Iowa Basic Business Taxes
Corporate Taxes & Incentives Guide
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. Iowa has no “throwback” penalty. Payroll and property owned or leased in Iowa are not taken into consideration in the income apportionment.
Job creation tax credit
Firms entering a job training agreement under Iowa Code Chapter 260E and increasing base employment by 10 percent get a credit against personal or corporate income taxes. A new jobs tax credit may be deducted from Iowa income taxes owed.
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 taxpayer's' apportioned share of qualifying research expenditures in Iowa. Companies approved for expansion under the High Quality Jobs program may be eligible for a supplemental tax credit of 3% or 10% for qualifying research and development activities. Unused R&D tax credits may be returned.
Taxes on property are levied by cities, counties, townships, and school districts. Commercial and industrial property is assessed at 90 percent of market value. Agricultural property is assessed based on a productivity formula. There are no personal property taxes in Iowa.
Business inventory tax
There is no property tax on 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
Industrial machinery, equipment, and computers are exempt from sales taxes and property taxes.
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. Local communities may have a 1 percent local option sales tax.
Industrial fuels and raw materials
Inputs 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 also exempt from sales tax.
Iowa State Contact
Iowa Economic Development Authority
Business Development Team
E-mail: email@example.com 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. This information was last updated October 2015.