IowaSF 65791st General Assembly (2025–2026)SenateWALLET

A bill for an act related to state taxation and finance and other related matters, by creating, modifying, and eliminating tax credits and tax incentive programs, providing for penalties, and including effective date and retroactive applicability provisions. (Formerly SSB 1205.) Effective date: 06/06/2025, 07/01/2025, 12/31/2025, 01/01/2026. Applicability date: 01/01/2017, 01/01/2025, 01/01/2026.

Sponsored By: COMMITTEE ON WAYS AND MEANS

Signed by Governor

Personalized for You

How does this bill affect your finances?

Personalize government policy and PRIA will tell you what this bill means for your household, plus every other piece of legislation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.

Free to download

Bill Overview

Analyzed Economic Effects

35 provisions identified: 6 benefits, 15 costs, 14 mixed.

Lower Endow Iowa credits for donors

The yearly pool of Endow Iowa tax credits falls from $6 million to $3.5 million. The maximum credit for one taxpayer falls from $100,000 to $50,000. These lower limits reduce available tax help for donors contributing to qualifying funds.

Small business disability credit limited

This small business assistive-device credit is limited to tax years beginning in 2024. It covers qualifying device purchases, rentals, modifications, or workplace changes for a current or future employee with a disability. Credits depend on availability, and 90% of any credit above the business's tax bill is refundable for that year. This provision does not make the credit available for later tax years. The subsection is repealed January 1, 2031.

New tax refunds for startup investors

For tax years starting January 1, 2025, onward, cash equity investments earn refundable credits: 20% for urban businesses or 35% for rural businesses. The minimum investment is $10,000; principals and affiliates are excluded. Annual credit limits are $100,000 per person, spouse and dependents combined; $100,000 per entity; and $500,000 per business. Certified businesses must have principal operations and most employees in Iowa, operate five years or less, employ at least one full-time-equivalent worker, and have net worth no higher than $10 million. They must be independent, have experienced leadership, operate in listed industries, and have two investors and $500,000 in financing or binding commitments. Retail, real estate, health care and licensed professional services are excluded. Pass-through owners receive credits by earnings share; credits cannot be transferred or carried back, but overpayments can go toward next year's taxes. Investors cannot claim both overlapping investment credits for the same investment.

Tighter rules for charitable giving credits

Endow Iowa credits require foundations and permanent endowment funds without a corporation's or other business's name. Foundations must report the previous year's grants to the legislature by January 31. They must also provide requested information to verify eligible gifts. Beginning January 1, 2026, the annual program cap is $3.5 million, with a $150,000 maximum per taxpayer.

New fees for business incentive recipients

Beginning December 31, 2025, participating businesses and housing businesses pay a one-time $500 fee before receiving a tax incentive certificate. Agreements worth at least $100,000 also carry a 0.5% fee. For business agreements, that fee applies to incentives actually claimed and is collected after the claim. For housing agreements, it applies to incentives available under the agreement and is collected before an incentive is issued.

Contractors face penalties for false reports

Beginning June 6, 2025, contractors and subcontractors commit an aggravated misdemeanor by willfully filing false tax-paid reports under the refund program. They also owe the tax, any applicable penalty, and interest.

Rising penalties for fuel reporting violations

People required to file motor fuel reports or keep records face civil penalties for late reports or missing records. The director may charge $100 for the first violation. The penalty rises by $100 for each additional violation in the calendar year of the first violation.

Lower yearly cap on business credits

Iowa cuts the yearly tax-credit limit for covered business programs from $170 million to $110 million. The Iowa Economic Development Authority can exceed that limit by up to 20%, charged against the next fiscal year. Credits irrevocably declined or revoked by June 30 of the following fiscal year can be reassigned. Those awards can be reassigned in the year they are declined or revoked without counting as an over-limit award.

Youth grants prioritize struggling Iowa counties

Beginning December 31, 2025, summer youth corps grants use a county-based definition of economic distress. Counties must meet at least three of six measures covering unemployment, wages, family poverty, population loss, or residents age 65 or older. The commission designates a share of grants for distressed areas. Projects targeting those areas receive priority consideration.

Funding options for startup business accelerators

Beginning December 31, 2025, the authority may fund the creation or operation of business accelerators and their satellite locations. Eligible accelerators serve technology, value-added agriculture, information solutions, alternative and renewable energy, or advanced manufacturing startups. Assistance may include grants, loans, forgivable loans, and royalty payments. It is limited to funds, rights, and assets legally available to the authority; no dollar amount is specified.

Production companies get temporary filming rebates

Qualifying production facilities can receive rebates up to 30% of documented eligible costs, excluding sales, use, and hotel and motel taxes. Eligible costs must follow application approval and occur from July 1, 2025, through June 30, 2027. Productions need a fully funded budget of at least $1 million, including at least $500,000 in qualified costs. Eligible productions are feature films, television series, documentaries, or unscripted series rated G, PG, PG-13, or R. Facilities must be qualifying Iowa studios or companies based in Iowa for the previous three consecutive years. Productions must display a noticeable 'filmed in Iowa' credit and be publicly available through paid viewing, purchase, rental, or subscription streaming. Payment requires a certified public accountant's examination and final spending information. Total rebates cannot exceed $4 million, and the program ends July 1, 2027.

State funds support business disaster recovery

The law creates state funds for development programs, designated fund deposits, disaster recovery businesses, and Business Incentives for Growth. Disaster aid requires physical damage, closure from a natural disaster, and a location in a federally declared disaster area. A reopening plan must include employing a substantial number of the business's pre-disaster workers. Earnings, repayments, and recovered aid stay available without the usual year-end return; the authority budgets available revenue each year. Beginning December 31, 2025, previously appropriated assistance money remains available for the new development purposes, with uncommitted transferred money lasting through the following fiscal year. Uncommitted brownfield redevelopment money also transfers to development funds chosen by the authority when that division takes effect.

Fuel dealers keep gasoline promotion credits

The law extends specified fuel-credit repeal dates from January 1, 2026, to January 1, 2028. Eligible E-15-plus gasoline dealers whose tax years end before December 31, 2027, get a transition claim. They can claim the remaining eligible period through December 31, 2027, in the following tax year.

Local property tax relief for businesses

Effective June 6, 2025, communities can exempt part of the value added by approved business project improvements from property taxes. Eligible improvements include new construction, rehabilitation and additions. Relief can last up to 10 years, starting when the improvements are first assessed. Communities decide whether to grant relief; school district taxes are excluded.

Business applicants pay fees and plan

Effective June 6, 2025, businesses seeking program incentives must pay an application fee set by agency rule. They must use the authority's required application form and process. Projects with high water use must include a water conservation and waste reduction plan.

Less required help for business applications

Beginning December 31, 2025, the state office providing technical support no longer has to help complete certain business-assistance applications. This removes required help with technical information for the referenced economic development assistance. The change does not itself change who qualifies for assistance.

Tighter business aid rules after cuts

The authority may cut or end assistance after a business closure or mass layoff that requires state notice. Beginning December 31, 2025, projects without new jobs or substantial new investment are presumed to simply move operations within Iowa. Local operating cuts within 12 months before or after an application are presumed to occur during the application process. The authority considers a support letter from the affected community. Expansion remains allowed when similar Iowa operations are not closed or substantially reduced.

Business growth incentives face award caps

Business Incentives for Growth awards cannot begin before January 1, 2026. Each business's total award is capped at 5% of qualifying investment, or 7.5% in a rural county. Rural counties have 20,000 or fewer residents under the latest decennial census. During transition, growth incentives share $50 million with High Quality Jobs, whose pre-January 2026 allocations count first. Beginning July 1, 2026, growth allocations alone face a $50 million annual cap, and the shared transition rule ends.

Businesses face incentive repayment enforcement

Participating businesses must certify compliance annually, meet project terms and maintain base employment through their agreement's end. Assigning an agreement requires advance written approval; good-cause amendments cannot raise the approved incentive maximum. Violations, layoffs, permanent closures or knowingly employing unauthorized workers can trigger reduced incentives, repayment or penalties. Following a final repayment decision, the authority notifies Iowa's tax department, which treats the amount as tax due. Counties can also recover property taxes previously exempted under the program.

Businesses face tighter incentive eligibility rules

Effective June 6, 2025, these incentives target advanced manufacturing, bioscience, insurance and finance, and technology and innovation. Data centers, retail businesses, and businesses limiting entry through membership or cover charges are excluded. Projects need community approval, comprehensive benefits for every full-time-equivalent worker, and compliance with relocation and legal requirements. Relocation alone does not qualify; the authority must consider harm to competitors and possible worker displacement. Beginning December 31, 2025, applicants must report five years of environmental and worker-safety violations. A consistent pattern blocks assistance unless violations lacked serious health, safety or environmental effects, or mitigating circumstances existed.

Employer child care credit narrows

This employer child care credit applies only to tax years beginning January 1 through December 31, 2025. The state credit equals the share of the federal employer-provided child care credit tied to Iowa spending. The related state-code provisions are repealed January 1, 2031.

Veterinary research gets retroactive tax rules

For individual and corporate research credits, qualifying cattle and hog veterinary research is not treated as agricultural production. This rule applies when the credit is based on qualifying agriscience research. That research must meet oversight, Iowa research, evaluation and public-results requirements. The change applies retroactively to tax years beginning January 1, 2017, onward.

Housing refunds protected, repayments treated as taxes

Beginning December 31, 2025, housing businesses can seek refunds for project-related sales and use taxes paid before completion. The taxes must be listed in the agreement. Claims filed within one year after the agreement completion date cannot be denied under the specified filing-time limit. If a business fails project or agreement requirements, a final repayment decision goes to Iowa's tax department. Repayment is tax due from the claimant, and nonpayment receives unpaid-tax treatment.

Lower investment requirements for Iowa fund

The Iowa fund's required proposed binding investment commitments drop from at least $15 million to at least $3 million. Its minimum investment in companies based in Iowa also drops from $15 million to $3 million. The fund faces lower investment requirements, but less investment in Iowa companies is required.

Disaster housing credits get separate funding

Disaster recovery housing credits are administered separately from workforce housing's annual limits and small-city reservation. Beginning December 31, 2025, projects need a presidential major disaster declaration dated March 12, 2019, or later. The county must qualify for federal individual assistance. Housing businesses must certify the location and document that the disaster created the project's need.

Housing developers face caps and preferences

Workforce housing credit caps are $39.5 million in 2025–2026, $36.5 million in 2026–2027, and $35 million annually thereafter. Half is reserved for qualified small-city projects; unused reservations can fund other projects that year. Each project faces a $1 million combined incentive cap, with reductions divided between refunds and investment credits. Extra scoring points can favor communities with no award in the prior three rounds or specified assisted business growth. Credits revoked or irrevocably declined before June 30 of the following fiscal year can be reissued during the revocation or declination year without counting against its annual cap.

Business project aid with funding limits

Beginning June 6, 2025, eligible businesses can receive grants, loans, forgivable loans, royalty payments, or other help. The authority and board set the amount and type, using only legally available funds and assets. They must find the help supports project completion, extensive economic impact, or choosing Iowa over an out-of-state location. Businesses must sign agreements explaining when repayment is required. Businesses can combine program aid with federal, state, and local incentives, but the authority may block aid through its other programs.

Aviation fuel producers gain capped credits

Qualifying Iowa sustainable aviation fuel earns a refundable credit of $0.25 per gallon for production during 2026–2035. Fuel must use feedstock processed or refined in Iowa, meet specified quality standards, and cut life-cycle emissions at least 50%. Producers need a state agreement and must apply the year after production. Limits are $1 million per business per production year and five certificates per business; certificates cannot issue before July 1, 2026, and claims cannot begin before September 1, 2026. Aviation fuel and renewable chemical credits share $10 million annually, divided by the board. Renewable chemical awards cover fiscal years from July 1, 2025, through June 30, 2036; the aviation fuel program is repealed January 1, 2037.

Blended fuel tax calculations face corrections

Before June 1, Iowa's tax department can correct distribution percentages used to set blended-fuel excise tax rates. Corrections address mistakes or late retail-dealer reports. They can raise or lower rates for gasoline containing at least 15% ethanol and biodiesel containing at least 20% biodiesel.

Business incentive transition protects existing awards

The law repeals listed High Quality Jobs statutes effective December 31, 2025. Agreements entered into or amended by that date remain valid, and earlier incentives and carryforward rights stay protected. Beginning that date, eligible businesses can combine program incentives with other federal, state and local incentives. The targeted jobs withholding credit remains excluded; High Quality Jobs is no longer listed as an exception.

Business investment credits carry repayment risks

Effective June 6, 2025, approved businesses can receive investment credits spread equally over five tax years. Certificates require the project, or part of it, to be in service; pass-through owners claim their earnings share. Annual allocations limit awards, and credits cannot be carried back before the first claim year. Disposing of, razing or making covered property unusable within five years adds tax equal to 100%, 80%, 60%, 40% or 20% of the credit, respectively. Beginning December 31, 2025, specified investment credits offset individual income, corporate income and insurance-premium taxes after other required credits.

Business project refunds arrive faster

Certified businesses can receive negotiated sales and use tax refunds for project construction and equipment under written contracts. Eligible costs include specified utilities, tangible property and services, but exclude intangible property, furniture and furnishings. Contractors must provide sworn tax statements before contract completion. Businesses can apply as often as quarterly, with final applications due within one year after project completion. After audit and approval, the state pays as soon as practicable instead of spreading refunds equally over five tax years.

Businesses get a replacement research credit

The former research activities credit is limited to tax years starting in 2025; its code section is repealed January 1, 2027. For tax years starting in 2026 onward, approved businesses get a refundable replacement credit of up to 3.5% of eligible research costs. Businesses claim it the year after spending, within a $40 million annual allocation. Five-year certification and annual applications verified by a certified public accountant are required; available credits are divided proportionally, with up to 5% reserved for businesses increasing research spending. Certificates cannot be transferred, excess credits can be refunded or applied to the next tax year, and both research credits cannot appear on the same return.

Investor credit funding and transition limits

The law allocates $10 million annually between innovation fund and seed investor credits, with the board deciding the split. For the fiscal year starting July 1, 2025, qualifying-business credits authorized before July 1, 2026, reduce that allocation. The law repeals five legacy investment-credit provisions. However, qualifying investment credits issued before June 30, 2026, remain valid under their original terms.

Redevelopment credits gain reuse and limits

Brownfield and grayfield redevelopment tax credit awards face a $15 million annual limit. Revoked, previously unawarded and qualifying declined credits can be awarded later without counting against that limit. Declined awards must be irrevocably returned by June 30 of the immediately following fiscal year. Beginning December 31, 2025, final repayment decisions for agreement violations go to Iowa's tax department. Repayment becomes tax due from the taxpayer who claimed the credit, with unpaid-tax collection treatment.

Sponsors & Cosponsors

Sponsor

COMMITTEE ON WAYS AND MEANS
Affiliation unavailable

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 157 • No: 62

legislature vote • 5/14/2025

Amendment H-1351

Yes: 29 • No: 58

House vote • 5/14/2025

Passed House

Yes: 84 • No: 3

Senate vote • 5/13/2025

Passed Senate

Yes: 44 • No: 1

Actions Timeline

Explanations of votes.
6/27/2025House
Explanation of vote.
6/27/2025House
Signed by Governor.
6/6/2025Senate
Fiscal note.
6/6/2025legislature
Reported correctly enrolled, signed by President and Speaker, and sent to Governor.
5/23/2025Senate
Explanation of vote.
5/20/2025House
Message from House.
5/14/2025Senate
Immediate message.
5/14/2025House
Passed House, yeas 84, nays 3.
5/14/2025House
Amendment H-1351, yeas 29, nays 58, filed, lost.
5/14/2025House
Substituted for HF 1054.
5/14/2025House
Read first time, passed on file.
5/14/2025House
Fiscal note.
5/14/2025legislature
Message from Senate.
5/14/2025House
Immediate message.
5/13/2025Senate
Passed Senate, yeas 44, nays 1.
5/13/2025Senate
Amendment S-3175 filed, adopted.
5/13/2025Senate
Fiscal note.
5/13/2025legislature
Committee report, approving bill.
5/12/2025Senate
Introduced, placed on Ways and Means calendar.
5/12/2025Senate

Bill Text

As Introduced
PDF
Enrolled
PDF

Related Bills

Back to State Legislation