A bill for an act relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions.
Summary
Senate File 201 would amend Iowa’s individual income tax law to create a new subtraction from net income for certain amounts received from nonqualified deferred compensation plans. The bill allows eligible taxpayers to exclude up to $500,000 of income or earnings from such a plan, provided the taxpayer is disabled, age 55 or older, or is a qualifying surviving spouse or survivor with an insurable interest. The measure is modeled on Iowa’s existing retirement income exclusion and applies the same general eligibility framework to this category of deferred compensation.
The bill also includes a special rule for married taxpayers filing separate returns, requiring the annual exclusion amount to be allocated between spouses in proportion to each spouse’s share of the deferred compensation income. In addition, the bill is retroactive to January 1, 2025, meaning it would apply to tax years beginning on or after that date.
Impact
SF 201 would expand Iowa’s income tax subtraction provisions in section 422.7 of the Code by adding a new exemption for nonqualified deferred compensation plan distributions and related earnings. This would reduce taxable income for qualifying recipients and could lower state income tax liability for affected retirees, disabled taxpayers, and certain surviving spouses. Because the bill is retroactive to the start of 2025, taxpayers with qualifying income for that year could benefit immediately if the bill becomes law.
Sentiment
Based on the bill text and the limited available legislative context, the measure appears to be framed as a targeted tax relief bill rather than a controversial structural tax change. The absence of recorded committee testimony or votes suggests there is not yet a documented public debate in the available materials. Overall, the bill’s design mirrors an existing retirement income exclusion, which may indicate a generally favorable or at least familiar policy approach among its sponsors and early reviewers.
Contention
The main policy issue is the scope of the tax break: the bill extends a substantial exclusion to income from nonqualified deferred compensation plans, which are typically available to select employees and can involve higher-income earners. That could raise questions about equity, revenue impact, and whether the benefit should be limited to the same groups already eligible for retirement income exclusions. Another possible point of discussion is the retroactive effective date, which can affect prior tax-year filings and state revenue estimates. No specific objections or supporters are identified in the provided committee materials.
Similar To
A bill for an act relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions.(See HF 961.)
Similar To
A bill for an act relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions.(Formerly HF 94.)
A bill for an act relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions.(Formerly HF 94.)
A bill for an act relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions.(See HF 961.)
A bill for an act exempting from state income tax income received by a certified public accountant performing certain audits or examinations of governmental subdivisions, and including retroactive applicability provisions.
A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.(Formerly HF 56.)
A bill for an act providing a deduction from the individual and corporate income taxes for the amount of certain income derived from indigent representation by an eligible law firm, and including retroactive applicability provisions.
A bill for an act creating a premarital counseling tax credit available against the individual income tax, and including retroactive applicability provisions.
A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.
A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.
A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.(See HF 624.)