Tax Advantages
Iowa Corporate Income Tax
A number of features of Iowa's corporate income tax offer significant advantages when compared to the corporate taxes of other states.
- 50 percent deductibility of federal taxes from Iowa corporate income tax.
- Single-factor, non-unitary tax. Iowa's tax is based only on the percentage of total sales income within the state. Thus, if you have no sales in Iowa, you pay no Iowa corporate income tax.
- Iowa corporate income tax may be reduced or eliminated by the New Jobs Tax Credit.
Businesses entering into an agreement under the state's training program that increase their workforce by at least 10 percent, qualify for this credit to their Iowa corporate income tax. The credit is equal to 6 percent of the state unemployment insurance taxable wage base. The credit for 2012 is $1,518 per new employee. The tax credit can be carried forward up to 10 years.
Research and Development Tax Credit
A refundable credit for increasing research activities is up to 6.5 percent of the company’s allotted share of qualifying research expenditures in Iowa. A company must meet the qualifications of the federal research activities credit in order to be eligible for the credit on the Iowa return. Companies approved for expansion in an Enterprise Zone or under the High Quality Jobs program may be eligible for the amount of the tax credit to be doubled for qualifying research and development activities.
Tax Increment Financing (TIF)
City councils or county boards of supervisors may use the property taxes resulting from the increase in taxable valuation due to construction of new industrial or commercial facilities to provide economic development incentives to a business or industry. Tax increment financing may be used to pay the cost of public improvements and utilities which will serve the new private development, to finance direct grants or loans to a company, or to provide a local match for federal or state economic development assistance programs. TIF does not increase a company's property taxes, but it allocates virtually all of the taxes which are paid back to the city or county, where they may be spent to benefit the company.
No Sales and Use Tax on Machinery and Equipment
The purchase of industrial machinery and computers assessed as real property and used in manufacturing or the processing of data by insurance companies, financial institutions or certain commercial enterprises, is exempt from Iowa sales or use tax.
No sales tax is due on purchases of electricity or natural gas used in the manufacturing process.
No Property Tax on New Industrial Machinery and Equipment
There is no property tax on new industrial machinery and equipment.
Pollution control equipment is eligible for exemption from property tax. An application must be filed for exemption.
No Personal Property (Inventory) Tax
Personal property is not assessed for tax purposes. In Iowa, personal property includes corporate inventories of salable goods, raw materials and goods-in-process.