A bill for an act relating to deducting excess business losses for purposes of the individual income tax, and including retroactive applicability provisions.

This Iowa bill (HSB 229) allows individual taxpayers to deduct business losses previously disallowed due to federal tax rules for state income tax purposes. Specifically, it permits deductions for business losses that were excluded under federal Section 461(l) limitations during tax years 2021-2022. The bill applies retroactively to those years, meaning taxpayers can now adjust their state tax filings for 2021 and 2022 to include these previously disallowed losses. It directly affects Iowa residents who filed business tax returns during 2021-2022 and had federal business losses exceeding the $305,000 (single) or $610,000 (married) federal thresholds. The change modifies Iowa’s tax code to align with federal carryforward rules for disallowed business losses during that period.