislators are regularly contacted about the costs for law enforcement to drive across the state and find inpatient psychiatric beds; the costs to the hospitals that are not reimbursed for a patient no longer in need of acute level placement; and the costs to our jails and prisons for unintentionally becoming the default locations to treat individuals with mental illness.

The House Majority carefully modeled HF 2456 based on recommendations from mental health experts in the state.  This bill takes a significant step forward to address these complex issues.

This bill increases access to mental health services and creates new services for urban and rural communities in Iowa. The non-partisan Legislative Services Agencies estimates that Medicaid members will make up 80% of the clientele using these preventative services, and this bill ensures long-term sustainable funding for these mental health and substance abuse services as Medicaid covered services.

Importantly, this bill returns mental health care determinations to medical professionals, instead of judges and law enforcement officers. Mental illness is a health condition, and it should be treated as compassionately as any other illness.

We also passed House File 2305 this week to expand telehealth services in Iowa.  Many rural parts of the state have limited access to psychiatrists and other mental health professionals. This bill expands the options for a mental health provider to see a patient using modern technology.

Both of these bills take a significant step forward in improving the mental health system in Iowa, and a detailed analysis of each bill can be found below.

Iowa Ranks Best State in America

Is this Heaven?  No, it’s Iowa.

In recent months, Iowa has received numerous accolades highlighting our strong fiscal management, high quality education system, and affordability for families.

This week, US News & World Report named the Best State in America.  They ranked Iowa number in the nation.  The rankings include all 50 states and compiled 77 metrics with thousands of data points.

The report ranks Iowa highly in several categories including:

  • Infrastructure – #1
  • Health Care – #3
  • Opportunity – #4
  • Education – #5
  • Quality of Life – #9

This new report confirms what many Iowans already knew:  Iowa is a great place to live, work, raise a family, or grow a business.  The House majority is just getting started in efforts to make our state even better for future generations.

News from District 96

I met with Dr. Ken Paulsen on Wednesday.  We discussed issues including funding the ISU Animal Diagnostic Lab.  I also got to see the first half of the Monticello Girls Basketball game at the State tournament before being called back to the Capitol to vote.

Dominic Hogan, of the Jones County Farm Bureau, and I visited about health care issues.

Capitol Update: Week 7


Governor’s Tax Reform-Tax Year 2018 Changes

This week the Governor’s tax reform bill (House Study Bill 671) was assigned to a House Ways and Means subcommittee. The bill is lengthy and contains changes and reforms spanning multiple tax and fiscal years. It is probably easiest to take the reforms tax year by tax year—focusing this week on tax year 2018 which you will being filing a return for in April 2019.

The bill provisions that could take effect in 2018 are mostly what people would think of as traditional coupling provisions. A few provisions are directly related to the tax reform passed by Congress last December.

Changes include an expanded definition of qualified education expenses under the 529 education savings plans. This is one of those provisions that is necessary because of federal tax reform. This change will let Iowans withdraw money (with no penalty) from a 529 plan to pay for K-12 tuition expenses. The bill does require that the K-12 school be within the state of Iowa.

House Study Bill 671 coupled with federal code on a few other provisions including:

  • Definitional changes regarding retirement savings and business accounting rules
  • The above-the-line deduction for teachers’ education expenses
  • The exclusion of IRA distributions for 70 ½ year and older charitable contributions
  • The option to itemize sales and use taxes in lieu of income taxes

Probably the biggest coupling provision in tax year 2018 is the Section 179 coupling. The Governor’s bill would raise the Section 179 limit to $100,000/$400,000, a number up from current law’s $25,000/$200,000. The Federal tax reform bill set the limit at $1 million.. House Study Bill 671 also gives shareholders the ability to depreciate expensing above the cap over the following five years to avoid certain situations where individuals with multiple pass-through entities were losing out on the provision entirely for some entities.

The cost of the tax year 2018 changes outlined above is estimated at $53 million. Most of that would be realized in fiscal year 2019. Next week, we will cover the provisions in the Governor’s bill that relate to tax year 2019. Those changes include rate changes and sales tax reforms.

On Wednesday morning Senate Republicans released details of their own tax reform/tax reduction package.  No one outside of the authors of that bill were privy to details prior to its release.  As such, it will be a few days before the House will be able to make any informed comments on the idea.

Noteworthy Bills from the Commerce Committee

The first legislative funnel came and went last week. Unless a bill has been assigned to the Appropriations, Ways and Means, or Government Oversight committee, it must pass out of a committee to receive further consideration this legislative session. The following are some of the significant bills to survive the first legislative funnel in the Commerce Committee.

HF2364/HSB 637 – Health Benefit Plans

This bill clarifies that a health benefit plan, sponsored by a nonprofit agricultural organization is not insurance or subject to insurance regulations. Health benefit plans must be administered by a domestic entity registered with the insurance commissioner. This third-party administrator must have a history of providing healthcare services. The nonprofit agricultural organization is required to file with the insurance commissioner certifying they meet all requirements. HSB 637 passed out of committee by a vote of 16-7 and is waiting to be considered by the entire House of Representatives.  Status: House Calendar

HF 2305/HSB 572 – Telehealth

Many parts of Iowa have limited access to a doctor. Few general practitioners and even fewer specialists in the state effectively results in long travel times and expensive transportation costs for many Iowans. Faced with these barriers, often times, Iowans may end up going without the care they need. One possible solution is telehealth. Telehealth allows long distance patient/clinician contact and care. It is a practice that would allow an Iowan to speak with, visually see and be treated by a doctor by utilizing audio visual technology. HF 2305 would require telehealth care to be covered by healthcare insurance, just like health insurance would cover a face to face visit between a patient and their healthcare professional. It passed out of committee unanimously.  Status: House Calendar

HSB 602 – Future Ready Iowa

Iowa has a skilled workforce shortage; this bill takes a number of steps to increase and improve the skills of Iowa’s workforce beyond a high school degree. This includes creating a program for small and medium sized apprenticeship sponsors. It also creates a volunteer mentor program to support future ready programs, a summer youth internship program, an employer innovation program, an education last dollar scholarship program, an education grant program, and a program for high-school students to attend college level classes during the summer. These steps will help businesses grow and help individual Iowans adapt to the changing economy and find new and better careers. HSB 602 passed out of committee by a vote of 16-7 and is waiting to be considered by the entire House of Representatives.  Status: Passed House Commerce Committee

News from District 96

I met with the Adam Ryan who was here at a member of the Iowa Young Cattlemen group as well as the Jones County 4-Hers who were here to tour the Capitol and learn about the legislative process. The Jones County Safe and Healthy Youth Coalition were here for Youth Substance Abuse Day on the Day.