News & Insights

Iowa Retroactively Decouples from Tax Cuts and Jobs Act of 2017

Tax Development Jul 24, 2020

Iowa Retroactively Decouples from Tax Cuts and Jobs Act of 2017Under a new law signed on June 29, 2020,1 Global Intangible Low Tax Income (GILTI), under Internal Revenue Code (IRC) § 951A, is no longer subject to inclusion in the Iowa tax base. The new law contains a simple statement that taxpayers are required to subtract any income included in their Iowa tax base related to IRC § 951A.

The new law also departs from IRC § 163(j) dealing with interest deduction limitations. This provision is more complex in that the interest deduction limitations will continue to apply to years in which the additional first-year depreciation allowance authorized in IRC § 168(k) applies in computing net income for state tax purposes. For those years, a taxpayer is also not permitted to deduct any amount of carryforward of interest expense paid if 1) the interest expense was originally paid or accrued during a tax year in which additional first-year depreciation was taken, or 2) the interest expense was originally paid or accrued during a tax year in which the taxpayer was not required to file an Iowa return.

Both provisions are retroactive to years beginning on or after January 1, 2019. Taxpayers that had included GILTI or limited their interest expense deductions on their Iowa returns should consider amending those returns.

1 H.F. 2641

TECHNICAL INFORMATION CONTACT:

Mark L. Nachbar
Principal
Ryan
213.627.1719
mark.nachbar@ryan.com

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