The Iowa Research and Development (R&D) Tax Credit is an annual tax credit based on qualified expenses as allowed under section 26 USC 41 of the Internal Revenue Code (IRC). Businesses must first be certified by the Iowa Economic Development Authority (IEDA) as eligible to apply for the credit. IEDA will allocate available tax credits on a pro rata basis to businesses actively investing in innovation that occurs within the State of Iowa. Tax credits are refundable, but not transferable.
Types of support
Tax credit —earned when qualifying expenditures are filed and accepted on federal return. If the credit exceeds Iowa income taxes owed, the difference is refunded.
Certified businesses will enter a contract with IEDA that outlines program requirements. An annual report is required while certification is active.
Eligibility
Certification
- Business must be primarily engaged in advanced manufacturing, bioscience, insurance and finance, or technology and innovation.
- The R&D sectors available for the credit may include the following: second-generation food innovation, food ingredients and supplements, crop protection, hybrid seed technologies, diagnostic analytics and immunotherapies, chip technologies and microelectronics, medical equipment and supplies, software and technology, aerospace, pharmaceuticals, and consumer products.
- R&D must occur in the state of Iowa.
Tax Credit Application
- Applicant must successfully complete certification as qualified business to be eligible to apply for R&D Tax Credit.
Who’s Not Eligible
- Businesses primarily engaged in:
- Accounting
- Agriculture production
- Agriculture cooperatives
- Architecture
- Collection
- Construction
- Ethanol Biorefinery
- Finance or Investment
- Real Estate
- Retail
- Transportation
- Wholesale
- Businesses with a documented pattern of legal or regulatory violations (i.e., environmental, antitrust, worker safety or trade rules)
- Those associated with a foreign adversary or foreign adversary entity.
Application Process
- Submit an application for certification to determine eligibility as a qualified business.
- Submit an application for tax credit – applications are due January 31 annually.
- IEDA Director approval - IEDA will allocate available tax credits on a pro rata basis to businesses actively investing in innovation that occurs within the State of Iowa.
- Submit through the online portal. Both applications for certification and tax credit are managed online.
Resources
Resource documents will be shared when the application round opens.