Culver seeks ways to address tax snafu

DES MOINES – Gov. Chet Culver said Wednesday he has asked state tax officials to provide “any and all options” he might use to address a snafu that could prove costly for flood victims and other taxpayers.

Federal changes approved for 2008 offered income-tax deductions, exemptions and other advantages for items like disaster-related expenses, business equipment depreciation, education-related expenses, tuition and fees and certain sales tax charges. The state, however, did not retroactively adopt those deductions for state tax purposes.

State Department of Revenue officials say the result means some income tax filers, who claimed the same benefits on their Iowa returns as on their federal return, likely will owe money to the state treasury either via increased tax liabilities or the return of part of the tax refunds they received.

"The last thing our state tax laws should do is burden those who were victims of last year's historic floods and storms, and the issue of adopting federal tax law changes to Iowa should be addressed,” Culver said in a statement issued by an aide Wednesday.

“Therefore, I am taking two steps. First, I have directed the Department of Revenue to provide me with any and all options that may be implemented by executive action this calendar year. Second, I will be speaking with legislative leaders, from both sides of the political aisle, to address this issue in 2010 with the same bipartisanship approach that we gave to other disaster-related legislation," according to the statement.

Meanwhile, Rep. Christopher Rants, a Sioux City Republican eyeing a 2010 bid for governor, said Wednesday Iowa disaster victims should be exempt from paying extra state income taxes due to the problem created by legislative failure to “couple” with federal tax changes.

Rants said taxpayers were following the advice that state officials gave tax preparation specialists when they claimed deductions and other breaks for flood-related expenses on their 2008 state income tax returns – exclusions that later were voided when majority Democrats in the Iowa Legislature failed to meld federal tax changes with the state tax code.

“It's not fair that those who were flooded out are being punished today for listening to the advice of their state government,” Rants said in a statement. “Victims and tax preparers who deducted their flood related losses should be given a tax amnesty from having to pay the tax collector for listening to faulty advice.”

Rants said minority GOP legislators repeatedly urged Democrats to authorize tax law updates that would mirror the federal changes, but those calls were ignored. “Today people are feeling the real pain of Gov. Culver's decision to reject that idea,” he said.

Bob Vander Plaats, another Sioux City Republican with 2010 gubernatorial aspirations, said the failure of Culver and legislative Democrats to mesh Iowa's tax code with federal disaster relief provisions was “simply a way to take money from people who had already suffered far too much.”

Sen. Matt McCoy, D-Des Moines, vice chairman of the Senate Ways and Means Committee, said Tuesday that lawmakers discussed the possibility of adopting the federal tax changes, but the issue got knotted with other tax proposals that stalled during the 2008 session.

The issue was not taken up because it carried at least a $56 million revenue price tag during an already tough budgeting cycle, McCoy added.

Vander Plaats said the effect of the Democratic inaction was to balance the state budget on the backs of thousands of flood victims.