Qualifying Business Tax Credits

Investments in Qualifying Businesses tax credits, along with the Community-Based Seed Capital Funds tax credits, were created to enhance the quality of life for Iowa citizens by increasing the availability and accessibility of venture capital, particularly for ventures at the seed capital investment stage, which can encourage the creation of wealth through higher-paid, new jobs while at the same time promoting industrial development and innovation. This program is designed to encourage venture capital investment at the seed capital stage. The total amount of tax credits available to be issued for investments in Qualifying Businesses and Community-Based Seed Capital Funds (Angel Investor Tax Credits) is $2 million per fiscal year. 

Investors can receive tax credits equal to 20 percent of the investor’s equity investment in a Qualifying Businesses. Investors must invest cash to purchase equity or near-equity in a Qualifying Business.
Tax credits are awarded on a first-come, first-serve basis. The maximum amount of a tax credit per investment by an investor in any one Qualifying Business is $50,000. The maximum amount of tax credits per investor equals $250,000 (5 investments in separate Qualifying Businesses x $50,000 per investment).
Tax credit certificates are eligible for redemption three years after the investment in a Qualifying Business.

To qualify, they must meet the following prerequisites:

• The principal business operations of the business are required to be located in Iowa;
  
• The business has to be in operation for six years or less, as measured from the date of the investment for which a credit is claimed;
  
• The business must have an owner who has successfully completed one of the following:
  
  • An entrepreneurial venture development curriculum, such as programs developed by a John Pappajohn Entrepreneurial Center, or a holistic training program recognized by IEDA, which generally includes the following areas: entrepreneurial training, management team development, intellectual property management, market research and analysis, sales and distribution development, financial planning, and management and strategic planning;
    
  • Three years of relevant business experience;
    
  • A four-year college degree in business management, business administration or a related field;
    
  • Other training or experience sufficient to increase the probability of success of the qualifying business;
    
• The business cannot be a business engaged primarily in retail sales, real estate, the provision of health care services or other services requiring a professional license;
  
• The business must have a net worth of $5 million or less as of the date of the investment for which the credit is claimed; and
  
• Within 24 months from the first date on which the equity investments qualifying for investment tax credits have been made, the business shall have secured total equity or near equity financing equal to at least $250,000.

IOWA Tax Credits

Jobs Credits

​The Iowa New Jobs Tax Credit is an Iowa corporate income tax credit available to companies that enter into a New Jobs Training Agreement and expands their Iowa employment base by ten percent or more.

The amount of this one-time tax credit will depend upon the wages a company pays and the year in which the tax credit is first claimed. The maximum tax credit in 2014 was be $1,608 per new employee. Unused tax credits may be carried forward up to ten years.

In addition to the income tax credits, Iowa offers grants for customized training through their technical colleges as well.

Other Tax Incentives

Iowa also offers tax incentives for research and development and innovative projects. We are happy to expand on the criteria of theses benefits at a client's request.

Angel Investor Tax Credits

Angel Investor tax credits are offered to increase the availability and accessibility of venture capital, particularly for ventures at the seed capital investment stage. The previous program, the Qualifying Business tax credit, and the Community-Based Seed Capital Fund tax credits work together to encourage the creation of wealth through high-paid, new jobs while promoting industrial development and innovation. The total amount of tax credits available per fiscal year is $2 million.

Investors can receive up to 20 percent of the equity investment in either a designated Qualifying Business or Community-Based Seed Capital Fund if investing in a Qualifying Business as outlined below:

• Investors receive tax credits equal to 20 percent of the investor’s equity investment in a Qualifying Business.
  
• Investors must invest in the form of cash to purchase equity or near-equity in a Qualifying Business.
  
• Tax credits are awarded on a first-come, first-serve basis.
  
• The maximum amount of a tax credit per investment by an investor in any one Qualifying Business is $50,000. The maximum amount of tax credits per investor equals $250,000 (5 investments in separate Qualifying Businesses x $50,000 per investment).
  
• Tax credit certificates are eligible for redemption three years after the investment in a Qualifying Business.
  

If investing in a Community-Based Seed Capital Fund the following are required:

• Investors receive tax credits equal to 20 percent of the investor’s equity investment in a Community-Based Seed Capital Fund.
• Investors must invest in the form of cash to purchase equity or near-equity in a Community-Based Seed Capital Fund.
• Tax credits are awarded on a first-come, first-serve basis.
• Tax credit certificates are eligible for redemption three years after the investment in a Community-Based Seed Capital Fund.

Investors must submit an application by March 31 of the year following the calendar year in which the investor made the equity investment in either scenario. 

High Quality Jobs Program/Credits

​The High Quality Jobs program provides qualifying businesses tax credits and direct financial assistance to off-set some of the costs incurred to locate, expand or modernize an Iowa facility. To qualify for this very flexible assistance package that includes loans, forgivable loans, tax credits, exemptions and/ or refunds, eligible businesses must meet certain wage threshold requirements.  Visit wage requirements to view the requirements for wage thresholds.

To be eligible the following criteria must be met:

• A business must meet wage thresholds requirements.
  
• Actual award amounts will be based on the business's level of need; the quality of the jobs; the percentage of created or retained jobs defined as high-quality; and the economic impact of the project.
  
• Created jobs must pay at least 100 percent of the qualifying wage threshold at the start of the project and 120 percent of the qualifying wage threshold by project completion and through the project maintenance period unless in a distressed area.
  
• Retained jobs must pay at least 120 percent of the qualifying wage threshold throughout the project completion and maintenance periods.
  
• The business must provide a sufficient benefits package to all full time employees that includes at least one of the following:
  
  • Business pays 80 percent of medical and dental premiums for single coverage plans, OR
    
  • Business pays 50 percent of medical and dental premiums for family coverage plans, OR
    
  • Business pays for some level of medical and dental coverage and provides the monetary equivalent value through other employee benefits.
    

Tax incentives available are as follows:

• The State's refundable research activities credit may be increased while the business is participating in the program.
  
• A local property tax exemption of up to 100 percent of the value added to the property to a period not to exceed 20 years may be available.
  
• An investment tax credit equal to a percentage of the qualifying investment, amortized over five years. This tax credit is earned when the corresponding asset is placed in service and can be carried forward for up to seven additional years or until depleted, whichever occurs first.
  
• A refund of state sales, service or use taxes paid to contractors or subcontractors during construction.
  
• For distribution center projects, a refund of sales and use taxes paid on racks, shelving, and conveyor equipment.
  
• To assure your addition/expansion can benefit from this program, businesses must apply prior to the beginning of the project.