Tax breaks

2020 snapshot

Exemptions, deductions and exclusions

The Department of Revenue hasn’t updated this study since 2020. These are its estimates for tax year 2020 (property tax: 2018 assessments). Iowa has since cut income tax rates to one flat rate and stopped taxing retirement income, so the income tax figures, especially, are out of date².

Every break in the study

21 breaks in corporate income tax.

• Fifty Percent Federal Deductibility$38.0M
  Corporate income tax · Deduction · Administrative · Iowa Code 422.35(4)Corporations may deduct from net income fifty percent of federal income taxes paid or accrued during the tax year, adjusted for any federal income tax refunds received during the tax year.
• Foreign Dividends$27.7M
  Corporate income tax · Deduction · Administrative · Iowa Code 422.35(21)Corporations may claim a deduction based on percentage of ownership as set forth in Section 243 of the Internal Revenue Code for foreign dividends including Subpart F income, income earned by a foreign subsidiary of a domestic corporation strictly from foreign sources, as defined in Section 952 of the Internal Revenue …
• Tax Free Like-Kind of Exchanges$2.2M
  Corporate income tax · Exclusion · Business Incentive · Iowa Code 422.3(5)No gain or loss shall be recognized as income subject to tax on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
• Alternative Minimum Tax Exemption$600K
  Corporate income tax · Exemption · Administrative · Iowa Code 422.33When computing the corporate alternative minimum tax, minimum taxable income is reduced by an exemption before application of the tax.
• Corporate Charitable Contributions$500K
  Corporate income tax · Deduction · Charitable Organization Support · Iowa Code 422.35Corporations may deduct from income subject to tax contributions to nonprofit, charitable organizations. However, corporate charitable contributions are limited to 10 percent of taxable income for the year in which the deduction is made computed without regard to (1) the deduction for charitable contributions, (2) the …
• Work Opportunity Credit$200K
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.35(5)The Federal Work Opportunity Credit replaced the Federal Targeted Jobs Tax Credit. The program provides a tax credit for employers who hire certain targeted groups including low income individuals, vocational rehabilitation referrals, former AFDC recipients, veterans, ex-felons, food stamp recipients, and SSI …
• Percentage Depletion -Fuel Producers$100K
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.35(10)Fuel producers are able to recognize the expense of the consumption of depletable assets as a percentage of sales of those assets, in place of cost depletion. Cost depletion is recognizing, as an expense, the amount of asset consumed.
• Added Wage Deduction-All BusinessesNot estimated
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.35A business is allowed an additional deduction from income equal to sixty-five percent of the wages, up to $20,000 per individual, paid to qualified individuals who are hired for the first time by the taxpayer during the tax year paid for work done in Iowa during the first twelve months of employment.
• Added Wage Deduction-Small BusinessesNot estimated
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.35(6)If a business is a small business, an additional deduction from income is allowed equal to sixty-five percent of the wages, up to $20,000 per individual, paid to qualified individuals who are hired for the first time by the taxpayer during the tax year paid for work done in Iowa during the first twelve months of …
• Agricultural Cost-Sharings PaymentsNot estimated
  Corporate income tax · Exclusion · Agriculture Support · Iowa Code 422.3(5)Agricultural cost-sharing payments may be excluded in whole or in part from income subject to tax if three conditions are met: The United States Secretary of Agriculture certifies that the payment services to conserve soil and water resources, improve forests, or provide a habitat for wildlife;
• Alcohol Fuel Credit DeductionNot estimated
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.35(7)The federal alcohol fuels credit, as provided in Section 40 of the Internal Revenue Code, is a deduction from Iowa income subject to tax to the extent that use of the federal credit increased Iowa income subject to tax.
• Electric and Telephone Coops and MutualsNot estimated
  Corporate income tax · Exemption · Business Incentive · Iowa Code 422.3(5)The incomes of mutual and cooperative telephone and electric companies are exempt from income subject to tax if at least 85 percent of their revenues are derived from patron service charges.
• Employment Stock Ownership (ESOP)Not estimated
  Corporate income tax · Exclusion · Business Incentive · Iowa Code 422.3(5)Employee Stock Ownership Plans (ESOPs) are a special type of tax exempt employee benefit plan intended to encourage employee ownership.
• Gains from Sales on Municipal BondsNot estimated
  Corporate income tax · Exclusion · Government Support · Iowa Code 422.35Income from the sale of obligations of the State of Iowa and its political subdivisions shall be added to Iowa net income to the extent not already included.
• Interest-Beginning Farmer BondsNot estimated
  Corporate income tax · Exclusion · Government Support · Iowa Code 16.75Interest from bonds or notes issued by the Agricultural Development Authority, (now the Iowa Finance Authority) to finance the beginning farmer loan program is exempt from the State individual and corporate income subject to tax. Also, the bond interest cannot be taxed for inheritance tax purposes.
• Interest-State ExemptNot estimated
  Corporate income tax · Exclusion · Government Support · Iowa Code 422.35Interest on a selected list of bonds and notes issued by various state and local government entities are specifically exempt from the state individual and corporate income subject to tax. These bonds include, Vision Iowa Program Bonds; School Infrastructure Program Bonds; Iowa Jobs Program Bonds;
• Percentage Depletion -Non-Fuel MineralsMinimal
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.3(5)Producers of non-fuel minerals are eligible to recognize the expense of the consumption of depletable assets as a percentage of sales of those assets in place of cost depletion. Cost depletion is recognizing, as an expense, the amount of asset consumed.
• Sale of Farm Refiners Deferral of GainNot estimated
  Corporate income tax · Exclusion · Agriculture Support · Iowa Code 422.3(5)A taxpayer that sells stock in a domestic corporation that is engaged substantially in refining or processing agricultural or horticultural products and reinvests the proceeds in qualified replacement property may exclude from income subject to tax the gain on the original sale.
• Speculative Shell BuildingNot estimated
  Corporate income tax · Deduction · Community Development Support · Iowa Code 422.35(16)A for-profit entity, community devleopment organization, or a non-profit cooperative association that owns a speculative shell building can deduct from income subject to tax depreciation on the building as if the speculative shell building was classified as a fifteen year property.
• Tax Free Exchange of ContractsNot estimated
  Corporate income tax · Exclusion · Individual Benefit · Iowa Code 422.3(5)Policyholders who surrender life insurance or annuity contracts held by a financially troubled insurance company may qualify for non-recognition of gain as part of income subject to tax if, within 60 days, all cash received is reinvested in another policy or contract issued by another insurance company or in a single …
• Wages Paid to Certain IndividualsNot estimated
  Corporate income tax · Deduction · Business Incentive · Iowa Code 422.35(6)(a)A taxpayer who is considered to be a small business corporation is allowed a deduction up to 65 percent not to exceed $20,000 of the the first twelve months of wages paid or accrued during the tax years for work done in Iowa by certain individuals including ex-felons and handicapped individuals.