From: Elist <Elist@IDRF.STATE.IA.US>

To: <IDRFINCTAXPROF@ELISTS.IDRF.STATE.IA.US>

Date: 1/30/04 4:23PM

Subject: Iowa Tax Issues

BONUS DEPRECIATION and IRC SECTION 179

As of January 30, 2004, Iowa has NOT coupled with the increase in the

Section 179 expense. Therefore, the Section 179 limit for Iowa purposes at

this time is $25,000.

The Iowa Legislature will decide this legislative session whether or not to

couple with the changes to the Internal Revenue Code that increase the

Section 179 expense to $100,000. It is unknown at this time when the Iowa

Legislature will make its decision.

The department is directing taxpayers to file their returns assuming that

the Section 179 limit is $25,000.

The preferred method to reflect the decoupling with the IRS is to

incorporate the change on the IA 4562A, which will then carry over to line

14. If the adjustment for Section 179 cannot be addressed using the IA

4562A, then simply make the adjustment directly on line 14 of the IA 1040.

If the Iowa Legislature decides to adopt the $100,000 Federal provision,

then an amended return can be filed to claim the higher expense amount.

We will send an update through this e‑mail system as soon as any legislation

is finalized.

FEDERAL ADVANCE CHILD TAX CREDIT

IN MOST CASES, the Federal Advance Child Tax Credit MUST be included on line

27 of the IA 1040.

The Federal Advance Child Tax Credit should NOT be included on line 27 of

the IA 1040 in those cases where the taxpayer did not receive the benefit of

reducing their Federal tax for this credit.

Examples of when NOT to include the credit include:

* The taxpayer is not entitled to use the Child Tax Credit on the 2003

Federal return to reduce Federal tax

* The taxpayer had no Federal tax liability for 2003

* The taxpayer has high income and did not qualify for the Child Tax

Credit for 2003

Examples of when TO include the credit include:

* Nonresident and part‑year residents filing in Iowa for the first

time

* Taxpayers whose 2002 Iowa tax returns were filed using the

low‑income exemption or using the alternate tax calculation.

Iowa Taxpayers Are E‑Filing!

To see how we're doing, go to our home page: www.state.ia.us/tax

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> CLASSES ABOUT IOWA TAXES ARE HELD STATEWIDE. USE THE FOLLOWING LINK TO SEE

> OUR LIST OF TAX CLASSES: http://www.state.ia.us/tax/educate/educate.html

>