Research Activities Credit

Refundable tax credits for research and development investments make companies more profitable

Iowa sets itself apart as being one of the few states to offer a refundable research activities credit. Iowa companies earn refundable tax credits for research and development investments that may be paid directly in cash to the company once its tax liabilities have been met. A company must meet the qualifications of the federal research credit in order to be eligible. Supplemental research credits are also available through the High Quality Jobs (HQJ) program.

• Tax credits are available for expenditures including:
  • Wages paid to an employee for performing or supporting a research activity conducted at an Iowa facility or for an employee in Iowa who directly supervises or directly supports research activities
  • Supplies including tangible property other than land, improvements to land and depreciable property
  • 65% of expenses related to contract research
• Research may include manufacturing process improvements and time spent by engineers, management and other employees designing and testing new manufacturing processes
• Tax credit calculation is based on the total amount of research expenses, the company’s gross receipts and a fixed base percentage, which changes based on the number of years the company has been incurring qualified research expenditures in Iowa

Eligibility

• Companies must meet the qualifications of the federal research credit

How to Apply

• Companies should contact a tax advisor to determine if activities and expenditures qualify