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Tax incentive overhaul includes eliminating some, growing and reviving others
Iowa Economic Development Authority Director Debi Durham’s proposal was considered publicly for the first time Thursday by lawmakers and stakeholders
Mar. 27, 2025 7:09 pm, Updated: Mar. 28, 2025 7:56 am
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DES MOINES — Some state tax incentive programs to encourage economic development would be eliminated, others would be boosted and new incentives would be created under a proposed overhaul of Iowa’s network of tax credits.
The proposal from the Iowa Economic Development Authority was considered in a pair of legislative hearings Thursday at the Iowa Capitol, where stakeholder groups and lawmakers offered their thoughts.
IEDA Director Debi Durham said the goals for the redesign, established by her agency and the governor’s office, were to make Iowa’s network of tax incentives balanced and responsible, and to provide a return on investment to taxpayers.
Durham and lawmakers in support say it is time to redesign the state’s tax incentives because many were created when Iowa had a less-competitive overall tax structure. Since statehouse Republicans have in recent years lowered Iowa’s business and personal income tax rates, not all incentives remain necessary, proponents argued.
“We want incentives that will allow us to compete but at the same time grow our GDP and basically create wealth in Iowa, and we believe we have done that,” Durham said.
Under Durham’s proposal:
- The Research Activities Credit for research and development investments would be redesigned and capped at $40 million. The current credit is uncapped; the average annual allocation is roughly $56 million, according to IEDA.
- The High Quality Jobs tax credit, which is designed to offset the costs for a company to move to Iowa or expand or update a current Iowa facility, would be redesigned and reduced from a $68 million annual allocation to $50 million.
- The Endow Iowa tax credit, which encourages philanthropic giving, would be repealed. The state allocates $6 million annually to that program.
- The Targeted Jobs Withholding Tax Credit, which was designed to help border communities compete with neighbor states with more competitive tax codes, would sunset after 2027.
- The Iowa Film Production Incentive Program would be recreated, adding $10 million over a two-year pilot run. A previous version of the credit was eliminated in 2009 after just three years after a state audit discovered $26 million was improperly issued.
- The Workforce Housing Tax Credit, which provides tax benefits to developers to provide new housing, would receive an $8 million boost to a $43 million annual allocation.
- The Renewable Chemical Production Tax Credit would be doubled to $10 million and include incentives to produce sustainable aviation fuel.
Durham said the legislation is not perfect and acknowledged that various stakeholders will take issue with some of the proposals.
Rep. Bobby Kaufmann, a Republican from Wilton who chairs the House’s committee on tax policy, praised the legislative package but also said he has heard some concerns that he believes lawmakers will find to have merit and want to work through.
“I think it’s an extremely aggressive and necessary change to our tax credit system. As our (personal income tax) rate has lowered down to 3.8 percent, the need for some of these things has diminished,” Kaufmann said. “I think it’s an aggressive bill and I think that’s a great thing. Our tax system has become competitive; we need to make sure our tax credit system is competitive.”
Iowa stakeholders offer feedback
Lobbyists representing local economic development agencies and chambers of commerce, housing developers, nonprofits and community foundations, taxpayer advocates and an Iowa-based film production company testified Thursday during the public comment periods of the two legislative hearings.
Nonprofit and community foundation leaders were vocal in their opposition to the proposal to end the annual allocation to the Endow Iowa credit. Multiple speakers said the credit is vital to encouraging donors in their communities.
Lynne Carroll, executive director of Heart of Iowa Big Brothers Big Sisters in Marshall County, said the organization was able to start an endowment that benefits the community and has since grown thanks to Endow Iowa.
“The only reason that (endowment) has grown is due to the Endow Iowa tax credit,” Carroll said. “Those funds continue to help small nonprofits like me to be able to reinvest in the community — not just in that program or that agency for today or for this fiscal year, but for long term.”
A lobbyist for Kemin Industries, a biotech human and animal food company, said the proposed $40 million cap on what would be the renamed Research and Development Tax Credit would create uncertainty for Iowa businesses. The lobbyist said that uncertainty could sway a company that is considering whether to invest in Iowa or another state with a more robust research and development tax credit.
“From a certainty perspective for a business, be they someone large like Kemin or a startup, introducing the cap at $40 million will interject a lot of uncertainty for a business that decides that they may want to try to claim that credit and make business investment decisions in this state based on the availability of that credit being there,” Kemin lobbyist Dane Schumann said.
The proposal to add sustainable aviation fuel and boost the funding for the Renewable Chemical Production tax credit was welcomed by biofuels companies.
“Stakeholders from Iowa and beyond have had a conversation about what is necessary to bring staff to Iowa, and this is an excellent opportunity for the state to have new production,” said Kent Hartwig, of Gevo, a Colorado-based renewable fuels and chemicals company focused on aviation fuel. “These plants are substantial. They’re billion-plus investments that have massive trickle-down effects. …
“As we look to build these facilities that have significant capital investment, we need investment. We need Wall Street to say, ‘This is a place to invest.’ So incentives like this are meaningful. They will provide us with another chip to go to these Wall Street investors and say Iowa is a place to build this plant.”
Both of the twin bills, House Study Bill 305 and Senate Study Bill 1205, were approved by subcommittee panels of state legislators Thursday. That makes both eligible for consideration by the House and Senate Ways and Means committees.
Kaufmann said the House bill will be considered by the full committee in two weeks.
Comments: (515) 355-1300, erin.murphy@thegazette.com
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