October 2018

October 2018

Iowa Department of Revenue Issues Key Guidance on DPAD, Like-Kind Exchange, and 2019 Income Tax Brackets

For tax year 2018, Iowa has coupled only with selected federal changes. With those exceptions, Iowa tax law looks to the Internal Revenue Code as it existed on January 1, 2015. This non-conformity has presented some challenges. Recently, the Iowa Department of Revenue issued guidance on several provisions that have created the greatest number of questions. Yesterday, the Department also issued its 2019 tables for income tax brackets, interest rates, and standard deductions. This article summarizes these notices.

DPAD – Alive and Well in Iowa in 2018

The Tax Cuts and Jobs Act repealed federal DPAD (IRC § 199) for tax years beginning on or after January 1, 2018. Iowa, however, has not coupled with this repeal for tax years beginning on or after January 1, 2018, but before January 1, 2019. Consequently, DPAD is available to Iowa taxpayers for tax year 2018. This has created many questions given the fact that Iowa has never had its own Form 8903. The federal DPAD has always just modified Iowa income.

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Sound Advice Can Help Prevent Costly Traps When Facing Financial Distress

As tough times continue in the farm sector, more farmers are calling it quits. In particular, many operators who do not own ground and are dependent upon renting the land of others are struggling to hold on. Many are selling farm assets and securing full-time off-farm employment to make ends meet. It’s a quiet exodus, but it comes with hidden danger.

Liquidating assets without a careful plan can generate tax consequences that will impair any hope for a fresh start down the road. As farmers weigh these tough decisions, it is imperative that they seek good counsel regarding their options. Although cash flow is tight, good advice is worth the investment.

It is important to remember that depreciated assets, when sold, generate ordinary income tax liability. Depreciation is intended to allow farmers to write off the cost of a business asset over its useful life. Especially in light of bonus depreciation and Section 179 expensing, these costs are often written off long before the life of the asset ends. If the owner sells the

asset while it still has value, IRC § 1245 steps in to “recapture” ordinary income tax on the difference between the current basis of the asset and the sales price. Continue reading here.

Proposed Regulations Would Allow HRAs Integrated with Individual Health Insurance in 2020

Newly published proposed regulations from the U.S. Departments of Treasury, Health and Human Services, and Labor, if implemented, would significantly change the landscape in the healthcare market, reinstating (in new form) some health care reimbursement options that existed prior to the Affordable Care Act.

Not intended to be effective until final regulations are issued and not before 2020, the proposed rules seek to implement President Trump’s October 12, 2017, Executive Order 13813, which directed the agencies to propose guidance to expand employers’ ability to offer health reimbursement arrangements (HRAs) to their employees. The proposed rules would seek to restore some plan options to employers that ACA regulations subjected to a potential $100 per day per employee penalty.

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CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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