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Iowa State R&D Tax Credit

Refundable Tax Credit – Yes

Businesses can take advantage of the Research and Development Tax Credit in the state of Iowa. Companies can use the credits to offset costs spent performing qualifying research activities against state and federal tax liabilities. The credit is often overlooked by companies simply because they don’t realize the work they are doing in their daily operations qualifies them. Companies performing any kind of research and development may be missing out on significant tax credits.

Businesses in Iowa can take advantage of the federal R&D Tax credit, as well as credits specific to the state of Iowa.

Iowa State R&D Tax Credit Program Highlights

    • After a company’s tax liabilities are met, Iowa R&D State Tax Credits are fully refundable.
    • The research activities must be performed within the state of Iowa to qualify.
    • The credit it 6.5% of the lower of qualifying research expenditures that exceed a base amount of 50% of qualifying research expenditures.
    • The alternative Simplified Credit is 4.55% of all expenditures occurred in Iowa for the past three years.
    • The Supplemental Credit is an additional 10% of a company’s qualifying incremental research expense for gross revenues less than $20 million and 3% for a company with gross revenues over $20 million.
    • The Supplemental Research Activities Credit must be calculated using the same method that the Research Activities Tax credit was calculated.

Federal R&D Tax Credit Program Highlights

  • Every year, more than $7.5 billion in federal R&D credits are given out to companies across the United States.
  • The Research and Development Tax Credit provides cash incentives through the form of credits for companies performing research activities in the United States.
  • The credit offsets costs spent performing research activities against federal tax liabilities.
  • Tax credits may be carried forward as far as 20 years.
  • The credit can be taken by a business on all open tax years, typically the last three or four years, plus the current year.
  • The credit creates a significant reduction to current and future federal tax liabilities.
  • All companies can potentially benefit from the tax credit if qualifying research activities are taking place.

Who Qualifies for Iowa’s Research and Development Tax Credit?

  • Qualifying businesses are C-Corporations, S-Corporations, LLC’s and Partnerships who have met the federal R&D guidelines.
  • According to the Iowa Department of Revenue, the business must be engaged in manufacturing, life sciences, software engineering, or aviation and aerospace.
  • Business cannot be in the following industries: 
    • Agricultural Production
    • Architecture 
    • Real Estate
    • Wholesale
    • Contractors, subcontractors, builders, or contractor-retailers engaged in commercial and residential installation or repair are also excluded from applying.

The Research and Development Tax Credit

R&D is a dollar for dollar tax credit that can be claimed by companies in the United States to offset costs spent performing research and development to benefit their business. Created as an incentive by the United States Government for businesses to undergo research activities to develop or improve their products, processes, or software, The R&D credit was made permanent on a federal level by the Protecting Americans Against Tax Hikes Act of 2015, allowing business owners to ensure their research activities would earn them the lucrative credit. The PATH Act also broaden the variety of industries that are able to claim the credit.

How to Apply

Claiming your R&D tax credits is made simple by our team at National Tax Group. During your call, we’ll determine if your research activities qualify your company to take advantage of the R&D Tax Credit Program. We’ll provide the proper documentation and remain by your side until all documentation is submitted and approved by the Internal Revenue Service. In the highly unlikely event of an audit, we will supply all materials needed to clear it at no extra cost for you. Contact our tax experts to get started.