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Tax Advantages & Incentives

New and existing businesses in Greater Des Moines (DSM) enjoy a number of corporate tax advantages and incentives — some of the best in the country.

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Tax Advantages

Iowa Corporate Income Tax

Iowa's corporate income tax offers significant advantages when compared to the corporate taxes of other states, including:

  • 50% deductibility of federal taxes from Iowa corporate income tax.
  • Single-factor, non-unitary tax. Iowa's tax is based only on the percentage of total sales income within the state. Thus, if a business has no sales in Iowa, it pays no Iowa corporate income tax.
  • Iowa corporate income tax may be reduced or eliminated by the New Jobs Tax Credit.

New Jobs Tax Credit

Businesses entering into an agreement under the state's training program and increasing their workforce by at least 10% qualify for this credit to their Iowa corporate income tax. The credit is equal to 6% of the state unemployment insurance taxable wage base. The credit for 2021 is $1,944 per employee. The tax credit can be carried forward up to 10 years. 

Research and Development Tax Credit

A refundable credit for increasing research activities is up to 6.5% of the company’s allotted share of qualifying research expenditures in Iowa. A company must meet the qualifications of the federal research activities credit and be engaged in the manufacturing, life sciences, software engineering or aviation and aerospace industry to be eligible for the credit on the Iowa return. Companies approved for expansion under the High-Quality Jobs program may be eligible for the amount of the tax credit to be increased for qualifying research and development activities.

Tax Increment Financing (TIF)

City councils or county boards of supervisors may use the property taxes resulting from the increase in taxable valuation because of construction of new industrial or commercial facilities to provide economic development incentives to a business or industry. Tax increment financing may be used to pay the cost of public improvements and utilities that will serve the new private development, to finance direct grants or loans to a company, or to provide a local match for federal or state economic development assistance programs. TIF does not increase a company's property taxes, but it allocates virtually all of the increased taxes that are paid back to the city or county, where they may be spent to benefit the company.

No Sales and Use Tax on Machinery and Equipment

The purchase of industrial machinery, equipment and computers used in manufacturing or the processing of data by insurance companies, financial institutions or certain commercial enterprises is exempt from Iowa sales or use tax. 

No sales tax is due on purchases of electricity or natural gas used in the manufacturing process.

No Property Tax on Industrial Machinery and Equipment

There is no property tax on industrial machinery, equipment and computers. 

Pollution control equipment is eligible for exemption from property tax. An application must be filed for exemption.

No Personal Property (Inventory) Tax

In Iowa, personal property is not assessed for tax purposes. Personal property includes corporate inventories for salable goods, raw materials and goods-in-process.

Incentives

Iowa offers an array of financial assistance programs to make starting a business in Iowa easier. Funds may be awarded as a forgivable loan, low- or no-interest loan, or principal or interest buydown on a loan. Here's a general overview of what's available.

High-Quality Job Creation Program

Provides qualifying businesses tax credits to offset the cost incurred to locate, expand or modernize an Iowa facility. To qualify for this very flexible assistance package that includes tax credits, exemptions and/or refunds, a business must be a non-retail or non-service business and meet wage requirements.

Iowa New Jobs Training Program

The Iowa Industrial New Jobs Training (260E) program assists businesses creating new positions with new employee training. If a company is expanding operations, or locating a new facility in the state, the program can provide flexible funding to meet the wide variety of training and employee development needs for its new employees. Examples of fund use include screening and assessment, travel for training purposes, in-plant instruction, costs of training facilities, equipment and supplies, etc. The program is paid for by the new employees' withholding taxes at no cost to the employee or the company. These taxes may be diverted for a 10-year period to pay for upfront training costs.

Iowa New Jobs Tax Credit

Businesses entering into an agreement under the state's training program and increasing their workforce by at least 10% qualify for this credit to their Iowa corporate income tax. The credit is equal to 6% of the state unemployment insurance taxable wage base. The credit for 2021 is $1,944 per employee. The tax credit can be carried forward up to 10 years.

Infrastructure Programs

Funding for rail and road improvements is available through the Iowa Department of Transportation.

Local incentives are offered by many of the metro communities. These incentives include direct financial assistance programs, infrastructure improvements and forgiveness of property taxes. The Partnership will facilitate discussions with local communities to evaluate incentives for businesses.

A complete list of state tax advantages and incentives is available here.