On March 15, 2019, Governor Kim Reynolds signed Senate File 220 (SF 220), which increases the Iowa IRC Section 179 expense allowance deduction for corporations and financial institutions. In 2018, Senate File 2417 raised the IRC Section 179 expansion cap and investment limits for individual taxpayers to $70,000 and $280,000, respectively (see Tax Alert 2018-1123). This increase was not effective for corporations (including S corporations) and financial institutions as the limitations for those taxpayers were $25,000 and $200,000, respectively. This change will put corporations and financial institutions on par with the treatment of individual taxpayers.

The changes enacted by SF 220 are retroactively effective for tax years beginning on or after January 1, 2018.

Implications

While full conformity with IRC Section 179 was preferable to many Iowa taxpayers, the changes adopted by SF 220 provide equitable treatment among all Iowa taxpayers for the same tax year. For a calendar-year taxpayer, the 2018 Iowa corporate, S corporation and financial institution returns are due April 30, 2019 (unless extended). Early filers may want to consider amending returns if beneficial to do so.

EY will continue to monitor developments in this area. The 2019 legislative session is scheduled to end on May 3, 2019.

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