Bills › 90th General Assembly
Relating to eligibility for claiming the research activities tax credit available against the individual and corporate income tax, and including retroactive applicability provisions
Sponsored by the House Ways and Means Committee
Topics:AgricultureTaxesIncome taxesTax credits & incentives
Same legislation: HSB 727
Where it is now
- Done: IntroducedFebruary 22, 2024
- Done: SubcommitteeFebruary 22, 2024
- Done: House committeeMarch 13, 2024
- Stopped: Passes the HouseDied when the General Assembly ended
- Next: Senate committee
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Died when the session ended The 2024 session adjourned on April 19, 2024, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?
What’s in it
AI summary People doing agriscience research can now claim a tax credit that was previously unavailable to those in agricultural production. This change allows researchers to get money back for their work to help encourage more scientific study in Iowa. The new rule applies to tax years starting on or after January 1, 2017.1
Read the official explanation
This bill relates to eligibility for claiming the research activities tax credit available against the individual and corporate income tax. Under current law, a person engaged in agricultural production as defined in Code section 423.1(5), is not eligible for claiming the research activities tax credit. However, the bill specifies a person conducting agriscience research is eligible to claim the research activities tax credit and is not considered agricultural production for purposes of the tax credit. The calculation of the tax credit is based upon increasing research activities in the state and is refundable. The bill defines “agriscience research”. The bill applies retroactively to January 1, 2017, for tax years beginning on or after that date.
House subcommittee
Named February 22, 2024 (as HSB 727). On March 5, 2024 it recommended passage. Vote Total: 3-0.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
Less revenue: up to $48.3M Compare with other bills
AI summary This bill allows agriscience research to qualify for the Research Activities Tax Credit. It is projected to decrease net General Fund revenue by $37.7 million in fiscal year 2024, $48.3 million in fiscal year 2025, $28.0 million in fiscal year 2026, $16.5 million in fiscal year 2027, $13.7 million in fiscal year 2028, and $13.0 million in fiscal year 2029.3
Read the fiscal note
Description
House File 2660 includes agriscience research as an eligible activity for claiming the Research Activities Tax Credit (RAC) and defines “agriscience research.”
The Bill applies retroactively to tax years beginning on or after January 1, 2017.
Background
2018 Iowa Acts, chapter 1161 (Income and Sales Tax Modification Act), made changes to the RAC that restricted the types of industries eligible for the credit, which were retroactively effective to tax year (TY) 2017. Iowa Code chapter 422 details the RAC, which is available to claim against the individual income tax and corporate income tax for qualified research activities in the State. There is currently an exclusion from the RAC for persons engaged in agricultural production as defined in Iowa Code section 423.1. The Bill redefines “agriscience research” to include qualified research activities in the areas of animal science, veterinary medicine, nutritional science, or genetic science that may be eligible to claim the RAC. From FY 2019 to FY 2023, approximately $294.9 million in credits was claimed against the State individual income and corporate income taxes.
Assumptions
- The Bill makes no provision to allow tax returns to be amended beyond the standard three-year amendment period in current law, according to the Iowa Department of Revenue (IDR). Therefore, it is assumed that tax years prior to TY 2020 would not have amendments filed.
- It is assumed that $24.3 million in pending tax credit appeals filed with the IDR is included in this fiscal analysis, which includes pending appeals from tax years beginning in TY 2017.
- The initial fiscal impact of the Bill will occur in FY 2024 due to amended tax returns.
- The tax credit is fully refundable for tax years beginning prior to January 1, 2023.
- According to the IDR, aggregate tax credit claims will increase by $21.9 million for TY 2020 based on appeals filed with the IDR.
- Tax credits due to the Bill will increase at a rate of 2.9% based on historical claim data.
- For tax years beginning on or after January 1, 2023, any refundable portion of the tax credit is limited to a percentage of the excess of the tax liability as follows: 70.0% for tax years beginning in 2023, 65.0% for tax years beginning in 2024, 60.0% for tax years beginning in 2025, 55.0% for tax years beginning in 2026, and 50.0% for tax years beginning in 2027 or later.
- The tax credit is refundable and will have no impact on the income surtax for schools.
- According to the IDR, it is assumed that 94.7% of the tax credits will be claimed, with the timing of claims indicated below:
- Year 0 = 0.0%
- Year 1 = 10.1%
- Year 2 = 50.4%
- Year 3 = 28.8%
- Year 4 = 3.0%
- Year 5 = 2.4%
Fiscal Impact
The proposed expansion of the RAC in House File 2660 is projected to decrease net General Fund revenue by the following amounts each fiscal year:
- FY 2024 = $37.7 million
- FY 2025 = $48.3 million
- FY 2026 = $28.0 million
- FY 2027 = $16.5 million
- FY 2028 = $13.7 million
- FY 2029 = $13.0 million
Sources
- Iowa Department of Revenue
- Legislative Services Agency analysis
- Research Activities Credit, Agricultural Production · March 19, 2024 · $48.3M
Iowa Code it changes
Lobbying
2 for · 0 against · 18 undecided · Who →
Family tree
Study bill
90th General Assembly