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HF 980

A bill for an act relating to unemployment insurance taxes on employers.

2025-2026 Regular Session

HF 980 lowers Iowa employer UI tax burdens by cutting the taxable wage base and maximum contribution rate, while consolidating rate tables and adjusting reserve calculations.

Explanation of vote.
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WeVote Research Nonpartisan
Bill Summary · HF 980

Summary — HF 980 (introduced March 27, 2025)

Subject: Unemployment insurance (UI) taxation of employers; labor & employment; taxation

Purpose / intent

HF 980 revises how Iowa calculates employers’ taxable wage base and UI contribution rates with the stated effect of lowering employer UI tax burdens. The bill also restructures contribution rate tables and benefit-ratio ranks and alters certain reserve-ratio computations that determine which tax table is in effect.

Key provisions

  • Taxable wages: changes the statutory definition by excluding wages an Iowa employer pays to an employee who works in another state when that other state extends employment reciprocity to Iowa.
  • Taxable wage base: reduces the taxable-wage base used to compute employer UI taxes from 66.7% of the prior-year statewide average weekly wage (currently yielding $39,500) to 33.3% (estimated taxable wage base ≈ $19,800). If the state-calculated taxable wage would fall below the federal minimum ($7,000), the federal definition controls.
  • Contribution rates / tables:
    • Lowers the statutory maximum employer contribution rate from 9.0% to 5.4%.
    • Reduces the number of benefit-ratio ranks from 21 to 9.
    • Reduces the number of contribution rate tables from 8 to 4 (renamed from numbered to lettered tables).
    • Reassigns new employers’ initial benefit-ratio ranks: new nonconstruction contributory employers move from rank 12 → rank 4; new construction/landscaping contributory employers move from rank 21 → rank 9.
  • Reserve ratio computation: changes how the “current reserve ratio” is calculated (uses the preceding year rather than the prior five calendar quarters), removes the requirement to add $150 million on the computation date, and removes the highest cost–benefit ratio from that computation.
  • Mechanics: changes how the effective contribution-rate table for a rate year is determined, and clarifies triggers that can shift to a higher-rate table if fund ratios decline.
  • Effective date: most tax-base and table changes take effect in calendar year (CY) 2026 (per Fiscal Note assumptions).

Fiscal impact (Legislative Services Agency estimates)

  • HF 980 is estimated to materially reduce annual UI Trust Fund revenue:
    • CY2026: revenue reduction ≈ $193.2 million
    • CY2027: ≈ $229.4 million
    • CY2028: ≈ $241.2 million
    • CY2029: ≈ $253.5 million
    • CY2030: ≈ $266.3 million
  • Trust Fund balance projection under HF 980 (LSA estimates): declines from roughly $2.06 billion in CY2026 to ~$1.78 billion by CY2030 (assumes no additional one‑time federal funds, 3.0% annual wage growth, and Contribution Table D in effect unless triggers require a higher table).

Who is affected

  • Primary: Iowa employers (lower taxable wages and lower possible maximum contribution rates reduce employer UI tax liabilities).
  • Indirect: The UI Trust Fund (reduced revenue could increase the likelihood of needing higher contribution tables in future downturns to stabilize the fund).
  • Note: The taxable-wage exclusion applies only where reciprocity exists between Iowa and the other state.

Legislative actions / amendments

  • Introduced March 27, 2025; referred to Ways & Means calendar.
  • Fiscal Note issued April 8, 2025.
  • Multiple amendments filed (H-1318, H-1319, H-1320, H-1321, H-1322, H-1323, H-1277). Of these, H-1277 (technical text change) was adopted (May 14). Several substantive amendments (including H-1322 reporting requirement, H-1321 international-outsourcing agreement, H-1323 wording change) were put to roll-call but failed (yeas in the 26–28 range; nays ~58–60). Several other amendment attempts were ruled not germane or failed on motions to suspend rules.
  • June 27, 2025: multiple “explanation of vote” entries recorded (reflecting floor votes and positions).

Important context and assumptions

  • LSA estimates use CY2024 data and assume changes take effect CY2026.
  • The UI Trust Fund balance as reported by USDOL on March 1, 2025, was $1.887 billion (exclusive of the Unemployment Compensation Reserve Fund).
  • Projections assume no future one-time federal deposits and steady employment/unemployment trends; actual fiscal outcomes depend on economic conditions and any future statutory triggers that could change contribution tables.

If you’d like, I can prepare a side-by-side comparison of current law vs. HF 980 showing example employer tax calculations under typical wage scenarios.

Compiled from official sources — confirm details with the bill’s official record.

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