Iowa Basic Business Taxes 2011
Iowa's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include a job creation tax credit and enterprise zones.
Iowa corporate income tax is a non-unitary, single-factor formula based only on profits from sales in the state. Iowa also allows a 50-percent deduction of federal corporate income tax apportioned to Iowa in computing state taxes. Tax rates vary from 6-12 percent, depending upon income produced. Payroll and property owned or leased in Iowa are not taken into consideration in the sales formula.
Job creation tax credit
A new jobs tax credit may be deducted from corporate gross income (to the extent that it increased federal taxable income) for state income tax purposes. Firms entering a job training agreement under Iowa Code Chapter 260E and increasing base employment by 10 percent, and new industries creating jobs, get a credit against personal or corporate income taxes.
Research and development
A refundable corporate income tax credit of 6.5 percent is available for research expenditures within the state. The income tax credit for increasing research activities is 6.5 percent of the taxpayers' apportioned share of qualifying research expenditures in Iowa. Companies approved for expansion in an Enterprise Zone or under the High Quality Jobs program may be eligible for a supplemental tax credit for qualifying research and development activities.
Cities and counties with areas of economic distress may receive certification of enterprise zones to offer added incentives for business investments. Employers locating in enterprise zones may receive the following benefits: property tax exemptions on land and buildings; an investment tax credit of up to 10 percent against state corporate income taxes; refunds of sales, services, or use taxes paid to contractors during construction; supplemental research-and-development activities credit against corporate income taxes; and additional funding for job training programs.
Taxes on property are levied by cities, counties, townships, and school districts. All property is assessed at 100 percent of market value. However, agricultural property market value is based on a productivity factor within the taxing jurisdiction. The tax on personal property has been eliminated.
Business inventory tax
No personal property tax for corporate inventories of goods-in-process, raw materials, or salable goods.
Property tax exemptions are available for certain pollution control and recycling property.
Property tax exemption
A city or county may provide a partial exemption from property taxation of the actual value-added to industrial real estate, research-service facilities, warehouses, distribution centers, and owner-occupied cattle facilities by new construction. The state's Urban Revitalization Act helps stimulate redevelopment of blighted or deteriorated areas. All qualified real estate is eligible to receive an exemption from taxation on the actual value-added by improvements.
Industrial machinery and equipment
Railroad rolling stock is exempt from sales tax. Industrial machinery, equipment, and computers are exempt from sales taxes. Iowa has repealed property tax on machinery, equipment, and computers.
Sales and use taxes
A 6 percent sales tax is imposed on gross receipts from retail sales of tangible personal property, admissions, rentals, and certain services. Property subject to sales tax is exempt from use tax if sales tax has previously been paid. Industrial machinery, equipment, and computers assessed as real property and used for manufacturing or to process data by insurance companies, financial institutions, or certain commercial enterprises are exempt from sales tax. Interstate telecommunications services are also exempt from sales tax. Purchases of electricity or natural gas used directly in the manufacturing process are exempt from sales tax.
Industrial fuels and raw materials
Industrial chemicals directly used, consumed, dissipated, or depleted in processing personal property for resale are exempt from sales and use taxes. Containers and packaging materials, fuels, industrial steam, and electricity directly used in processing are exempt from sales tax.
Iowa State Contact
Iowa Department of Economic Development
200 East Grand Avenue
Des Moines, IA 50309
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.