Iowa Corporate Income Tax
A number of features of Iowa’s corporate income tax offer significant advantages when compared to other states’ corporate taxes.
- – Fifty 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.
- – Iowa corporate income tax may be reduced or eliminated by the New Jobs Tax Credit, High Quality Job Creation Program or Enterprise Zone benefits.
No Sales or Use Tax on Manufacturing Machinery and Equipment Purchases
The purchase of industrial machinery and computers assessed as real property and used for manufacturing or used to process data by insurance companies, financial institutions or certain commercial enterprises, is exempt from Iowa sales or use tax. In addition, there is no sales tax on materials used in the manufacturing process.
No Property Tax on New Industrial Machinery and Equipment
Manufacturing machinery and equipment, as well as, computers used to process data by insurance companies and financial institutions is exempt from property tax. Pollution control equipment is eligible for exemption from property tax.
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.
No Sales Tax on Electricity or Natural Gas
No sales tax is due on purchases of electricity or natural gas used directly in the manufacturing process.
Iowa is a Right-to-Work State
Under Iowa law an employee may not be required to join a union or pay dues or fees to any labor union, association or organization as a condition of employment.
Iowa has one of the lowest, new employer, unemployment insurance rates in the nation. The rate for all non-construction businesses is 1% for a 3-year period.
Workers’ Compensation Cost
Iowa’s workers’ compensation costs are the 15th lowest in the nation. The average cost of workers’ compensation insurance for manufacturers in Iowa is 16% lower than the national average.
The Regulatory Assistance Program enhances the range of services available to Iowa companies by advising and assisting companies in the preparation and submission of permit application with the Iowa Department of Natural Resources (DNR) and other Iowa regulatory agencies. The mission of the Regulatory Assistance Program is to facilitate communication between the business and regulators and to expedite the permitting process.
Research and Development Tax Credit
A refundable credit for increasing research activities is 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.
Local Tax Abatement
Iowa law allows cities and counties to abate local property taxes for improving industrial real estate. The maximum amount of actual value added at a new or expanded facility, which is eligible to be exempt from taxation, is as follows:
- Year One: 75%
- Year Two: 60%
- Year Three: 45%
- Year Four: 30%
- Year Five: 15%
Tax Increment Financing (TIF)
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.