Established under Iowa Code section 15E.52, the Innovation Fund Tax Credit Program is designed to stimulate venture capital investment in innovative Iowa businesses.
The program encourages taxpayers to make equity investments in certified Innovation Funds, helping support early-stage companies with high growth potential and strengthening Iowa’s innovation economy.
Innovation Funds invest in innovative Iowa businesses engaged in advanced manufacturing, biosciences, and information technology.
Read full Innovation Fund Tax Credit Program Code and Innovation Fund Tax Credit Program Administrative Rules.
Program Overview
Tax credits are equal to 25 percent of a taxpayer’s equity cash investment called into a certified Innovation Fund.
Investments must be cash in exchange for equity. Equity includes stock, membership interests, partnership interests, or near equity, and does not include non-cash consideration.
Innovation Funds must be certified by the Board before tax credit certificates may be issued to investors.
Tax credits are issued on a first come, first served basis, subject to the annual allocation limits established under Iowa Code section 15.119.
Investors apply during the annual filing window established by rule. For fiscal years beginning on or after July 1, 2026, applications must be submitted from September 1 through December 31 (261 IAC 116.5). Investors must apply in the first available application window after the date of investment.
How the Program Works
An Innovation Fund applies to IEDA for certification and must demonstrate that it meets all criteria in Iowa Code section 15E.52(7) and 261 IAC 116.2.
Once certified, the Innovation Fund accepts qualifying equity investments and then invests in innovative businesses with a principal place of business in Iowa.
Investors into the fund submit applications for tax credit certificates during the annual filing window of September 1 through December 31. IEDA reviews submissions and makes recommendations to the Board for approval.
Tax credit certificates are issued on a first come, first served basis until the annual maximum allocation is reached. Investors claim the credit by attaching the issued certificate to their Iowa tax return.
Certified Innovation Funds must also submit annual reporting to maintain compliance with certification requirements.
Innovation Fund Eligibility Overview
To participate, a fund must be certified by the Board and meet statutory and administrative rule requirements, including:
- Organized for the purpose of investing in promising early-stage companies with a principal place of business in Iowa
- Proposes to provide multiple rounds of funding and early-stage private sector funding to innovative businesses with high growth potential
- Proposes to evaluate prospective businesses using a rigorous approach and collaborate with state and local entities to ensure policy consistency
- Proposes to collaborate with Iowa regents institutions to potentially commercialize research developed at those institutions
- Proposes to obtain at least three million dollars in binding investment commitments and to invest a minimum of three million dollars in Iowa businesses
Detailed eligibility requirements are available in the program checklist listed in the Resources at the bottom of this page.
Investment and Investor Overview
Eligible investments must be equity investments in the form of cash made in a certified Innovation Fund.
Investments made more than 120 days before a fund applies for certification are not eligible for tax credits.
Tax credits may be claimed against Iowa individual income tax, corporate income tax, franchise tax, insurance premiums tax, and the moneys and credits tax.
If the credit exceeds the taxpayer’s Iowa tax liability, the excess amount may be carried forward for up to five years. Tax credit certificates may be transferred once, in whole or in part, in accordance with Iowa Code section 15E.52.
Tax credits are not guaranteed and are issued only after review and Board approval, subject to annual allocation limits and application timing requirements.
Program Updates and Historical Note
Beginning in fiscal year 2026, program changes include:
- A required minimum threshold of three million dollars in binding investment commitments for certified innovation funds.
- A new annual investor filing window of September 1 through December 31 for fiscal years beginning on or after July 1, 2026.
Application Process
There are two applications for this program, and both are accessed through GovConnectIowa: https://govconnect.iowa.gov
To certify a fund:
- Sign Up for an account
- To start a certification application, log in and click “I Want To”, then under “Tax Credits” click “Certify an Innovation Fund”
- Once there, click “Apply for an Innovation Fund Certification”. Go through the steps of uploading documentation and answering fund questions.
- Following certification, and when it’s time for the fund investors to fill out their tax credit applications, the fund will upload the investor list for who should be applying for a tax credit.
- Navigate to “I Want To”, then under “Tax Credits” click “Certify Fund or Business” then under “Upload Investor List” click “Upload an Innovation Fund Investor List”
The individual investor will apply for a tax credit:
- Sign Up for an account at GovConnectIowa
- Log in and click “I Want To”, then under “Tax Credits” click “Apply for a Tax Credit”
- Navigate to “Innovation Fund or Redevelopment Tax Credits” then click on “Apply for an Innovation Fund Investor Tax Credit”
- Applications for tax credits must be submitted within the filing window of September 1 through December 31 of the calendar year when the investment into the fund took place.