General Assembly: 77 (1997 Regular GA) - Chapter 158 - Tax administration and related matters


Published: 1997

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CH.15S LAWS OF THE SEVENTY-SEVENTH G.A., 1997 SESSION

CHAPTER 158 TAX ADMINISTRATION AND RELATED MATTERS

H.F.266

322

AN ACT relating to the administration of state individual income, corporate, franchise, motor fuel, and other taxes; collection of taxes and use of collection receipts; property taxes; property tax credits and replacement claims; sales, services, and use taxes and the imposition thereof on sales of prepaid telephone calling cards and prepaid authorization numbers; tax refund setoffs; and other duties of the department and director of revenue and finance; providing a penalty; and including effective and retroactive applicability date provisions.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 321.19, subsection 1, unnumbered paragraph 2, Code 1997, is amended to read as follows:

The department shall furnish, on application, free of charge, distinguishing plates for vehicles thus exempted, which plates except plates on Iowa highway safety patrol vehicles shall bear the word "official" and the department shall keep a separate record. Registration plates issued for Iowa highway safety patrol vehicles, except unmarked patrol vehicles, shall bear two red stars on a yellow background, one before and one following the registra- tion number on the plate, which registration number shall be the officer's badge number. Registration plates issued for a county sheriffs patrol vehicles shall display one seven-pointed gold star followed by the letter "S" and the call number of the vehicle. However, the director of general services or the director of transportation may order the issuance of regular regis- tration plates for any exempted vehicle used by peace officers in the enforcement of the law, persons enforcing chapter 124 and other laws relating to controlled substances, persons in the department of justice, the alcoholic beverages division of the department of commerce, &BEl the department of inspections and appeals. and the department of revenue and finance. who are regularly assigned to conduct investigations which cannot reasonably be con- ducted with a vehicle displaying "official" state registration plates, and persons in the lot- tery division of the department of revenue and finance whose regularly assigned duties relating to security or the carrying of lottery tickets cannot reasonably be conducted with a vehicle displaying "official" registration plates. For purposes of sale of exempted vehicles, the exempted governmental body, upon the sale of the exempted vehicle, may issue for in-transit purposes a pasteboard card bearing the words "Vehicle in Transit", the name of the official body from which the vehicle was purchased, together with the date of the pur- chase plainly marked in at least one-inch letters, and other information required by the department. The in-transit card is valid for use only within forty-eight hours after the purchase date as indicated on the bill of sale which shall be carried by the driver.

Sec. 2. Section 331.427, subsection 1, unnumbered paragraph 1, Code 1997, is amended to read as follows:

Except as otherwise provided by state law, county revenues from taxes and other sources for general county services shall be credited to the general fund of the county, including revenues received under sections 101A3, 101A7, 123.36, 123.143, 142B.6, 176AS,321.105, 321.152, 321G.7, 331.554, subsection 6, 341A20, 364.3, 368.21, 422.85, 422A2, 428AS, 430A3, 433.15, 434.19, 445.57, 453A35, 458A21, 483A12, 533.24, 556B.l, 567.10, 583.6, 602.8108,904.908, and 906.17, and chapter 405A, and the following:

Sec. 3. NEWSECTION. 405AI0 FRANCHISE TAXREVENUEAU..OCATION. For the fiscal year beginning July 1, 1997, and each subsequent fiscal year, there is appro-

priated from the general fund of the state to the department of revenue and finance the sum of eight million eight hundred thousand dollars which shall be paid quarterly on warrants by the director as allocated pursuant to section 422.65.

323 LAWS OF THE SEVEN1Y-SEVENTH G.A., 1997 SESSION

Sec. 4. Section 421.4, Code 1997, is amended to read as follows: 421.4 DEPUTIES.

CH.158

The director may appoint deputy directors and may designate one or more of the deputies as acting director. A deputy designated to serve in the absence of the director has all of the powers possessed by the director. The director may employ certified public accountants, engineering and technical assistants, and other employees. or independent contractors necessary to protect the interests of the state and any political subdivision.

Sec. 5. Section 421.17, subsection 21, paragraph b, subparagraph (3), Code 1997, is amended to read as follows:

(3) The child support recovery unit, the foster care recovery unit, and the investigations division of the department of inspections and appeals shall, at least annually, submit to the department of revenue and finance for setoff the debts described in this subsection, whieft aFe at least fifty dallllFfi constituting a minimum amount determined by rule of the depart- ment of revenue and finance, on a date to be specified by the department of human services and the department of inspections and appeals by rule.

Sec. 6. Section 421.17, Code 1997, is amended by adding the following new subsection: NEW SUBSECTION. 22A To develop, modify, or contract with vendors to create or ad-

minister systems or programs which identify nonfilers of returns or nonpayers of taxes administered by the department. Fees for services, reimbursements, or other remuneration paid under contract may be funded from the amount of tax, penalty, interest, or fees actually collected and shall be paid only after the amount is collected. An amount is appropriated from the amount of tax, penalty, interest, and fees actually collected, not to exceed the amount collected, which are sufficient to pay for services, reimbursement, or other remu- neration pursuant to this subsection. Vendors entering into a contract with the department pursuant to this subsection are subject to the requirements and penalties of the confidential- ity laws of this state regarding tax information.

Sec. 7. Section 421.17, subsection 23, paragraphs c, d, and g, Code 1997, are amended to read as follows:

c. The college student aid commission shall, at least annually, submit to the department of revenue and finance for setoff the guaranteed student loan defaults, 'Nhieh &Fe at least fifty dellaFs constituting a minimum amount set by rule of the department of revenue and fi- nance, on a date or dates to be specified by the college student aid commission by rule.

d. Upon submission of a claim, the department of revenue and finance shall notify the college student aid commission whether the defaulter is entitled to a refund or rebate of at least fifty daliaFS the minimum amount set by rule of the department and if so entitled shall notify the commission of the amount of the refund or rebate and of the defaulter's address on the income tax return. Section 422.72, subsection 1, does not apply to this paragraph.

g. The department of revenue and finance shall, after notice has been sent to the defaulter by the college student aid commission, set off the amount of the default against the defaulter's income tax refund or rebate if bath the 8fBauftt af the default QRd the Feftiad aF Febate are at least fifty daliaFS constituting a minimum amount set by rule of the department. The depart- ment shall refund any balance of the income tax refund or rebate to the defaulter. The department of revenue and finance shall periodically transfer the amount set off to the college student aid commission. If the defaulter gives written notice of intent to contest the claim, the commission shall hold the refund or rebate until final disposition of the contested claim pursuant to chapter 17 A or by court judgment. The commission shall notify the defaulter in writing upon completion of setoff.

Sec. 8. Section 421.17, subsection 25, paragraph c, Code 1997, is amended to read as follows:

c. The clerk of the district court, on the first day of February and August of each calendar year, shall submit to the department for setoff the debts described in this subsection, whieft

CH.158 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION 324

aFe at least fifty deUaFS constituting a minimum amount set by rule of the department.

Sec. 9. Section 421.17, subsection 29, paragraphs a and e, Code 1997, are amended to read as follows:

a. For purposes of this subsection unless the context requires otherwise: (1) "State agency" means a board, commission, department, including the department of

revenue and finance, or other administrative office or unit of the state of Iowa or any other state entity reported in the Iowa comprehensive annual financial report. The term "state agency" does not include the general assembly, the governor, or any political subdivision of the state, or its offices and units.

(2) "Department" means the department of revenue and finance and any other state agency that maintains a separate accounting system and elects to establish a debt collection setoff procedure for collection of debts owed to the state or its agencies.

(3) The term "person" does not include a state agency. e. Before setoff, the amount of a person's claim on a state agency and the amount of a

person's liability to a state agency shall he at least fifty dellaFS constitute a minimum amount set by rule of the department.

Sec. 10. NEW SECTION. 421.61 UNCONSTITUTIONALLY WITHHELD TAX BEN- EFITS.

If a provision in the Code grants a tax benefit to taxpayers that is unconstitutionally withheld from other taxpayers as expressed in an Iowa attorney general's opinion based upon decisions of the Iowa supreme court, United States supreme court, or other courts of competent jurisdiction, the tax benefit shall also be granted to the adversely affected taxpay- ers as if the unconstitutional provision did not exist.

Sec. 11. Section 422.5, subsection 1, paragraphj, subparagraph (2), unnumbered para- graph 1, Code 1997, is amended to read as follows:

The tax imposed upon the taxable income of a resident shareholder in a value-added corporation which has in effect for the tax year an election under subchapter S of the Inter- nal Revenue Code and carries on business within and without the state may be computed by reducing the amount determined pursuant to paragraphs "a" through "i" by the amounts of nonrefundable credits under this division and by multiplying this resulting amount by a fraction of which the resident's net income allocated to Iowa, as determined in section 422.8, subsection 2, paragraph "b", is the numerator and the resident's total net income computed under section 422.7 is the denominator. If a resident shareholder has elected to take advan- tage of this subparagraph. and for the next tax year elects not to take advantage of this subparagraph. the resident shareholder shall not reelect to take advantage of this subpara- graph for the three tax years immediately following the first tax year for which the share- holder elected not to take advantage of this subparagraph. unless the director consents to the reelection. This IJ&FQgFaIJB subparagraph also applies to individuals who are residents of Iowa for less than the entire tax year.

Sec. 12. Section 422.20, subsection 3, unnumbered paragraph 1, Code 1997, is amended to read as follows:

Unless otherwise expressly permitted by section 421.17, subsections 21, 22, ~ 23, 25, 29, and 32, sections 252B.9, 421.19, 421.28, 422.72, and 452A.63, and this section, a tax return, return information, or investigative or audit information shall not be divulged to any person or entity, other than the taxpayer, the department, or internal revenue service for use in a matter unrelated to tax administration.

Sec. 13. Section 422.32, subsection 4, Code 1997, is amended to read as follows: 4. "Corporation" includes joint stock companies, and associations organized for pecuni-

ary profit, and IJuhliely tF&ded partnerships and limited liability companies taxed as corpo- rations under the Internal Revenue Code.

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Sec. 14. Section 422.42, subsections 1 and 14, Code 1997, are amended to read as fol- lows:

1. "Agricultural production" includes the production of flowering, ornamental, or veg- etable plants in commercial greenhouses or otherwise and production from aquaculture. "Agricultural products" include flowering, ornamental, or vegetable plants and those prod- ucts of aquaculture.

14. "Retail sale" or "sale at retail" means the sale to a consumer or to any person for any purpose, other than for processing, for resale of tangible personal property or taxable ser- vices, or for resale of tangible personal property in connection with taxable services; and includes the sale of gas, electricity, water, and communication service to retail consumers or users; but does not include agricultural breeding livestock and domesticated fowl; and does not include commercial fertilizer, agricultural limestone, herbicide, pesticide, insecticide, food, medication, or agricultural drain tile, including installation of agricultural drain tile, any of which are to be used in disease control, weed control, insect control, or health promo- tion of plants or livestock produced as part of agricultural production for market; and does not include electricity, steam, or any taxable service when purchased and used in the pro- cessing of tangible personal property intended to be sold ultimately at retail. When used by a manufacturer of food products, carbon dioxide in a liquid, solid, or gaseous form, electric- ity, steam, and other taxable services are sold for processing when used to produce market- able food products for human consumption, including but not limited to, treatment of mate- rial to change its form, context, or condition, in order to produce the food product, mainte- nance of quality or integrity of the food product, changing or maintenance of temperature levels necessary to avoid spoilage or to hold the food product in marketable condition, maintenance of environmental conditions necessary for the safe or efficient use of machin- ery and material used to produce the food product, sanitation and quality control activities, formation of packaging, placement into shipping containers, and movement of the material or food product until shipment from the building of manufacture. Tangible personal prop- erty is sold for processing within the meaning of this subsection only when it is intended that the property will, by means of fabrication, compounding, manufacturing, or germina- tion become an integral part of other tangible personal property intended to be sold ulti- mately at retail; or will be consumed as fuel in creating heat, power, or steam for processing including grain drying, or for providing heat or cooling for livestock buildings or for green- houses or buildings or parts of buildings dedicated to the production of flowering, ornamen- tal, or vegetable plants intended for sale in the ordinary course of business, or for use in cultivation of agricultural products by aquaculture. or for generating electric current, or in implements of husbandry engaged in agricultural production; or the property is a chemical, solvent, sorbent, or reagent, which is directly used and is consumed, dissipated, or depleted, in processing personal property which is intended to be sold ultimately at retail or con- sumed in the maintenance or repair of fabric or clothing, and which may not become a component or integral part of the finished product. The distribution to the public of free newspapers or shoppers guides is a retail sale for purposes of the processing exemption.

Sec. 15. Section 422.43, Code 1997, is amended by adding the following new subsection: NEW SUBSECTION. 12. A tax of five percent is imposed upon the gross receipts from the

sales of prepaid telephone calling cards and prepaid authorization numbers. For the pur- pose of this division, the sales of prepaid telephone calling cards and prepaid authorization numbers are sales of tangible personal property.

Sec. 16. Section 422.45, subsection 7, unnumbered paragraph 1, Code 1997, is amended to read as follows:

A private nonprofit educational institution in this state, nonprofit private museum in this state, tax-certifying or tax-levying body or governmental subdivision of the state, including the state board of regents, state department of human services, state department of transpor- tation, a municipally owned solid waste facility which sells all or part of its processed waste

CH.158 LAWS OF THE SEVENTY-SEVENTH G.A., 1997 SESSION 326

as fuel to a municipally owned public utility, and all divisions, boards, commissions, agen- cies, or instrumentalities of state, federal, county, or municipal government which do not have earnings going to the benefit of an equity investor or stockholder, may make applica- tion to the department for the refund of the sales, services, or use tax upon the gross receipts of all sales of goods, wares, or merchandise, or from services rendered, furnished, or per- formed, to a contractor, used in the fulfillment of a written contract with the state of Iowa, any political subdivision of the state, or a division, board, commission, agency, or instru- mentality of the state or a political subdivision, a private nonprofit educational institution in this state, or a nonprofit private museum in this state if the property becomes an integral part of the project under contract and at the completion of the project becomes public property, is devoted to educational uses, or becomes a nonprofit private museum; except goods, wares, or merchandise, or services rendered, furnished, or performed used in the performance of any contract in connection with the operation of any municipal utility engaged in selling gas, electricity, or heat to the general public or in connection with the operation of a municipal pay television system; and except goods, wares, and merchandise used in the performance of a contract for a "project" under chapter 419 as defined in that chapter other than goods, wares, or merchandise used in the performance of a contract for a "project" under chapter 419 for which a bond issue was approved by a municipality prior to July 1, 1968, or for which the goods, wares, or merchandise becomes an integral part of the project under contract and at the completion of the project becomes public property or is devoted to educational uses.

Sec. 17. Section 422.45, subsection 18, Code 1997, is amended to read as follows: 18. Gross receipts from the sale of tangible personal property, except vehicles subject to

registration, to a person regularly engaged in the business of leasing if the period of the lease is for more than ORe year five months, or in the consumer rental purchase business if the property is to be utilized in a transaction involving a consumer rental purchase agree- ment as defined in section 537.3604, subsection 8, and the leasing or consumer rental of the property is subject to taxation under this division. If tangible personal property exempt under this subsection is made use of for any purpose other than leasing, renting, or con- sumer rental purchase, the person claiming the exemption under this subsection is liable for the tax that would have been due except for this subsection. The tax shall be computed upon the original purchase price. The aggregate of the tax paid on the leasing, renting, or rental purchase of such tangible personal property, not to exceed the amount of the sales tax owed, shall be credited against the tax. This sales tax is in addition to any sales or use tax that may be imposed as a result of the disposal of such tangible personal property.

Sec. 18. Section 422.45, subsection 39, paragraphs a and c, Code 1997, are amended to read as follows:

a. The implement, machinery, or equipment is directly and primarily used in livestock or dairy production. use in aquaculture production. or in the production of flowering, ornamen- tal, or vegetable plants.

c. The replacement part is essential to any repair or reconstruction necessary to the farm machinery's or equipment's exempt use in livestock or dairy production. use in aquaculture production. or in the production of flowering, ornamental, or vegetable plants.

Sec. 19. Section 422.47, subsection 4, paragraph f, Code 1997, is amended to read as follows:

f. In this section, "fuel" includes gas, electricity, water, heat, steam, and any other tangible personal property consumed in creating heat, power, or steam. In this section, "fuel con- sumed in processing" means fuel used or disposed of for processing including grain drying, for providing heat or cooling for livestock buildings or for greenhouses or buildings or parts of buildings dedicated to the production of flowering, ornamental, or vegetable plants in- tended for sale in the ordinary course of business, for use in aquaculture production. or for generating electric current, or in implements of husbandry engaged in agricultural produc- tion. In this subsection, "fuel exemption certificate" means an exemption certificate given by

327 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION CH.158

the purchaser under penalty of peIjury to assist retailers in properly accounting for nontax- able sales of fuel consumed in processing. In this subsection, "substantial change" means a change in the use or disposition of tangible personal property and services by the purchaser such that the purchaser pays less than ninety percent of the purchaser's actual sales tax liability. A change includes a misstatement of facts in an application made pursuant to paragraph "c" or in a fuel exemption certificate.

Sec. 20. Section 422.53, Code 1997, is amended by adding the following new subsection: NEW SUBSECTION. 8. a. Except as provided in paragraph "b", purchasers, users, and

consumers of tangible personal property or enumerated services taxed pursuant to this division, chapter 423, or chapter 422B, may be authorized, pursuant to rules adopted by the director, to remit tax owed directly to the department instead of the tax being collected and paid by the seller. To qualify for a direct pay tax permit, the purchaser, user, or consumer must accrue a tax liability of more than four thousand dollars in tax under this division and chapter 423, in a semimonthly period and make deposits and file returns pursuant to section 422.52. This authority shall not be granted or exercised except upon application to the director and then only after issuance by the director of a direct pay tax permit.

b. The granting of a direct pay tax permit is not authorized for any of the following: (1) Taxes imposed on the sales, furnishing, or service of gas, electricity, water, heat, pay

television service, and communication service. (2) Taxes imposed under sections 423.7 and 423.7 A and chapter 422C.

Sec.21. Section 422.65, Code 1997, is amended to read as follows: 422.65 ALLOCATION OF REVENUE. All moneys received from the franchise tax shall be deposited in the state general fund.

CemmeaeiBg '.v#Il the Meal yeM hegin&i&g July 1, 1996, thefe is appfepriateEl fef eaeh fiseal Yi!lM B=sm the fFa&eliise taK meaey Feeep.'t!El aaEl ElepesiteEl iB the state geaeFal RmEl the sam ef eight milliea eight 1HJ&ElFeEl theysaaEl Elellafs '.vhieh shall he paiEl qtl8Fteriy ea VI8ff'a&ts hy the _eelef, aftef eeFtifieatiea hy the _eelsf, Franchise tax moneys appropri- ated in section 405A.I0 are allocated as follows:

1. Sixty percent to the general fund of the city from which the tax is collected. 2. Forty percent to the county from which the tax is collected. If the financial institution maintains one or more offices for the transaction of business,

other than its principal office, a portion of its franchise tax shall be allocated to each office, based upon a reasonable measure of the business activity of each office. The director shall prescribe, for each type of financial institution, a method of measuring the business activity of each office. Financial institutions shall furnish all necessary information for this pur- pose at the request of the director.

Q\:Iarterly, the diFeelef shall eeFtify te the tl'eaS\:lfef at state the ame\:l&ts te he paiEl te eaeh eity aBEl ee\:l&ty B=em the state geaef81 RmEl. Allmeaeys feeeP.reEl ft:em the fFa&ehise tax aFe appfepriateEl aeeefEliBg te the pfe .. ri5ieas ef this seetiea.

Sec. 22. Section 422.72, subsection 3, unnumbered paragraph 1, Code 1997, is amended to read as follows:

Unless otherwise expressly permitted by section 421.17, subsections 21, 22, ~ 23,25, 29, and 32, sections 252B.9, 421.19, 421.28, 422.20, and 452A63~ and this section, a tax return, return information, or investigative or audit information shall not be divulged to any person or entity, other than the taxpayer, the department, or internal revenue service for use in a matter unrelated to tax administration.

Sec. 23. Section 422.72, Code 1997, is amended by adding the following new subsection: NEW SUBSECTION. 7. Notwithstanding subsection 3, the director shall provide state

tax returns and return information in response to a subpoena issued by the court pursuant to rule of criminal procedure 5 commanding the appearance before the attorney general or an assistant attorney general if the subpoena is accompanied by affidavits from such person

CH.158 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION 328

and from a sworn peace officer member of the department of public safety affirming that the information is necessary for the investigation of a felony violation of chapter 124 or chapter 706B. The affidavits accompanying the subpoenas and the information provided by the director shall remain a confidential record which may be disseminated only to a prosecutor or peace officer involved in the investigation, or to the taxpayer who filed the information and to the court in connection with the filing of criminal charges or institution of a forfeiture action. A person who knowingly files a false affidavit with the director to secure informa- tion or who divulges information received under this subsection in a manner prohibited by this subsection commits a serious misdemeanor.

Sec. 24. Section 423.1, subsection 8, Code 1997, is amended to read as follows: 8. "Retailer maintaining a place of business in this state" or any like term includes any

retailer having or maintaining within this state, directly or by a subsidiary, an office, distri- bution house, sales house, warehouse, or other place of business, or any ageftt representa- tive operating within this state under the authority of the retailer or its subsidiary, irrespec- tive of whether saeh that place of business or ageftt representative is located here perma- nently or temporarily, or whether the retailer or subsidiary is admitted to do business within this state pursuant to chapter 490.

Sec. 25. Section 423.25, Code 1997, is amended to read as follows: 423.25 TAXATION IN ANOTHER STATE. If any person who causes tangible personal property to be brought into this state or who

uses in this state services enumerated in section 422.43 has already paid a tax in another state in respect to the sale or use of the property or the performance of the service, or an occupation tax in respect to the property or service, in an amount less than the tax imposed by this title, the provisions of this title shall apply, but at a rate measured by the difference only between the rate fixed in this title and the rate by which the previous tax on the sale or use, or the occupation tax, was computed. If the tax imposed and paid in the other state is equal to or more than the tax imposed by this title, then a tax is not due in this state on the personal property or service.

Sec. 26. Section 425.7, subsection 3, Code 1997, is amended to read as follows: 3. If the director of revenue and finance determines that a claim for homestead credit has

been allowed by the board of supervisors which is not justifiable under the law and not substantiated by proper facts, the director may, at any time within thirty-six months from July 1 of the year in which the claim is allowed, set aside the allowance. Notice of the disallowance shall be given to the county auditor of the county in which the claim has been improperly granted and a written notice of the disallowance shall also be addressed to the claimant at the claimant's last known address. The claimant or board of supervisors may appeal to the state board of tax review pursuant to section 421.1, subsection 4. The claimant or the board of supervisors may seekjudicial review of the action of the Elif'eetaF af FeVeBtie aBEl fiRaBee state board of tax review in accordance with the 19"lIa admiRistFatP.re JJFaeedtlFe Aet chapter 17 A

If a claim is disallowed by the director of revenue and finance and not appealed to the state board of tax review or appealed to and upheld by the state board of tax review and a petition for judicial review is not filed with respect to the disallowance, any amounts of credits allowed and paid from the homestead credit fund including the penalty, if any, become a lien upon the property on which credit was originally granted, if still in the hands of the claim- ant, and not in the hands of a bona fide purchaser, and any amount so erroneously paid including the penalty, if any, shall be collected by the county treasurer in the same manner as other taxes and the collections shall be returned to the department of revenue and finance and credited to the homestead credit fund. The director of revenue and finance may institute legal proceedings against a homestead credit claimant for the collection of payments made on disallowed credits and the penalty, if any. If a homestead credit is disallowed and the claimant failed to give written notice to the assessor as required by section 425.2 when the

329 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION CH.158

property ceased to be used as a homestead by the claimant, a civil penalty equal to fifty percent of the amount of the disallowed credit is assessed against the claimant.

Sec. 27. Section 426A.6, Code 1997, is amended to read as follows: 426A.6 SETTING ASIDE ALLOWANCE. If the director of revenue and finance determines that a claim for military service tax

exemption has been allowed by a board of supervisors which is not justifiable under the law and not substantiated by proper facts, the director may, at any time within thirty-six months from July 1 of the year in which the claim is allowed, set aside the allowance. Notice of the disallowance shall be given to the county auditor of the county in which the claim has been improperly granted and a written notice of the disallowance shall also be addressed to the claimant at the claimant's last known address. The claimant or the board of supervisors may appeal to the state board of tax review pursuant to section 421.1. subsection 4. The claimant or the board of supervisors may seekjudicial review of the action of the diPeetaF af Fe'leBae aBti MaBee state board of tax review in accordance with chapter 17 A. If a claim is disallowed by the director of revenue and finance and not appealed to the state board of tax review or appealed to and upheld by the state board of tax review and a petition for judicial review is not filed with respect to the disallowance, the credits allowed and paid from the general fund of the state become a lien upon the property on which the credit was originally granted, if still in the hands of the claimant and not in the hands of a bona fide purchaser, the amount so erroneously paid shall be collected by the county treasurer in the same manner as other taxes, and the collections shall be returned to the department of revenue and finance and credited to the general fund of the state. The director of revenue and finance may institute legal proceedings against a military service tax exemption claimant for the collection of payments made on disallowed exemptions.

Sec. 28. Section 426B.l, subsection 1, Code 1997, is amended to read as follows: 1. A property tax relief fund is created in the state treasury under the authority of the

department of f'e7.reBue aBti MaBee human services. The fund shall be separate from the general fund of the state and shall not be considered part of the general fund of the state except in determining the cash position of the state for payment of state obligations. The moneys in the fund are not subject to the provisions of section 8.33 and shall not be trans- ferred, used, obligated, appropriated, or otherwise encumbered except as provided in this chapter. Moneys in the fund may be used for cash flow purposes, provided that any moneys so allocated are returned to the fund by the end of each fiscal year. However, the fund shall be considered a special account for the purposes of section 8.53, relating to elimination of any GAAP deficit. For the purposes of this chapter, unless the context otherwise requires, "property tax relief fund" means the property tax relief fund created in this section.

Sec. 29. Section 426B.4, Code 1997, is amended to read as follows: 426B.4 RULES. The council on human services shall consult with the state-county management commit-

tee created in section 331.438 and the director of Fe>leBue &Btl fiRaBee human services in prescribing forms and adopting rules pursuant to chapter 17 A to administer this chapter.

Sec. 30. Section 427.1, subsection 16, Code 1997, is amended to read as follows: 16. REVOKING EXEMPTION. Any taxpayer or any taxing district may make applica-

tion to the director of revenue and finance for revocation for any exemption, based upon alleged violations of this chapter. The director of revenue and finance may also on the director's own motion set aside any exemption which has been granted upon property for which exemption is claimed under this chapter. The director of revenue and finance shall give notice by mail to the taxpayer or taxing district applicant and to the societies or organi- zations claiming an exemption upon property, exemption of which is questioned before or by the director of revenue and finance, and shall hold a hearing prior to issuing any order for revocation. An order made by the director of revenue and finance revoking or modifying an

CH.158 LAWS OF THE SEVEN1Y-SEVENTH G.A., 1997 SESSION 330

exemption is subject to judicial review in accordance with chapter 17 A. the Iowa adminis- trative procedure Act. Notwithstanding the terms of that Act, petitions for judicial review may be filed in the district court having jurisdiction in the county in which the property is located, and must be filed within thirty days after any order revoking an exemption is made by the director of revenue and finance.

Sec. 31. Section 427.5, unnumbered paragraphs 1 and 2, Code 1997, are amended to read as follows:

A person named in section 427.3, who is a resident of and domiciled in the state of Iowa, shall receive a reduction equal to the exemption, to be made from any property owned by the person or owned by a family farm comoration of which the person is a shareholder and who occupies the propertv and so designated by proceeding as provided in the section. To be eligible to receive the exemption the person claiming it shall have recorded in the office of the county recorder of the county in which is located the property designated for the exemp- tion, evidence of property ownership by that person or the family farm corporation of which the person is a shareholder and the military certificate of satisfactory service, order transfer- ring to inactive status, reserve, retirement, order of separation from service, honorable dis- charge or a copy of any of these documents of the person claiming or through whom is claimed the exemption.

The person shall file with the appropriate assessor on forms obtained from the assessor the claim for exemption for the year for which the person is first claiming the exemption. The claim shall be filed not later than July 1 of the year for which the person is claiming the exemption. The claim shall set out the fact that the person is a resident of and domiciled in the state of Iowa, and a person within the terms of section 427.3, and shall give the volume and page on which the certificate of satisfactory service, order of separation, retirement, furlough to reserve, inactive status, or honorable discharge or certified copy thereof is re- corded in the office of the county recorder, and may include the deSignation of the property from which the exemption is to be made, and shall further state that the claimant is the equitable or legal owner of the property designated or if the property is owned by a family farm cO!poration. that the person is a shareholder of that cO!poration and that the person occupies the property.

Sec. 32. Section 427B.19, subsection 3, unnumbered paragraph 1, Code 1997, is amended to read as follows:

On or before JiIly 1, 1996, aDd 9D 9F hef9Fe July September 1 of each saeeeediBg fiscal year through June 30, 2006, the county auditor shall prepare a statement, based upon the report received pursuant to subsections 1 and 2, listing for each taxing district in the county:

Sec. 33. Section 427B.19, subsection 4, Code 1997, is amended to read as follows: 4. The county auditor shall certify and forward one copy of the statement to the depart-

ment of revenue and finance not later than JQIy September 1 of each year.

Sec. 34. Section 427B.19A, subsection 2, Code 1997, is amended to read as follows: 2. If an amount appropriated for a fiscal year is insufficient to pay all claims, the director

shall prorate the disbursements from the fund to the county treasurers and shall notify the county auditors of the pro rata percentage on or before Aligyst 1 September 30.

Sec. 35. Section 428.4, unnumbered paragraph 3, Code 1997, is amended to read as follows:

Any buildings erected, improvements made, or buildings or improvements removed in a year after the assessment of the class of real estate to which they belong. shall be valued, listed~ and assessed and reported by the assessor to the county auditor after approval of the valuations by the local board of review, and said the auditor shall thereupon enter the taxable value of such building or taxable improvement on the tax list as a part of real estate to be taxed. If such buildings or improvements are erected or made by any person other than

331 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION CH.158

the owner of the land, they shall be listed and assessed to the owner of the buildings or improvements as real estate.

Sec. 36. Section 440.1, Code 1997, is amended to read as follows: 440.1 ASSESSMENT OF OMITTED PROPER1Y. When the director of revenue and finance is vested with the power and duty to assess

property and sai6 an assessment has, for any reason, been omitted, the director shall pro- ceed to assess sai6 the property for each of the omitted years, flet eKeeeEliflg fiv~ yeaFs last past. The omitted assessment shall only apply to the assessment year in which the omitted assessment is made and the four prior assessment years. Chapter 429 shall apply to assess- ments of omitted property.

Sec. 37. Section 441.8, unnumbered paragraphs 6 and 7, Code 1997, are amended to read as follows:

Upon receiving credit equal to one hundred fifty hours of classroom instruction during the assessor's current term of office of which at least ninety of the one hundred fifty hours are from courses requiring an examination upon conclusion of the course, the director of rev- enue and finance shall certify to the assessor's conference board that the assessor is eligible to be reappointed to the position. For assesseFS '»Bese pFeseflt teFlfts et efHee eKpiFe hefere siK yeaFs fFem JalN:l8ry 1, 1979, eF whe aFe persons appointed to complete an unexpired term, the number of credits required to be certified as eligible for reappointment shall be prorated according to the amount of time remaining in the present term of the assessor. !f the person was an assessor in another jurisdiction, the assessor may carry forward any credit hours received in the previous position in excess of the number that would be neces- sary to be considered current in that position.

Within each six-year period following Jaft\1ary 1, 198Q eF the appointment of a deputy assessor appeinted afteF Jamiary 1, 1979, the deputy assessor shall comply with this section except that upon the successful completion of ninety hours of classroom instruction of which at least sixty of the ninety hours are from courses requiring an examination upon conclusion of the course, the deputy assessor shall be certified by the director of revenue and finance as being eligible to remain in the position. If a deputy assessor fails to comply with this section, the deputy assessor shall be removed from the position until successful comple- tion of the reguired hours of credit. If a deputy is appointed to the office of assessor, the hours of credit obtained as deputy pursuant to this section shall be credited to that individual as assessor and for the individual to be reappointed at the expiration of the term as assessor, that individual must obtain the credits which are necessary to total the number of hours for reappointment.

Sec. 38. Section 441.11, Code 1997, is amended to read as follows: 441.11 INCUMBENT DEPU1Y ASSESSORS. The director of revenue and finance shall grant a restricted certificate to any deputy asses-

sor holding office as of January 1, 1976. A deputy assessor possessing such a certificate shall be considered eligible to remain in the deputy's present position provided continuing education requirements are met. To become eligible for another deputy assessor position, a deputy assessor presently holding office is required to obtain certification as provided for in section 441.5 and 441.10. The number of credit hours required for certification as eligible for appointment as a deputy in a jurisdiction other than where the deputy is currently serving shall be prorated according to the completed portion of the deputy's six-year continuing education period.

Sec. 39. Section 444.26, Code 1997, is amended to read as follows: 444.26 PROPER1Y TAX LEVY LIMITATIONS NOT AFFECTED. Sections 444.25, 444.25A; and 444.25B shall not be construed as removing or otherwise

affecting the property tax limitations otherwise provided by law for any tax levy of the political subdivision, except that, upon an appeal from the political subdivision, the state

CH.158 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION 332

appeal board may approve a tax levy consistent with the provisions of section 24.48 or 331.426.

Sec. 40. Section 444.27, subsection I, Code 1997, is amended to read as follows: 1. Faf p~ases afseetiaR 444.25, seetiaRs 24.48 aRe 331. 426 afe ' .. aie faf the meal years

BegiRRiRg July I, 1993, aRe July I, 1994. For purposes of section 444.25A, sections 24.48 and 331.426 are void for the fiscal years beginning July 1,1995, and July 1,1996.

Sec.41. Section 445.32, Code 1997, is amended to read as follows: 445.32 UENS ON BUILDINGS OR IMPROVEMENTS. If a building or improvement is erected or made by a person other than the owner of the

land on which the building or improvement is located, as provided for in section 428.4, the taxes on the building or improvement are and remain a lien on the building or improvement from the date of levy until paid. If the taxes on the building or improvement become delin- quent, as provided in section 445.37, the county treasurer shall collect the tax as provided in sections 445.3 and 445.4. This section does not apply to special assessments, or rates or charges.

Sec. 42. Section 452A 17, subsection I, paragraph a, Code 1997, is amended by adding the following new subparagraph:

NEW SUBPARAGRAPH. (9) Undyed special fuel used in watercraft.

Sec. 43. Section 452A.17, subsection 1, paragraph b, subparagraphs (4) and (5), Code 1997, are amended to read as follows:

(4) The claim shall state the gallonage of motor fuel or undyed special fuel that was used or will be used by the claimant other than in wateferaft af aircraft or to propel motor ve- hicles, the manner in which the motor fuel or undyed special fuel was used or will be used, and the equipment in which it was used or will be used.

(5) The claim shall state whether the claimant used fuel for ' .... atefeFait af aircraft or to propel motor vehicles from the same tanks or receptacles in which the claimant kept the motor fuel or undyed special fuel on which the refund is claimed.

Sec. 44. Section 452A65, unnumbered paragraph 1, Code 1997, is amended to read as follows:

In addition to the tax or additional tax, the taxpayer shall pay a penalty as provided in section 421.27. The taxpayer shall also pay interest on the tax or additional tax at the rate in effect under section 421.7 counting each fraction of a month as an entire month, com- puted from the date the return was required to be filed. If the amount of the tax as determined by the appropriate state agency is less than the amount paid, the excess shall be refunded with interest, the interest to begin to accrue on the first day of the thiFd second calendar month following the date of payment or the date the return was due to be filed or was filed, whichever is the latest, at the rate in effect under section 421.7 counting each fraction of a month as an entire month under the rules prescribed by the appropriate state agency. IB-lieti af a fenme allawee uReef this seetiaR, the lieeRsee may feElUest that the eepaFtHleftt alia' .... the fefaRe ta Be hele as a efeeit fef the lieeRsee. Claims for refund filed under sections 452A 17 and 452A21 shall accrue interest beginning with the first day of the second calen- dar month following the date the refund claim is received by the department.

Sec. 45. Section 633.699, subsection 7, Code 1997, is amended to read as follows: 7. To make any required division, allocation, or distribution in whole or in part in money,

securities, or other property, and in undivided interests therein pro rata, nonpro rata, or in combination of these methods, and to continue to hold any remaining undivided interest in trust.

Sec. 46. Section 633.703A, subsection 1, unnumbered paragraph 1, Code 1997, is amended to read as follows:

333 LAWS OF THE SEVENlY-SEVENTH G.A., 1997 SESSION CH.158

In order to allow a trust to qualify as a marital deduction trust for federal estate tax pur- poses, as a qualified subchapter S trust for federal income tax purposes, as separate trusts for federal generation-skipping tax purposes, or for any other federal or state income, estate, excise, or inheritance tax benefit or to facilitate the administration of a trust or trusts, the governing instrument of a trust may be amended as follows to permit the trust to be divided in cash or in kind. including in undivided interests. by pro rata or nonpro rata division. or in any combination thereof. into one or more separate trusts or be consolidated with one or more other trusts into a single trust:

Sec. 47. Section 990.14, subsection 6, Code 1997, as amended by 1997 Iowa Acts, House File 212,· section 2, is amended to read as follows:

6. Real property used in the operation of a racetrack or racetrack enclosure which is exempt from property taxation under another provision of the law, including being exempt because it is owned by a city, county, state, or charitable or nonprofit entity, may be subject to real property taxation by any taxing district in which the real property used in the opera- tion of the racetrack or racetrack enclosure is located. To subject such real property to taxation, the taxing authority of the taxing district shall pass a resolution imposing the tax and. if the resolution is passed prior to September 1. 1997. shall notify the eewJ:ty local assessor, diFeeteF ef Fe".'elN:!e aBd maBee, and the owner of record of the real property by September 1. 1997. preceding the fiscal year in which the real property taxes are due and payable. The assessed value shall be determined and notice of the assessed value shall be provided to the county auditor by the departmeBt ef Fe".'eBtie aBd fiBaBee local assessor by October 15. 1997. and the owner may protest the assessed value to the state local board of ~ review by December 1. 1997. For resolutions passed on or after September 1. 1997. the taxing authority shall notify the local assessor and owner of record prior to the next assess- ment year and the valuation and appeal shall be done in the manner and time as for other valuations. Property taxes due as a result of this subsection shall be paid to the county treasurer in the manner and time as other property taxes. The county treasurer shall remit the tax revenue to those taxing authorities imposing the property tax under this subsection. Real property subject to tax as provided in this subsection shall continue to be taxed until such time as the taxing authority of the taxing district repeals the resolution subjecting the property to taxation. NetwithstaBEliBg seetieB 990.7, the depaFbBeBt ef Fe".'elN:!e aBd fi Bauee shall adept mles te implemeBt this stibseetieB.

Sec. 48. Sections 236.15A, 427A.13, 440.2, 440.3, 440.4, 444.25, and 444.28, Code 1997, are repealed.

Sec. 49. Sections 11 and 13 of this Act which amend sections 422.5 and 422.32 apply retroactively to January 1, 1997, for tax years beginning on or after that date.

Sec. 50. Section 17 of this Act, amending section 422.45, subsection 18, being deemed of immediate importance, takes effect upon enactment.

Sec. 51. Sections 6,12, and 22 of this Act, enacting section 421.17, subsection 22Aand amending section 422.20 and section 422.72, subsection 3, and relating to contractual agree- ments by the department of revenue and finance, being deemed of immediate importance, take effect upon enactment.

Sec. 52. Section 20 of this Act, enacting section 422.53, subsection 8, takes effect Janu- ary 1, 1998.

Sec. 53. Sections 42 and 43 of this Act, amending section 452A.17, subsection 1, being deemed of immediate importance, take effect upon enactment and apply retroactively to July 1, 1996.

Approved May 19,1997

• Chapter 9 herein