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Gronstal: forget coupling

March 11, 2010

It looks like Iowa isn't going to bother to couple with 2008 or 2009 changes in the federal tax law, reports the Quad City Times:

"It’s unlikely we’re going to find the ability to give up significant state revenue this year when we’re cutting every thing else in state government," Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Wednesday.

Not conforming Iowa’s tax code to federal changes in 2008 or 2009 amounts to a roughly $90 million issue over the two years, said Jim McNulty of the state Department of Revenue.

That means taxpayers will have to make extra adjustments from their federal return to compute their Iowa taxable income. These will include:

- No bonus depreciation

- The 2009 Section 179 deduction for Iowa will be limited to $133,000. The federal limit for this deduction for the cost of equimpment that would otherwise be capitalized and depreciated is $250,000. Iowa has conformed to the 2008 Section 179 limit.

- No $250 deduction for educator expenses. This will trigger lots of $17 deficiency notices for teachers. (1040 line 23)

- No deduction for higher education tuition and fees (1040 line 34)

- No deduction for the sales tax paid for a new car purchase.

- No exclusion for the first $2,400 of jobless benefits.

- No Schedule A deduction for state and local sales taxes.

- No retroactive 2009 deduction for contributions to charity for Haiti disaster relief paid between 1/1/2010 and 2/28/2010.

One more argument for the Quick and Dirty Iowa Tax Reform.