House passes $120 Million in pandemic relief

Tuesday, March 9, 2021

This week the House passed Senate File 364 that provides three very important pandemic related tax exemptions. Collecting tax on pandemic related payments from Iowa’s small businesses and families is not the right thing to do.

First, Senate File 364 fully conforms with federal law for those fiscal-year filers who previously were excluded from such conformity and allows such filers to take business expense deductions using federal paycheck protection program loan proceeds that were forgiven. With this provision, all businesses who received PPP loans that were forgiven will be able to take expense deductions without regard to whether they are a calendar or fiscal filer.

Second, the bill exempts any qualifying COVID-19 grant issued to an individual by the economic development authority, the Iowa finance authority or the department of agriculture and land stewardship from income tax. A “qualifying COVID-19 grant” includes any grant identified by the department of revenue by rule that was issued under a grant program administered by the economic development authority, Iowa finance authority or the department of agriculture and land stewardship to provide financial assistance to individuals or businesses economically impacted by the COVID-19 pandemic.

Finally, the amendment excludes unemployment insurance (UI) payments received through recent federal pandemic unemployment insurance programs from Iowa taxable income. The changes are retroactive to Jan. 1, 2020, and apply to tax year (TY) 2020. The federal programs included in the exemption are:

·      Federal Pandemic Unemployment Compensation (FPUC)

·      Pandemic Unemployment Assistance (PUA)

·      Pandemic Emergency Unemployment Compensation (PEUC)

·      Unemployment compensation approved by presidential declaration and known as Lost Wages Assistance (LWA).

The funds to pay for the bill with amendment come from the Taxpayer Relief Fund, which has $90.2 million currently in its account in FY 2021. The additional funds will come from the ending balance. After the December 2020 Revenue Estimating Conference, the FY 21 ending balance was projected to be $443.4 million.

Since it was government that forced shutdowns which led to job and income loss, taxing pandemic relief money is not the right thing for Iowa.