 |
 |
 |
 |
 |
 |
 |
 |
54. OTHER IOWA CREDITS. Enter the total of the credits listed:
New form IA 148 Tax Credits Schedule must be completed.
a. Economic Development Region Revolving Fund Tax Credit:
An economic development region revolving fund tax credit is available for individual income tax.
An economic development region shall consist of no less then three counties, unless two contiguous counties have a combined population of at least 300,000. These economic development regions must establish a focused economic development effort that will include a regional development plan relating to areas such as advanced manufacturing, life sciences and biotechnology, insurance or financial services, and information solutions. These regions may create a revolving fund.
A tax credit equal to 20% of the contribution made to an economic development region revolving fund is available for individual income, corporation income tax. If the contribution is made by a partnership, limited liability company, S corporation, estate or trust, the tax credit is claimed by an individual based on the pro rata share of the individual’s earnings from the partnership, limited liability company, S corporation or estate or trust. Any tax credit in excess of the tax liability can be carried forward for the following 10 years or until depleted, whichever is the earlier. The tax credit cannot be carried back to a year prior to when a contribution was made, and the credit is not transferable.
The total amount of tax credits authorized during a fiscal year cannot exceed $2 million. Any credit amount less than $2 million that is unused in a fiscal year can be carried forward to the succeeding fiscal year.
The Iowa Department of Economic Development is responsible for administering and authorizing these tax credits.
Sections 422.11K, 422.33(17) and 422.60(9)
The Endow Iowa Tax Credit is equal to 20% of a taxpayer’s endowment gift to a qualified community foundation. The gift must be for a permanent endowment fund established to benefit a charitable cause in Iowa. The Iowa Department of Economic Development is responsible for registering and authorizing the tax credits, and controlling the distribution of these tax credits.
Any tax credit in excess of the taxpayer’s tax liability can be carried forward for the following five years or until depleted, whichever occurs first.
An individual can claim the credit for a gift made by a partnership, limited liability company, S corporation, estate, or trust electing to have the income taxed to the individual, based on the pro rata share of earnings from the pass-through entity.
422.11H, 422.33(14) and 422.60(7)
If a financial institution as defined in Section 581 of the Internal Revenue Code elects to file as an S corporation for Federal income tax purposes and therefore have its income taxed directly to the shareholders, those shareholders qualify for a franchise tax credit. The credit became effective in 1998.
Iowa imposes a franchise tax on financial institutions, and Iowa does not recognize the S corporation election for Iowa franchise tax purposes. Therefore, the franchise tax credit is allowed to avoid double taxation of income.
Starting with any financial institutions organized as limited liability companies on or after July 1, 2004, the franchise tax credit is also available to members of the limited liability company. The limited liability company would file the franchise tax return, and members of the limited liability company would be eligible to take the franchise tax credit.
This worksheet will help you calculate the credit. You do not need to send it with your return, but keep it with your tax records.
Sections 422.11 and 422.33(8)
d. Historic Preservation and Cultural and Entertainment District Tax Credit:
Starting in 2000, a historic preservation and cultural and entertainment district tax credit is available for 25% of the qualified costs of rehabilitation of eligible property in Iowa. This credit is administered by the state historic preservation office of the Iowa Department of Cultural Affairs.
Any credit in excess of the tax liability is subject to a refund at a discounted amount, which may be claimed on line 66 of the IA 1040. The credit was limited in the aggregate to $2.4 million per fiscal year through June 2005. However, starting with the fiscal year ending June 30, 2006, through the fiscal year ending June 30, 2015, an additional $4 million of credits per fiscal year is available for projects in cultural and entertainment districts. Starting in 2003, the property rehabilitation tax credit can be transferred to any person or entity.
Sections 422.11D, 422.33(10), 422.60(4) and 404A.2
e. Housing Investment Tax Credit
Starting in 1999, for taxpayers approved by the Iowa Department of Economic Development under the Eligible Housing Enterprise Zone Program, an investment tax credit is available equal to 10% of the new investment directly related to the building or rehabilitation of homes in an enterprise zone. This is a nonrefundable credit, with a 7-year carryforward. The credit is claimed on form IA 3468. The credit is based on a maximum of $140,000 for each single-family home or for each unit of a multiple dwelling.
Starting in 2003, for the investment tax credit for eligible housing projects only, the credit can be transferred to another person or entity, if low-income housing credits under Section 42 of the Internal Revenue Code was used to help finance the housing project.
Effective for projects beginning on or after July 1, 2005, the investment tax credit can be transferred if the housing development is located in a brownfield site or in a blighted area
An investment tax credit of 10% of the purchase price of real property including any buildings and structures located on the real property, cost of machinery and equipment and the cost of improvements to real property is available to an eligible business. An eligible business must be approved by the Iowa Department of Economic Development under the New Jobs and Income Program, New Capital Investment Program, Enterprise Zone Program, or the High Quality Job Creation Program. Any credit in excess of the tax liability can be carried forward seven years or until used, whichever comes first. If you are a partner, shareholder, member, or beneficiary in a partnership, Corporation, Limited Liability Company, estate or trust, you may claim the investment tax credit for the qualifying entity. The amount of the credit to you is based on your pro rata share of the individuals earnings of the qualifying entity.
If, however, the eligible business sells, disposes of, razes, otherwise renders unusable all or a part of the land, buildings, or other existing structures within five years of purchase, the investment tax credit must be recaptured in the year that all or a part of the property is sold, disposed of, razed, otherwise rendered unusable. The percentage of investment credit that is recaptured is from 100% if the property is sold, disposed of, razed, otherwise rendered unusable in the first year to 20% if the property is sold, disposed of, razed, otherwise rendered unusable in the fifth year.
The credit is determined by multiplying the qualifying new investment by 10 percent, except for the New Capital Investment Program, which has various rates of 1-5%, and the High Quality Job Creation Program, which has various rates of 1-10%, depending on the amount of qualifying investment and number of jobs created. New investment includes the cost of machinery and equipment purchased for use in the operation of the eligible business, and the cost of improvements to real property. New investment also includes the cost of land and any buildings and structures located on the land. The credit can be taken in the year the qualifying asset is placed in service. For businesses qualified on or after July 1, 2005, under the Enterprise Zone program and the High Quality Job Creation Program, the investment tax credit is amortized over a 5-year period. For the Housing Enterprise Zone Program, the credit can be taken in the year the home is ready for occupancy.
Any credit in excess of the tax liability for the tax year may be credited to the tax liability for the following 7 tax years or until depleted, whichever is earlier.
Eligible businesses involved in the production of value-added agricultural products or biotechnology-related processes may elect to refund all or a portion of the unused credit by applying for a tax credit certificate from the Department of Economic Development. The credit amount shown on the tax credit certificate may be claimed on line 66.
High Quality Job Creation Program:
Effective July 1, 2005, the High Quality Job Creation Program replaces the New Jobs and Income Program and the New Capital Investment Program. This affects tax years ending on or after July 1, 2005. These businesses must be approved by the Department of Economic Development to qualify for the tax credits. The amount of tax credits is dependent on the number of jobs created and the qualifying investment made. The new jobs must pay at least 130% of the average county wage to be eligible for these tax credits. The tax credits are as follows:
Pay 130% - 159% of average county wage
• Number of new jobs is zero
Investment less than $100,000 1% Investment tax credit
Investment of $100,000 $499,999 1% Investment tax credit and sales tax refund
Investment of $500,000 or more 1% Investment tax credit, sales tax refund and additional R & D credit• Number of new jobs is 1-5
Investment less than $100,000 2% Investment tax credit
Investment of $100,000 $499,999 2% Investment tax credit and sales tax refund
Investment of $500,000 or more 2% Investment tax credit, sales tax refund and additional R & D credit• Number of new jobs is 6-10
Investment less than $100,000 3% Investment tax credit
Investment of $100,000 $499,999 3% Investment tax credit and sales tax refund
Investment of $500,000 or more 3% Investment tax credit, sales tax refund and additional R & D credit• Number of new jobs is 11-15
Investment less than $100,000 4% Investment tax credit
Investment of $100,000 $499,999 4% Investment tax credit and sales tax refund
Investment of $500,000 or more 4% Investment tax credit, sales tax refund and additional R & D credit• Number of new jobs is 16 or more
Investment less than $100,000 5% Investment tax credit
Investment of $100,000 $499,999 5% Investment tax credit and sales tax refund
Investment of $500,000 or more 5% Investment tax credit, sales tax refund and additional R & D creditHigh Quality Job Creation Program continued
Pay 160% or more of average county wage and investment is at least $10 million• Number of new jobs is 21-30
6% Investment tax credit, sales tax refund, additional R & D credit and local property tax exemption
• Number of new jobs is 31-40
7% Investment tax credit, sales tax refund, additional R & D credit and local property tax exemption
• Number of new jobs is 41-50
8% Investment tax credit, sales tax refund, additional R & D credit and local property tax exemption
• Number of new jobs is 51-60
9% Investment tax credit, sales tax refund, additional R & D credit and local property tax exemption
• Number of new jobs is 61 or more
10% Investment tax credit, sales tax refund, additional R & D credit and local property tax exemption
High Quality Job Creation Program continued
The investment tax credit is amortized equally over a 5-year period, instead of the entire credit being available upon project completion. The investment tax credit in excess of the tax liability can be credited to the tax liability for the following seven years or until depleted, whichever occurs first.
The investment tax credit remains at 10% for both the enterprise zone program and the eligible housing enterprise zone program. However, the investment tax credit must be amortized over a 5- year period for the enterprise zone program for projects approved on or after July 1, 2005.
If you started a new business or increased employment of your existing business by 10% and your business had a 260E agreement with a vocational school or area community college, you may qualify for the New Jobs Credit. This credit includes the training of existing employees. This is a one-time credit, equal to 6% of the taxable wages which the employer is required to contribute to the state unemployment compensation fund.
Compute this credit on form IA 133 and attach to your return.
For 2006, this tax credit would equal $1,278 for each job created. It is a nonrefundable credit with a 10-year carryforward.
Section 422.11A and 422.33(6)
h. Minimum Tax Carry Forward Credit:
You may be eligible for this credit if you paid Iowa minimum tax in prior years based on tax preferences and adjustments. The credit is limited to the extent the regular tax exceeds the alternative minimum tax for a tax year. There is no limit on the number of years this credit can be carried forward. Compute on form IA 8801 and attach to the IA 1040.
Sections 422.11B, 422.33(7) and 422.60(3)
A producer or purchaser of renewable energy from a facility approved by the Iowa Utilities Board is entitled to a tax credit equal to 1.5 cents per kilowatt hour of electricity, or $4.50 per million BTUs of heat, refuse-derived fuel, methane gas or other biogas; or $1.44 per 1,000 standard cubic feet of hydrogen fuel.
The facilities approved cannot exceed 180 megawatts of nameplate generating capacity related to wind energy facilities, and cannot exceed the combined output of 20 megawatts of capacity and 167 billion BTUs of heat related to other facilities.
Any tax credit in excess of the tax liability can be carried forward for seven years. A tax credit certificate is issued by the Department of Revenue for the amount of the credit, and the credit can be transferred once. A producer or purchaser can receive the tax credit certificates for a ten year period, and no credit can be used for a tax year beginning prior to July 1, 2006.
Sections 422.11J, 422.33(16) and 422.60(8)
j. S Corp Apportionment Credit:
Starting in 1998, individual resident shareholders of S corporations which conduct business within and without Iowa can claim a tax credit. The credit is structured so that the S corporation is taxed on the greater of income attributable to Iowa under the single sales factor or actual distributions by the S corporation less federal income tax. The intent is to treat S corporations similar to C corporations who are entitled to apportion income within and without Iowa. Complete form IA 134 and attach to the IA 1040.
Section 422.8(2)(b)
k. School Tuition Organization Tax Credit Contributions:
A school tuition organization tax credit is available for individual income tax equal to 65% of the amount of a voluntary cash contribution made by a taxpayer to a school tuition organization. The contribution cannot be used for the direct benefit of any dependent of the taxpayer or any other student designed by the taxpayer.
A school tuition organization must be a charitable organization in Iowa that is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code that allocates at least 90% of its annual revenue in tuition grants for children who reside in Iowa to allow them to attend a qualified school of their parents' choice. The school tuition organization must represent more than one school, and they can only provide tuition grants to eligible students who are members of households whose annual income does not exceed an amount equal to three times the most recently published federal poverty guidelines published by the U.S. Department of Health and Human Services.
The department will authorize school tuition organizations to issue tax credit certificates for the following tax year. The total of tax credit certificates to be authorized is $2.5 million for the 2006 year only and $5.0 million for 2007 and subsequent years.
The organization will then issue tax credit certificates to the persons that made a contribution to the organization, and the certificate must be attached to the tax return to claim the credit. The tax credit certificate shall contain the taxpayer's name, address, tax identification number, amount of contribution, amount of the tax credit, and any other information required by the department.
Any credit in excess of the tax liability is not refundable but may be credited to the tax liability for the following five years or until depleted, whichever if the earlier. The amount of the contribution cannot be taken as a itemized deduction for charitable contributions for Iowa income tax purposes.
The conversion of an IRA into a contribution to a school tuition organization, which is now allowed by the Pension Protection Act only for 2006 and 2007, would also be eligible for the school tuition organization tax credit.
Section 422.11M
NONRESIDENTS AND PART-YEAR RESIDENTS
The school tuition organization tax credit must be adjusted using the following steps:
Step 1. Divide Iowa net income (line 26, IA 126) by all-source net income of you and spouse (line 26, IA1040).
Step 2. Multiply Step 1 above by the amount of credit shown on the tax credit certificate.
Step 3. Enter this amount in column D on Part I of the IA 148.
l. Venture Capital Credit - Iowa Fund of Funds:
Starting in 2002, a contingent tax credit is available for investments to a qualifying business, community-based seed capital fund, or a venture capital fund certified by the Iowa Capital Investment Board. The tax credit is only allowed to the extent that the actual rate of return on these investments does not meet the rate of return guaranteed to investors. The Iowa fund of funds will make investments in venture capital funds who make a commitment to consider investments in businesses located in Iowa .
The contingent tax credits are capped at $100 million in the aggregate, and cannot be claimed until at least 5 years after the investment is made. Also, only $20 million of credits can be claimed in one year. The credit is nonrefundable, with a 7-year carryforward.
The tax credit certificate issued by the Iowa Capital Investment Board must be attached to the Iowa return.
Section 15E.66
m. Venture Capital Credit - Qualified Business or Seed Capital Fund:
Starting in 2002, a tax credit is allowed for 20% of the equity investment made into a qualifying business or community-based seed capital fund approved by the Iowa Capital Investment Board. This credit is focused on angel investors who make investments in start-up companies. The tax credit cannot be claimed until 3 years after the investment is made; for example, investors who made investments in 2003 cannot claim the tax credit until the 2006 tax return.
Credits can be claimed until the total cap of $10 million is reached. This is a nonrefundable credit, with a 5-year carryforward.
Sections 15E.43, 422.11F, 422.33(12) and 422.60(5)
n. Venture Capital Credit - Venture Capital Funds:
Starting in 2002, a tax credit is allowed for 6% of the equity investment made in a venture capital fund approved by the Iowa Capital Investment Board. The tax credit cannot be claimed until 3 years after the investment is made; for example, investors who made investments made in 2003 cannot claim the tax credit until the 2006 tax return. The credits are capped in the aggregate at $5 million. This is a nonrefundable credit, with a 5-year carryforward.
Sections 15E.51, 422.11G, 422.33(13) and 422.60(6)
o. Wind Energy Production Tax Credit:
The wind energy production facility must be placed in service on or after July 1, 2005, but before July 1, 2009, to qualify for the tax credit. If the facility is not operational within 18 months of approval by the Utilities Board due to the unavailability of necessary equipment, the facility will be allowed an additional 12 months to become operational.
The credit is equal to one cent multiplied by the number of kilowatt-hours of electricity sold. Any tax credit in excess of the tax liability can be carried forward for seven years. A tax credit certificate is issued by the Department of Revenue for the amount of the credit, and the credit can be transferred once. The credit cannot be used for a tax year beginning prior to July 1, 2006.
In cases where the applicant is a partnership, limited liability company, S corporation, estate, trust, or other reporting entity which elects to have income taxed directly to an individual and the applicant is also eligible to receive renewable electricity production tax credits authorized under section 45 of the Internal Revenue Code, the credit does not have to be based upon the individual's pro rata share of earnings from the entity. There are two alternatives to issue the tax credits, as noted below:
- The credit can be claimed based on the amounts designated by the eligible partnership, limited liability company or S corporation to a partner, member or shareholder or;
- The credit and all future rights to the tax credit may be distributed to an equity holder or beneficiary as a liquidating distribution or portion thereof, of a holder or beneficiary's interest in the applicant entity
In both cases, the applicant must identify, in their application for the tax credit certificate, the holders or beneficiaries that are to receive the tax credit certificates.
Sections 422.11J, 422.33(16) and 422.60(8)