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By Jonathan Tucker | Principal, Research & Development Tax Credits
Right before wrapping up its session on May 15, 2025, the Iowa Legislature passed several new bills. One big change is Senate File 657, which will replace the old Research & Development (R&D) Tax Credit with a new R&D Tax Credit starting in 2026. These changes are now waiting for Governor Kim Reynolds to review.
What’s Changing with the R&D Tax Credit
The old R&D tax credit let businesses get money back (even more than they owed in taxes) for doing research in Iowa. But starting in 2026, that credit will end and a new one will take its place. Here’s how the new program will work:
- The Iowa Economic Development Authority (IEDA) will run the program, not the Department of Revenue.
- Businesses doing qualified research in Iowa (based on federal rules) can apply for the credit.
- The total amount of credits given out each year is limited to $40 million.
- A business can get up to 3.5% of their Iowa research expenses as a credit.
- If a business doesn’t owe that much in taxes, it can get a refund or use the credit next year.
- The credit can’t be sold or transferred to someone else.
- Businesses can apply for the credit for up to five years, but they must reapply each year and get their expenses reviewed by a CPA.
- Only certain industries can qualify, such as tech, biosciences, manufacturing, and insurance/finance.
- Some industries are not allowed to get the credit, such as farms, real estate companies, retailers, construction, and more.
This new system is meant to better target industries that the state wants to grow and modernize, while cutting back on older rules that were more open-ended.
How KBKG Can Help
KBKG and its experts specialize in navigating complex tax legislation and translating policy shifts into practical, strategic solutions. Businesses and individuals with questions about current or proposed tax incentives, such as Iowa’s new R&D tax credit, are encouraged to contact a KBKG expert today for guidance tailored to their situation.
About the Author
Jonathan Tucker | Principal – Research & Development Tax Credits
Jonathan Tucker is based in Atlanta, GA, and has over 20 years of experience providing federal business tax advisory services, primarily in R&D tax credits, to clients in various industries including technology, manufacturing, transportation, healthcare, retail and consumer products, hospitality, media and entertainment, financial, and other professional services industries. Read More