Update Regarding the Iowa Research Credit

Overview

On May 30, 2018, the Governor of Iowa signed into law Senate File 2417 which restricts the industries that are eligible for the State’s research credit. Under these changes, eligible taxpayers are only those engaged in the manufacturing, life sciences, software engineering, or aviation and aerospace industries.
 

Details

Previous to Senate File 2417, companies in any industry that claimed the Federal credit and conducted some research activities in Iowa were eligible for the Iowa credit. The new law restricts the industries that can claim the credit. To qualify as an eligible individual or corporation, the taxpayer must operate in the manufacturing, life sciences, software engineering, or aviation and aerospace industry. The Iowa research credit remains refundable for taxpayers that are in a loss position.
 
Furthermore, the Bill clarifies that the following persons are not eligible for the credit: a retailer, a wholesaler, a transportation company, those engaged in agricultural production, a finance or investment company, a publisher, an agricultural cooperative, a real estate company, a collection agency, an accountant, an architect, and a contractor that engages in commercial and residential repair and installation. 
 

BDO Insights

With the new industry restriction, fewer taxpayers will qualify for Iowa’s research credit, even those that may have invested in new software or automation technology.  Other states have instituted similar industry limitations and it will be interesting to see if the trend continues.

 

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For more information, please contact one of the following practice leaders: 
 

Chris Bard National Leader Los Angeles		Jonathan Forman Principal New York
Jim Feeser Managing Director Woodbridge		Chad Paul Partner Milwaukee
Patrick Wallace Partner Atlanta		David Wong Partner Los Angeles
Laura Morris Managing Director San Francisco		Brad Poris Managing Director Long Island
Joe Furey Managing Director Chicago		Gabe Rubio Managing Director Los Angeles

from BDO USA Tax Publications Feed https://www.bdo.com/insights/tax/r-d-tax/update-regarding-the-iowa-research-credit