TAX ADVANTAGES
Iowa's numerous tax benefits will ensure your business has every opportunity to achieve profitability and productivity!
Single-factor, nonunitary tax
Iowa's corporate income tax is a single-factor, nonunitary tax and based only on the percentage of total sales income within the state (Iowa manufacturer selling all its products outside Iowa pays no Iowa corporate income tax).
Federal Deductibility
Iowa is one of only five states that offers Federal Deductibility. This allows 50 percent deductibility of federal taxes on corporate income tax in Iowa.
Tax Advantages
Iowa has eliminated the following tax burdens:
- No sales or use tax on industrial machinery/equipment/computers
- No sales tax on purchases of electricity or natural gas used directly in the manufacturing process
- No sales or use tax on computer/peripherals used in the processing or storage of data
- No property tax on manufacturing machinery/equipment/computers
- No tax assessment on personal property (includes corporate inventories of salable goods, raw materials and goods in process)
Unemployment Insurance Rate
Iowa has the lowest new employer unemployment insurance rate in the nation. The rate for all non-construction business is 1% for a three-year period until an experience rating is established. Iowa offers a zero rate for good experience; approximately 45% of Iowa employers are at a zero rate.
Tax Reduction Programs
These tax reductions programs available through the state of Iowa may help your company experience higher profitability:
- Research and Development Tax Credit — Iowa is one of very few states to have continuously offered this 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.
- Iowa’s Leadership in Research and Development [PDF: 113k] — Facts About Iowa’s Research Activities Credit
- New Jobs Tax Credit — Iowa's corporate income can also be reduced or eliminated by the New Jobs Tax Credit. To qualify for this credit, a business must enter into an agreement under the Iowa New Jobs Training Program and increase its Iowa workforce by at least 10 percent.
- High Quality Job Creation Program — This program is designed to promote the creation 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.
- 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 new jobs and build or rehabilitate housing in those areas. Business locating or expanding in an Enterprise Zone may receive property tax exemptions, funding for employee training, sales tax refunds or other tax incentives.
Other Tax Relief Options
Other tax relief options may be available at a local city or county level.
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.
Local Tax Abatement — Iowa law allows cities and counties to abate local property taxes for value added to industrial real estate.
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.
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