Refactor the Iowa state tax model starting in 2023

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: patch
+  changes:
+    fixed:
+    - Iowa income tax structure on and after 2023.

policyengine_us/parameters/gov/states/ia/tax/income/alternate_tax/deduction/nonelderly.yaml

@@ -1,6 +1,7 @@
 description: Iowa has a alternate tax with this deduction against modified income for tax units without an elderly head or spouse.
 values:
   2021-01-01: 13_500
+
 
 metadata:
   label: Iowa deduction used in tax alternate tax calculations for nonelderly

policyengine_us/parameters/gov/states/ia/tax/income/alternate_tax/rate.yaml

@@ -1,6 +1,7 @@
 description: Iowa allows an alternate tax for non-single filing units that has this flat tax rate.
 values:
   2021-01-01: 0.0853
+  2023-01-01: 0.06
 
 metadata:
   label: Iowa alternate tax rate
@@ -15,3 +16,5 @@ metadata:
     href: https://tax.iowa.gov/sites/default/files/2023-01/2022IA1040%2841001%29.pdf#page=1
   - title: 2022 IA1040 Income Tax Return instructions
     href: https://tax.iowa.gov/sites/default/files/2023-03/2022%20Expanded%20Instructions_022023.pdf#page=54
+  - title: 2023 Iowa Alternate Tax Worksheet
+    href: https://revenue.iowa.gov/media/2754/download?inline

policyengine_us/parameters/gov/states/ia/tax/income/modified_income/sources.yaml

@@ -4,6 +4,11 @@ values:
     - ia_net_income
     - ia_pension_exclusion
     - ia_reportable_social_security
+  2023-01-01:
+    - ia_taxable_income_consolidated
+    - taxable_income_deductions
+    - qualified_business_income_deduction
+
 
 metadata:
   unit: list
@@ -17,4 +22,5 @@ metadata:
     href: https://tax.iowa.gov/sites/default/files/2023-01/2022IA1040%2841001%29.pdf#page=1
   - title: 2022 IA1040 Income Tax Return instructions
     href: https://tax.iowa.gov/sites/default/files/2023-03/2022%20Expanded%20Instructions_022023.pdf#page=37
-
+  - title: 2023 Iowa Alternate Tax Worksheet
+    href: https://revenue.iowa.gov/media/2754/download?inline

policyengine_us/parameters/gov/states/ia/tax/income/taxable_income/additions.yaml

@@ -0,0 +1,18 @@
+description: Iowa adds these sources to taxable income on and after 2023.
+values:
+  2021-01-01: []
+    # Interest from state and municipal securities 
+    # Dividends from state and municipal bonds
+    # Bonus Depreciation
+    # Net operating loss 
+
+
+metadata:
+  unit: list
+  period: year
+  label: Iowa taxable income additions
+  reference:
+  - title: 2023 IA1040 Iowa Income Tax Return
+    href: https://revenue.iowa.gov/media/2746/download?inline
+  - title: Iowa income tax law, 422.7 
+    href: https://www.legis.iowa.gov/docs/code/422.7.pdf

policyengine_us/parameters/gov/states/ia/tax/income/taxable_income/subtractions.yaml

@@ -0,0 +1,26 @@
+description: Iowa subtracts these sources from taxable income on and after 2023.
+values:
+  2021-01-01:
+    # Line 1B
+    - us_govt_interest
+    # Dividends from federal securitites
+    # Line 5B 
+    - taxable_social_security
+    # Line 6B
+    - military_service_income
+    # Line 7B
+    - ia_pension_exclusion
+    # Railroad unemployment income 
+    # Bonus Depreciation
+    # Iowa Health Insurance Deduction
+    # Iowa capital gains deduction
+
+metadata:
+  unit: list
+  period: year
+  label: Iowa taxable income subtractions
+  reference:
+  - title: 2023 IA1040 Iowa Income Tax Return
+    href: https://revenue.iowa.gov/media/2746/download?inline
+  - title: Iowa income tax law, 422.7 
+    href: https://www.legis.iowa.gov/docs/code/422.7.pdf

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/consolidated/ia_alternate_tax_consolidated.yaml

@@ -0,0 +1,19 @@
+- name: Elderly present
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_modified_income: 100_000
+    greater_age_head_spouse: 65
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_alternate_tax_consolidated: 4_080
+
+- name: Elderly not present
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_modified_income: 100_000
+    greater_age_head_spouse: 64
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_alternate_tax_consolidated: 5_190

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/consolidated/ia_income_tax_consolidated.yaml

@@ -0,0 +1,32 @@
+- name: Eligible, regular tax is lower than alternate tax
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_regular_tax_consolidated: 10_000
+    ia_alternate_tax_eligible: true
+    ia_alternate_tax_consolidated: 12_000
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_income_tax_consolidated: 10_000
+
+- name: Eligible, alternate tax is lower than regular tax
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_regular_tax_consolidated: 12_000
+    ia_alternate_tax_eligible: true
+    ia_alternate_tax_consolidated: 10_000
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_income_tax_consolidated: 10_000
+
+- name: Ineligible, regular tax is lower than alternate tax
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_regular_tax_consolidated: 12_000
+    ia_alternate_tax_eligible: false
+    ia_alternate_tax_consolidated: 10_000
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_income_tax_consolidated: 12_000

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/consolidated/ia_regular_tax_consolidated.yaml

@@ -0,0 +1,19 @@
+- name: Single person with $40,000 of employment income
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_taxable_income_consolidated: 40_000
+    filing_status: SINGLE
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_regular_tax_consolidated: 1_990.8
+
+- name: Joint person with $40,000 of employment income
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    ia_taxable_income_consolidated: 40_000
+    filing_status: JOINT
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_regular_tax_consolidated: 1_877.6

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/consolidated/taxable_income/ia_taxable_income_consolidated.yaml

@@ -0,0 +1,19 @@
+- name: Taxable income with subtractions
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    taxable_income: 1_000
+    ia_taxable_income_modifications_consolidated: -3_000
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_taxable_income_consolidated: 0
+
+- name: Taxable income with additions
+  absolute_error_margin: 0.01
+  period: 2023
+  input:
+    taxable_income: 1_000
+    ia_taxable_income_modifications_consolidated: 100
+    state_code: IA
+  output:  # from hand calculation following IA 6251 form
+    ia_taxable_income_consolidated: 1_100

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/ia_income_tax_before_credits.yaml

@@ -49,3 +49,30 @@
         state_code: IA
   output:
     ia_income_tax_before_credits: 1_500
+
+- name: Post 2023, only the consolidated structure applies
+  period: 2023
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        ia_base_tax_indiv: 700
+        ia_amt_indiv: 100
+        ia_base_tax_joint: 1_500
+        ia_amt_joint: 50
+      person2:
+        is_tax_unit_spouse: true
+        ia_base_tax_indiv: 600
+        ia_amt_indiv: 100
+        ia_base_tax_joint: 0
+        ia_amt_joint: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        ia_income_tax_consolidated: 4_000
+    households:
+      household:
+        members: [person1, person2]
+        state_code: IA
+  output:
+    ia_income_tax_before_credits: 4_000

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/ia_integration.yaml

@@ -342,3 +342,31 @@
         state_code: IA
   output:  # expected ia_income_tax from patched TAXSIM35 2023-06-23 version
     ia_income_tax: 14_590.43
+
+- name: Single person with $40,000 of employment income
+  absolute_error_margin: 1
+  period: 2023
+  input:
+    people:
+      person1:
+        employment_income: 40_000
+    households:
+      household:
+        members: [person1]
+        state_code: IA
+  output:  
+    ia_income_tax: 1_195
+
+- name: Single person with $40,000 of employment income
+  absolute_error_margin: 1
+  period: 2024
+  input:
+    people:
+      person1:
+        taxable_interest_income: 100_000
+    households:
+      household:
+        members: [person1]
+        state_code: IA
+  output:  
+    ia_taxable_income_consolidated: 85_400

policyengine_us/tests/policy/baseline/gov/states/ia/tax/income/ia_pension_exclusion_eligible.yaml

@@ -116,3 +116,21 @@
         state_code: IA
   output:
     ia_pension_exclusion_eligible: [true, true]
+
+- name: Only person who meets the age requirement is not a head or spouse
+  period: 2023
+  input:
+    people:
+      person1:
+        age: 54
+      person2:
+        age: 54
+      person3:
+        age: 70
+        is_tax_unit_head_or_spouse: false
+    households:
+      household:
+        members: [person1, person2, person3]
+        state_code: IA
+  output:
+    ia_pension_exclusion_eligible: [false, false, false]

policyengine_us/variables/gov/states/ia/tax/income/consolidated/ia_alternate_tax_consolidated.py

@@ -0,0 +1,26 @@
+from policyengine_us.model_api import *
+
+
+class ia_alternate_tax_consolidated(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Iowa alternate tax for years on or after 2023"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://revenue.iowa.gov/media/2754/download?inline"
+    defined_for = StateCode.IA
+
+    def formula(tax_unit, period, parameters):
+        modified_income = tax_unit("ia_modified_income", period)
+        # compute alternate tax following worksheet in the instructions
+        p = parameters(period).gov.states.ia.tax.income.alternate_tax
+        # ... determine alternate tax deduction
+        elderly_head_or_spouse = (
+            tax_unit("greater_age_head_spouse", period) >= p.elderly_age
+        )
+        alt_ded = where(
+            elderly_head_or_spouse, p.deduction.elderly, p.deduction.nonelderly
+        )
+        # ... determine alternate tax amount
+        alt_taxinc = max_(0, modified_income - alt_ded)
+        return alt_taxinc * p.rate

policyengine_us/variables/gov/states/ia/tax/income/consolidated/ia_income_tax_consolidated.py

@@ -0,0 +1,21 @@
+from policyengine_us.model_api import *
+
+
+class ia_income_tax_consolidated(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Iowa income tax for years on or after 2023"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://revenue.iowa.gov/media/2746/download?inline",
+        "https://www.legis.iowa.gov/docs/code/422.7.pdf",
+    )
+    defined_for = StateCode.IA
+
+    def formula(tax_unit, period, parameters):
+        reg_tax = tax_unit("ia_regular_tax_consolidated", period)
+        alt_tax_eligible = tax_unit("ia_alternate_tax_eligible", period)
+        alt_tax = tax_unit("ia_alternate_tax_consolidated", period)
+        smaller_tax = min_(reg_tax, alt_tax)
+        return where(alt_tax_eligible, smaller_tax, reg_tax)

policyengine_us/variables/gov/states/ia/tax/income/consolidated/ia_regular_tax_consolidated.py

@@ -0,0 +1,22 @@
+from policyengine_us.model_api import *
+
+
+class ia_regular_tax_consolidated(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Iowa regular tax for years on or after 2023"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://revenue.iowa.gov/media/2748/download?inline"
+    defined_for = StateCode.IA
+
+    def formula(tax_unit, period, parameters):
+        taxable_income = tax_unit("ia_taxable_income_consolidated", period)
+        p = parameters(period).gov.states.ia.tax.income.rates
+        filing_status = tax_unit("filing_status", period)
+        joint = filing_status == filing_status.possible_values.JOINT
+        return where(
+            joint,
+            p.by_filing_status.joint.calc(taxable_income),
+            p.by_filing_status.other.calc(taxable_income),
+        )

policyengine_us/variables/gov/states/ia/tax/income/consolidated/taxable_income/ia_additions_consolidated.py

@@ -0,0 +1,13 @@
+from policyengine_us.model_api import *
+
+
+class ia_additions_consolidated(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Iowa additions to taxable income for years on or after 2023"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://www.legis.iowa.gov/docs/code/422.7.pdf"
+    defined_for = StateCode.IA
+
+    adds = "gov.states.ia.tax.income.taxable_income.additions"

policyengine_us/variables/gov/states/ia/tax/income/consolidated/taxable_income/ia_subtractions_consolidated.py

@@ -0,0 +1,13 @@
+from policyengine_us.model_api import *
+
+
+class ia_subtractions_consolidated(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Iowa subtractions from taxable income for years on or after 2023"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://www.legis.iowa.gov/docs/code/422.7.pdf"
+    defined_for = StateCode.IA
+
+    adds = "gov.states.ia.tax.income.taxable_income.subtractions"

policyengine_us/variables/gov/states/ia/tax/income/consolidated/taxable_income/ia_taxable_income_consolidated.py

@@ -0,0 +1,22 @@
+from policyengine_us.model_api import *
+
+
+class ia_taxable_income_consolidated(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Iowa taxable income for years on or after 2023"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://revenue.iowa.gov/media/2746/download?inline",
+        "https://www.legis.iowa.gov/docs/code/422.7.pdf",
+    )
+    defined_for = StateCode.IA
+
+    def formula(tax_unit, period, parameters):
+        fed_taxable_income = tax_unit("taxable_income", period)
+        modifications = tax_unit(
+            "ia_taxable_income_modifications_consolidated", period
+        )
+        # Modifications include additions and subtractions
+        return max_(0, fed_taxable_income + modifications)