Update Regarding the Iowa Research Credit

July 2018

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.
 

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