Week 7 Legislative Update

Legislative Update 

The 2022 Iowa Legislative Session

Week of February 21st, 2022


This Week in the Iowa Legislature

A sense of normalcy returned to the legislature as both chambers spent hours in caucus each day before taking up over one hundred bills throughout the week. They focused on moving their priorities through one chamber to ensure those bills had the best possible chance of beating the second funnel deadline, now just 3 weeks away. In a surprising turn of events midweek, the tax plan became the center of attention consuming the bandwidth in both chambers.


Tax Plan Passage

After Governor Reynolds was selected as the Republican Party’s spokesperson to respond to President Biden’s State of the Union Address on March 1st, she called upon legislative leaders to quickly pass the pending tax bill both chambers were intensively working on. Republican leaders moved quickly to come to an agreement so Governor Reynolds could highlight it in her speech on the national stage next week. Leadership in both chambers worked overtime coming to an agreement overnight on Wednesday and then passed HF 2317  in both chambers on Thursday. The Senate passed the bill with bipartisan support in a 32-16 vote with two Democrats joining the Republicans in support. Within hours, the House amended and passed HF 2317, as negotiated with the Senate, also with bipartisan support in a 61-34 vote. Republicans trumpeted the plan as giving money back to taxpayers and a way to attract new residents while making Iowa more competitive. Many Democrats argued the plan is regressive, only a tax cut for the rich, and questioned how state revenues and services will be maintained in the years to come. The final plan which now awaits the Governor’s signature does not include the funding mechanism for IWILL as the Senate had advocated for but does include the following provisions:

  • A four-year phase in of a 3.9% flat state income tax rate
  • Retirement income, including farmer cash rent and company-owned stock plans, will be exempt from the state income tax
  • A corporate income tax rate reduction mechanism where every year the state brings in more than $700 million in business tax revenue, the corporate income tax rate will be reduced gradually until it reaches a flat 5.5%
  • A few corporate tax credits will be reduced in refundability over time including the most expensive Research and Activities Tax Credit, which paid out over $40 million in refunds last year
  • An automatic transfer from the Taxpayer Relief Fund to maintain government services funding if revenues do not meet expectations in the coming years

With the tax plan negotiations complete and several members with pending primaries, an early adjournment is likely in the cards as they now turn their attention to passing their budget bills.

Looking Ahead

Both the House and Senate plan to continue floor debate in the coming week in addition to getting their committees back to work since bills passed in one chamber must move through the opposite chamber’s committee process. This likely means subcommittees will increase in frequency in order to move bills to meet the second funnel deadline. Another busy week ahead is expected. A list of scheduled committees and subcommittees with their virtual access information can be found at the provided link. If you have challenges connecting with the virtual link, you can always call in.