DES MOINES - A decision by majority Democrats in the Iowa Legislature last session to not “couple” state tax laws with federal tax breaks is hitting some Iowa taxpayers in the pocketbook.

Federal changes offered 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.

That 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, said David Casey of the Iowa Department of Revenue.

Tax accountant Linda Lundahl of Marion estimated that 50 to 70 of her clients at Lundahl Hatt & Austad will have to pay back some of the refund they received because of the mix-up.

Lundahl said tax software and tax booklets from the Iowa Department of Revenue assumed that the Iowa General Assembly would adopt tax relief permitted by a federal law signed by President George W. Bush on Oct. 3, 2008. But that didn’t happen.

“Where is the communication between the Iowa Department of Revenue and the Legislature?” Lundahl asked.

She was not inclined to blame the Department of Revenue because, she said, benefits allowed under the portion of the law known as the Federal Tax Extenders are almost always adopted by the states.

Lundahl said the uncertainty about Iowa’s adoption of the federal tax changes stretched right up to the tax filing deadline, and many Illinois tax practitioners handling Iowa returns for their clients e-mailed their Iowa counterparts trying to find out its status.

The majority of Lundahl’s clients affected by the situation will have to pay back $300 to $400 of their refunds, she said.

State lawmakers discussed the possibility of adopting the federal tax changes, but that 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, said Sen. Matt McCoy, D-Des Moines, vice chairman of the Senate Ways and Means Committee.

“It was a hit to the budget that, frankly, was not an option. “ he said.

Sen. Randy Feenstra, R-Hull, who tried unsuccessfully to raise the issue in floor debates and amendments, said part of the problem was a timing issue. Tax preparers filed early returns with the expectation state lawmakers would address the issue before adjourning in late April.

However, the General Assembly wrapped up the 2009 session without applying provisions of the federal Heartland Disaster Tax Relief Act and other changes known as the Federal Extenders to the Iowa tax code.

“Now we’re in this mess,” Feenstra said. “It was a significant tax increase to Iowans.”

Affected taxpayers likely include classroom teachers who claimed up to $250 in credits for buying out-of-pocket school supplies; businesses or people who claimed tax advantages for losses from floods and tornadoes; or businesses claiming bonus depreciation on new investments.

Historically, the Legislature has a mixed track record on coupling with federal tax changes, but House GOP Leader Kraig Paulsen of Hiawatha said this year’s decision not to embrace the federal adjustments was “much more egregious” because it affected disaster victims negatively.

“Effectively, what they (majority Democrats) did was to use this as a way to raise revenue to the state,” he said. “Iowans are going to have to write larger checks to pay their income taxes as a result of their inaction,” he said. “They were trying to raise revenues so they could spend more. That’s the way I read it, anyway.”

Paulsen said minority Republicans unsuccessfully offered ways to reduce state spending by $300 million in the recent session that would have made tax coupling possible and removed the need for Iowans to do their tax accounting differently for the federal and state tax systems.

McCoy said he doesn’t recall lawmakers “having a specific conversation about how it would impact flood victims. I recall talking about how it would impact middle-class Iowans and the fact that it would have ramifications that would impact families across the state.

“But I also believe we looked at the amount of money involved spread across the state, and we thought it was something that could be more easily absorbed spread across the state equally than trying to come up with a solution to a $56 million problem,” he said. “Obviously, we would have loved to have had the ability to couple.”

McCoy said the situation is further complicated by the fact that the state likely ended the fiscal 2009 budget year with an imbalance that will have to be covered with surplus reserves. That likely will mean more across-the-board and targeted spending cuts in the current 2010 budget year, he added.

“It’s going to be painful, there’s no doubt about it. It’s a messy problem,” McCoy said. “I think it will be very unlikely to see any major tax changes in an election year.”