Tax Incentives
Iowa's numerous business advantages will ensure your business has every opportunity to achieve profitability and productivity! Tax incentives and direct financial assistance support business growth.
Business Tax Credits
These tax reduction programs available through the state of Iowa may help your company experience higher profitability:
- Assistive Device Tax Credit — Reduces taxes for small businesses that incur costs through making physical changes to the workplace to help employees with disabilities to get or keep their job.
- Brownfield/Grayfield Tax Credit Program — Qualifying projects can receive tax credits for qualifying costs of a Brownfield project and if the project meets green building requirements. Grayfield projects can get tax credits for qualifying costs and projects that meet green building requirements.
- Enterprise Zones — Enterprise Zones are economically depressed areas in which state and/or local tax benefits are available to businesses and developers make new investments, create or retain jobs and build or rehabilitate housing in those areas. Businesses locating or expanding in an Enterprise Zone may receive property tax exemptions, funding for employee training, sales tax refunds, Iowa income tax credits, or other tax incentives.
- High Quality Jobs Program — This program is designed to promote the creation or retention of quality jobs by assisting businesses locating, expanding or modernizing their facilities in Iowa through a package of tax credits, exemptions, and/or refunds to approved businesses.
- New Jobs Tax Credit — The Iowa New Jobs Tax Credit is an Iowa corporate income tax credit and is available to a company that has entered into a New Jobs Training Agreement (260E) and expands their Iowa employment base by 10% or more.
The amount of this one-time tax credit will depend upon the wages a company pays and the year in which the tax credit is first claimed. The maximum tax credit in 2011 will be $1,482 per new employee. Unused tax credits may be carried forward up to ten years. The tax credit may be claimed on Form IA 133 found on the Iowa Department of Revenue Website [www.iowa.gov/tax/forms/corpinc.html]
- Research Activities Tax Credit — Iowa is one of very few states to have continuously offered this refundable tax credit for increasing a company's research activities. Under certain conditions, this credit may be doubled. A company must meet the qualifications of the Federal Research Activities Credit in order to be eligible for the credit in Iowa.
- Targeted Jobs Withholding Tax Credit Pilot Program
— The Targeted Jobs Withholding Tax Credit Pilot Program is a new pilot program
enacted in 2006 which allows the diversion of withholding funds paid by an employer
to be matched by a designated "pilot" city to create economic incentives that can
be directed toward the growth and expansion of targeted businesses located within
Urban Renewal areas.
Investor Tax Credits
Three types of tax credits specifically related to venture capital investments in Iowa are listed below:
- Community-Based Seed Capital Funds — This program is designed to encourage groups of local investors to engage in venture capital investment to help attract and retain fast growing companies to their communities. Investors can receive tax credits equal to 20% of the amount of an equity investment in a Community-Based Seed Capital Fund.
- Endow Iowa
— Endow Iowa was developed to encourage the growth and development of community
foundations and related organizations in the state, by encouraging donations to
non-profit organizations. Individuals, businesses, and financial institutions are
eligible for a state tax credit equal to 20% of the amount donated for donations
to an Endow Iowa Qualified Community Foundation, or to a qualified Community Affiliate
Organization, up to a maximum credit of $100,000 per individual. There is $2 million
available for Endow Iowa per year for 2006, 2007 and 2008.
- Qualifying Business Tax Credit — This program is designed to encourage venture capital investment at the seed capital stage. Investors can receive tax credits equal to 20% of the amount of an equity investment in a Qualifying Business.
- Revolving Loan Funds — The Revolving Loan
Program was developed to encourage the growth and development of economic development
revolving loan funds in Iowa. Individuals, businesses, or non-profit organizations
are eligible for a state tax credit equal to 20% of the amount they donate to the
Revolving Loan Fund. The credit is refundable for organizations that are exempt
from federal income tax pursuant to section 501©(3) of the IRS Code. There
are over $2 million per year in new credit authority.
Download the 2006 Regional Revolving Loan Fund Tax Credit Application.
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Additional Tax Options & Exemptions
Other tax options may be available at a local city or county level.
Local Property Tax Abatement & Exemption — Iowa law allows cities and counties to abate local property taxes for improving industrial real estate. The most common amount of actual
value added at a new or expanded facility, which is eligible to exempt from taxation, is as follows:
Year One: 75% — Year Two: 60% — Year Three: 45% — Year Four: 30% — Year Five: 15%
Other types and terms of local property tax incentives are available. City councils or county boards of supervisors may use the property
taxes resulting from the increase in taxable valuation caused by the construction of new industrial or commercial facilities to provide economic development incentives to a business or industry. Tax Increment Financing may be used to offset the cost of public improvements and utilities that will serve the new private development, to finance direct grants or loans to a company, or to provide the local
match for federal or state economic development assistance programs.
Pollution Control or Recycling Property Tax Exemption — Improvements
to real property that are primarily used to control pollution of air or water, or
primarily used for recycling, may qualify for a property tax exemption.
Tax Increment Financing — City
councils or boards of supervisors may use the property taxes resulting from the
increase in taxable valuation caused by the construction of new industrial or commercial
facilities to provide economic development incentives to a business.